Rise of the Dollar in Cuba Complicates the Math of Survival
As the Cuban peso loses value, families are cutting back on purchases, while small businesses struggle to avoid bankruptcy.
By Julio Cesar Contreras (14ymedio)
HAVANA TIMES — By mid-morning, activity in the small private businesses of San Jose de las Lajas increasingly resembles a scene of shared uncertainty. Customers walk in, ask the price of a product, do the math in their heads, and often leave empty-handed. On the other side of the counter, vendors have no definitive answers either: they know what the merchandise cost a week ago, but they cannot say how much it will cost in a few days.
The dizzying rise of the USD on Cuba’s informal market has turned even the simplest purchase into a daily exercise in household arithmetic. In a municipality where, as in the rest of the country, wages are paid in pesos while many products are imported and paid for in foreign currency, every jump in the exchange rate triggers a new wave of price increases in the national currency.
At a café near the main park, a young woman checks the contents of her wallet several times before deciding what she can afford to buy. Behind the counter, beneath a chalkboard with prices written by hand, sweets and candies wait for customers who are buying less and less.
“The tube of baloney that cost 500 pesos less than a month ago was 600 last week and today it’s 650. I used to rely on that a lot for my children’s snacks. But everything has become so expensive that now I’m only giving them a small piece of bread with whatever I can find. It breaks my heart,” laments Yaritza, as she tries to manage the money she has available to buy only the most urgent necessities.
A single mother and teaching assistant, she says she no longer knows which small private business to visit to find cooking oil or meat products that have not increased by at least 50 pesos over the past month.
“At the current exchange rate, my salary doesn’t even reach 10 dollars a month. I say this because, although it’s true that the most basic things are still priced in pesos, the real value of food and essential goods has to be measured in dollars, because that’s how private merchants pay for them.”
Though she describes herself as bad at math, Yaritza has mastered a calculation that millions of Cubans perform every day: mentally converting the price of every product into dollars and comparing it to a salary that is rapidly losing purchasing power.
The situation is also hitting those who run businesses. A few meters from an elementary school, Abel manages a café whose regular customers are schoolchildren and their families. For years, candy and sweets were a safe bet. Now, constant price increases threaten the stability of his business.
“Until now, I’ve always had a good profit, but things are getting complicated because there’s nothing worse for commerce than having to constantly change prices,” he explained to 14ymedio.
One of his best-selling products was María cookies.
“The kids used to run out of school and buy two or three packs each. Now a box of 24 packs lasts me five days or more. What happened? I’ve been forced to raise the price because my suppliers have raised it for me too.”
Abel recalls that at the beginning of this year, a customer could buy two packs for 500 pesos. Today, that amount barely covers one pack, with a little money left over that is hardly enough to buy anything else.
“I’m trying to find cheaper alternatives, so I don’t keep losing customers. My family’s livelihood depends on this café.”
In other businesses around the municipality, the concern is the same. Some owners have chosen to review their prices weekly to avoid losses caused by the depreciation of the Cuban peso.
“I organize the restocking of my kiosk once a week. Then, depending on how the dollar is behaving, I raise the prices of certain products I sell so that I can guarantee a cost structure that allows me to maintain profitability,” explains Delvys.
The merchant acknowledges that, from a conventional business perspective, changing prices so frequently is a mistake.
“But in the harsh Cuban reality, it’s a way to avoid going bankrupt.”
Always carrying a calculator, Delvys tries to stay ahead of fluctuations in the informal market.
“Putting myself in the customer’s shoes, I understand how difficult it is to buy a bottle of cooking oil today for 1,300 pesos and find it costing 1,500 next week. People complain, and they’re absolutely right.”
He gives a recent example: Cristal beer, which sold for 350 pesos a few days ago and now costs around 420.
“If I don’t raise the price, how am I supposed to buy it again? How do I pay my employees, and where is my profit?”
At the entrance of some businesses, customers wait their turn leaning against newly varnished wooden counters. Others chat about the latest dollar exchange rate, which has become as common a topic of conversation as the weather forecast or the power outages.
“In this roller coaster where we’re all buying from someone else, we’re constantly on the verge of losing money,” Delvys sums up. “There are no winners here.”
In San José de las Lajas, the price of the dollar is no longer just an economic statistic. It is the exact measure of how much food a family can buy, how long merchandise will remain on a shelf, and how many times people will have to think before taking any product home.
First published in Spanish by 14ymedio and translated and posted in English by Havana Times.
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