New broom…in pesos or CUC?

Apropos the currency unification.

When my mother was told that on the corner “shopping” you could already also buy in Cuban pesos (CUP), she told me she was going to go there because she needed a good broom. A while later I saw her return with empty hands. “There weren’t any brooms?” I asked her. “Seventy pesos,” she answered with the disappointment and astonishment reflected on her face. “The broom costs 70 pesos.”

Don’t worry, I said to her, the “street vendors” sell home-made brooms for 40 pesos. “Yes, that’s your consolation; we’re all set up,” she answered, “because that’s what a pound of pork costs.”

I didn’t understand what she was referring to, but in my mind I started to work out simply what my mother had already done. If a pensioner needs to buy a broom –always opting for the cheapest -, and a mop to clean the floor that costs 20 pesos, she has to spend 60 pesos. That amount represents for many pensioners half of the money they get as a retirement pension. The rest, that is, the other half, would only be enough to buy 1 ½ pounds of pork.

Apropos the money-related worries of pensioners, an old friend who recently began his paperwork to retire, was telling me with despair that his standard of living would drop drastically at the moment he ended his life as an active worker. He explained that at present he could earn a bit over 1,000 pesos a month, and though that amount is not enough to cover all his needs, one could “make do” if one managed one’s money well and no unforeseen event came up – like the refrigerator or the fan breaking down. But starting now he would have to start “juggling” his money.

The problem, he explained, is that for the retirement only my basic wage is taken into account and lunch –some 15 pesos a day –, the incentive in CUC or the overfulfillments are not counted. According to his estimates, when he starts to collect his pension he should get some 400 pesos, which is why he will have to adjust his expenses to less than half of what he earns now. Or what is the same: 10 pounds of pork a month.

But let’s go back to the case of the broom that now can be bought indiscriminately in some establishments in convertible pesos (CUC) or its equivalent in pesos, at the current exchange rate of 25 pesos.

Ever since the decision to start the process of the currency unification was made public last year, the announcement was well received by the population in general, and on several occasions it has officially been reiterated that this process will not mean a price increase for consumers and that the savings accounts of Cubans in both currencies will be respected.

However, when the way in which that process will be implemented in the future and the previewed dates for all its stage is barely known, the acceptance in shops of the two currencies in circulation under the current conditions has not been a good experience for many. In fact the measure only saves people’s effort and time waiting on a line at the bank or the exchange house, but is the same expenditure as before for the purchase of the product and does not represent a relief for Cuban pockets, since the majority of the wages and pensions continue unmovable.

The need to unify the Cuban currency is unquestionable and even cannot be postponed. In the Guidelines that emanated from the Sixth Congress of the Party it is said that “advance will be made toward currency unification, in a process that will fundamentally depend on increases in labour productivity, the effectiveness of the distribution and redistribution mechanisms and, with this, of the availability of goods and services. Because of its complexity it will demand a rigorous preparation and execution, in the objective as well as the subjective plane.” Perhaps in the objective plane big steps have been taken for the success of its putting into practice – I don’t know-, but one would have to ask oneself if in the subjective plane “the preparation” has been sufficient.

It is evident that a decision of such a magnitude not only represents an enormous macroeconomic transformation for the conditions of current Cuban society, but will also affect directly and immediately each and every one of the country’s citizens. Perhaps because of the complex nature of the process, or because of security-related questions, it has been decided to limit to a minimum the information on such a crucial issue, but perhaps this has been taken to such a point that it has meant maintaining on the margin of the process the very individuals who, conscientiously or not, in the long term will be involved in it and will suffer all its less agreeable consequences or will enjoy its possible benefits.

That is why the more we approach what has come to be called “zero hour,” it is more necessary to find out if next month we will already be living in pesos, until when will the exchange rate remain at 25 and when will it be pegged at 10 pesos – just to cite some elementary examples -, because the family economy, which today is subject to great uncertainty, depends on all these questions.

But that instability is not only psychological because it is based on concrete situations, as has been the notable increase in the price for some foodstuff, both for those distributed by private sellers as well as those sold in the state-run establishments in a liberated form, among which are rice, sugar, pastas, diverse canned products and eggs.

In a recent article posted by Cubadebate, the former economy and planning minister and current advisor to the Centre for Research on the World Economy, José Luis Rodríguez, referred to the increase in consumer prices with relation to the wages and its social impact, among other subjects related to the Cuban economy. The expert pointed out in his commentary that while “the monthly average wage in 2013 stands at 471 pesos” – almost 20 CUC at the official exchange rate -, “which represents a 13.5% increase in relation to 2008,” when calculating the consumer price index in that same period, “the increase is 17.9%, which would express a much greater deterioration of the purchasing power in approximate terms of the real wage.”

However, the expert considers that “wages only represent around 46% of the total income – since these figures don’t include payments of the system of incentives in CUC, which are not counted as wages, as well as other benefits in kind and in cash.”

I confess that the economy is not my forte and instead of talking in macroeconomic terms managed by experts, I’m interested in approaching the way in which common people are affected in their daily life, even by those things they have no knowledge of, or which have not been considered as opportune to explain to them. This is why I think that, though my mother perhaps is not capable of understanding very well the meaning that the currency unification has for the country and which are the steps and the timetable for it implementation, at least someone should try to explain it to her, while she struggles with the dilemma she has of whether to sweep or eat. (2014)

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