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In Cuba they call him the Day zero, some fear him more than others, but for no one is indifferent. This is January 1, 2021, when a monetary and wage reform will come into force, which according to experts, will be painful but necessary for the island’s economy.
Cubans on Friday reviewed with a magnifying glass the salary increases of up to 525% (in the case of the minimum wage) and the price increases that will govern in the future as part of the reform announced by the government.
The lists of wages and prices were published in the official gazette, after on Thursday night, President Miguel Díaz-Canel announced the unification of the currency as of the first day of 2021, as part of a package of measures aimed at to correct distortions in the economy of your country.
“All those who have these low salaries (pensions), we are afraid that prices will rise,” told AFP Fe María Ramayo, a 67-year-old woman who receives social assistance from the State.
Only the price of 80-gram bread that each person receives daily for the ration card, a symbol of equality among Cubans, will go up 20 times to 4 cents, according to the gazette lists.
More optimistic than Ramayo, pensioner Roberto Periut, 77, is confident of the reform. “The State will know how it is going to sell the merchandise so that we poor people can live,” he says.
On Day Zero, as the population calls it, the convertible peso (CUC, equal to the dollar) will disappear and the Cuban peso (CUP) will remain at a single exchange rate of 24 per dollar to avoid its collapse against the US currency, recently reintroduced on the island by opening appliance and food stores where you can only pay with dollars.
On the black market, the dollar, which cannot be found in Cuban banks and exchange houses, has been on the rise for months.
With the unification of its currencies, the country will say goodbye to a system that has worked for 26 years.
The tough fit includes increases in the price of many foods and basic services, as well as the elimination of subsidies, to which the Cubans got used to.
The government insists that the measures seek to make the island’s economy more efficient and facilitate foreign investment, at a time when the country needs fresh money after being deprived of foreign exchange from tourism due to the coronavirus pandemic.
“Negative impacts”
For the economist Ricardo Torres, from the University of Havana, “it is a transformation that in some way could allow Cuba to place Cuba much more clearly on the international board, make our numbers more comparable if you like with those of other countries” .
“Of course, it facilitates decision-making and the arrival of potential investors,” he added.
The expert acknowledged that the measures will also have “negative impacts on the productive structure, on companies and also on production,” but said that society has to manage and not ignore these effects.
Díaz-Canel described the reforms as “one of the most complex tasks in the economic order” that the country has faced, affected by the fall in tourism due to the pandemic and the tightening of the US blockade under the administration of Donald Trump.
The government insists that “no Cuban will be left helpless,” but the Cuban ruler himself warned that inflation could be higher than expected.
This risk worries Cubans who, since the pandemic began, have been forced to stand in long lines to stock up on food and other basic necessities.
“Let it start with the economy”
Experts underscore the possibility of correcting the strong distortions generated by the bimonetary system and there are citizens who are in that line.
“Our country needs a change and what better way to start with the economy, which is a very important branch, which can provide a more stable basis for new development,” said Liurys Costa, a 20-year-old Biochemistry student.
Faced with serious liquidity problems, Cuba authorized on Tuesday the majority participation of foreign investors in some mixed capital companies, to stimulate investment.
The country needs an annual investment level of $ 5 billion, according to official experts, but the amount captured is well below that goal.
The president of the United States-Cuba Economic and Trade Council, based in New York, John Kavulich, was also optimistic about the announcement. “Although the necessary pain for the population will be inevitable, the result (of the reform) should rekindle the interest of companies in the Cuban market.”
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