Communism in Cuba fails again: inflation reached 6,900% and electricity blackouts return
The Cuban economic model is in a state of exhaustion and crisis. The socialist dictatorship of Miguel Díaz-Canel already admits that in the “formal” market the authorized products rose by at least 60%, but in the informal markets the economy has already entered hyperinflation and prices have risen 6,900% so far from 2021.
The numerous controls of the regime, between regulations on prices and quantities, could do little and nothing to mitigate inflation. The generalized shortage of supplies led to the rise of informal markets, which today constitute the only real mechanism for acquiring basic necessities, at least in the minimum essential quantities.
The violent inflationary spiral generated a deep malaise in the population in the face of the new failure of the socialist model. The suspension of the liberalizing measures allowed in the 1990s caused a total loss of confidence in the Cuban peso, which has practically no value anymore.
This skyrocketing price forced the authorities to carry out "corrective processes" on the level of regulated wages and public service rates, but the purchasing power of Cubans was inexorably deteriorated. Rates have risen 500% so far this year, while the legal minimum wage has increased 450% since January.
The results of the regime's controls and palliative measures were catastrophic: looting took place throughout the island in response to the shortage of supplies, and the socialist dictatorship has already established a scheme of gigantic electricity blackouts distributed throughout the country.
The currency conversion that had been in force since 1994 was dismantled by the socialist dictatorship in 2021. A process of exchange unification took place and the Central Bank of Cuba closed the possibility of backing the issue with a credible asset such as the dollar or other currencies.
The current economic crisis is the deepest since the so-called "special period" between 1989 and 1993, when the Soviet Union finally fell, and Cuba lost the only economic support in the world that it had. Cuban GDP collapsed 11% in 2020, and the economy was already practically stagnant since 2019.
To understand the inflationary collapse, it is necessary to review the fiscal trajectory of the regime over the last few years. Cuba accumulated important imbalances, being that the financial result went from representing a deficit of 1.3% of GDP in 2013 to reach a dramatic fiscal red of 17.7% of GDP in 2020. Even in 2017, the fiscal deficit already had climbed to 8.6% of GDP and was a time bomb.
The profound imbalance in the public accounts was covered almost entirely by unbacked monetary issuance, which quickly translated into an unprecedented rise in prices.
The timid reforms undertaken since 1993 did not lead anywhere. In 2020 the Cuban State came to present 64.6% of the economy, reaching a peak of 78% of GDP in 2008. The size of the State becomes impossible to finance with genuine resources.
The reforms on the money market were not part of a program towards a change of model and an eventual exit from socialism, but simply responded to the enormous financing needs of a bankrupt state.
Source: La Derecha Diario
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