The apparent distancing between the course of the Cuban retail market and the world market trends again was blown to pieces a few days ago: the local authorities agreed to raise the price for powdered milk starting April 4 in view of the continuous price rise in its import.

Officials from the Finances and Prices Ministry (MFP) and the Food Industry Ministry announced the measure to the daily Granma under the criterion that the price of that product rose from 4,720 to 5,563 dollars a ton. According to statements by the MFP’s Trade, Tourism and Service director, Octavio Beltrán Castillo, the hike “would generate losses for the business system if the corresponding adjustments were made in the retail price.”

The network of shops operating in hard currency increased the price of a 500 gram bag by 45 cents, to 3.35 convertible pesos (CUC), and the one kilogram bag by 85 cents, to 6.60 CUC – the CADECA Exchange Houses change 1 CUC for 24 Cuban pesos (CUP) for the population, while the official exchange rate stands at one dollar for one CUC as well as one CUP.

In both presentations, the price for milk increased a bit more than 15 percent, though the international increase reported by the MFP is 18 percent. The difference confirms the information provided by the vice president of the CIMEX Business Group, the principal retail trade firm in CUC: Bárbara Soto said that the price increase only includes the hike in Cuban spending to purchase that product abroad, but payments for transport, storage or other causes are not added to this.

Days before, Vice President of the Council of Ministers Marino Murillo explained to MPs that Cuba is making strong expenditures in the purchase of food, which restrict the possibility of using that money in the financing of necessary investments for the development of the country. The head of the government commission in charge of the economic transformations presented the aforementioned to argue the need for a new foreign investment law, finally approved by Parliament.

The country would lack the means of support for development if the majority of its finances are dedicated to ensuring only consumption, said Murillo. As an example of the spending in foodstuff whose prices are continuously going up, he precisely cited the case of milk – a timely preamble and perhaps not so much by chance, for the issuing only six days later of Resolution 165 of the MFP, which put into force a new price for that product.

According to the statistical data given by Murillo, Cuba’s spending for the purchase of powdered milk has increased more than 60 percent throughout a decade (from 2003 to 2012), though the average volume imported has decreased during that period: in the last three years it decreased by around 20 percent compared to the purchases made in 2003, of some 50,000 tons.

The most recent international price reported by the MFP implies an increase of 160 percent over the value of 10 years before: 2,106 dollars per ton in 2004.

“A very big change has to take place in cattle ranching and the dairy industry because we have to head toward a development variable to substitute those imports,” Murillo said to the MPs on March 29. “And with our own financing that will be very difficult,” he added to justify agriculture’s inclusion among the sectors previewed in the new law with a specific policy to encourage foreign investment.

The dairy industry receives between 300 and 310 million litres of milk from local cattle ranching, plus more than 80 million sold directly to the population. An official of the Food Industry business group, Iván Carranza, recognised that those volumes are far from the national demand. Cuban milk production only covers half of the consumption in the country. The rest is imported, Murillo reported to the National Assembly of People’s Power.

The development plans preview a modest increase: 450 million litres in 2020.

The State, which subsidises the milk for children until they are seven years old, is forced to increase this year by 12 million dollars the budget previewed initially for that, in order to not touch those prices, in Cuban pesos.

The only alternative left for rest of the population, meanwhile, is the commercial network with higher prices in convertible pesos.

Though very high for Cubans’ average purchasing power, the prices in those shops usually maintain a stability that does not reflect the changing evolution of the basic food prices on the world market, especially on the rise in recent years.

Something similar happened in 2007 with that same product and other foodstuffs, like vegetable oil. The price of gasoline and other fuels on occasions has also gone up for the same reasons.

After describing the measure as unavoidable, the daily Granma, the official organ of the Communist Party, promised that “in principle, that foodstuff will continue being guaranteed for a part of the population in a subsidised form.” But tensions continue on the rise regarding the State coffers, forced to already pay out some two billion dollars to purchase food, a great deal of which can be produced in the island’s very fields. Milk is only one example. (2014)