Cuba grapples with growing inequality

Cuba grapples with growing inequality
Thu Apr 10, 2008 2:12pm EDT
By Marc Frank - Analysis

HAVANA (Reuters) - Reforms passed by new President Raul Castro to allow
sales of computers, DVD players and cellular telephones and let Cubans
stay at tourist hotels are a recognition of growing inequality in the
communist country.

The goods and services are available only to Cubans who have the hard
currency to pay for them, in convertible pesos, or CUCs, that are worth
24 times more than the Cuban pesos that most salaries are paid in.

Most of the items and services were previously available on the black
market for those willing to break the law to buy them and risk the
products being confiscated.

By putting them on legal sale, it makes life easier for those Cubans
with access to CUCs, which are pegged at $1.08, but it also highlights
the inequalities in a country where the average wage is equivalent to
about $17 a month.

While professionals like doctors and teachers have very low state
salaries, those Cubans who receive remittances from family overseas,
tips from tourists, run small businesses, go on government missions
abroad, receive CUC bonuses, or sell goods on the black market have much
higher purchasing power.

That could change soon, however, with a new labor code that for the
first time does not put a limit on an individual's state wages as long
as they are tied to productivity.

Cubans were not shocked by the steps taken by Raul Castro within weeks
of succeeding his ailing brother Fidel Castro as president, but some
felt frustrated.

"I refuse to buy an electric moped for 98 CUCs. It is priced like a
limousine in any other country, at more than four times my monthly
salary," a doctor said after visiting a shop where new consumer items
were on sale.

INCENTIVES

Sugar worker Ernesto Martinez said most people supported the measures
despite the inequality they revealed.

"Everyone realizes these measures could in one way or another expose
differences, but if we do not take them what's going to happen?" he said
in a phone interview from the countryside.

"People have to work in any society, but if there is no incentive in
life they don't work, at least the majority."

Cuba prides itself on being the most egalitarian society in Latin
America but inequality is not new here. Around 85 percent of the
country's private savings in Cuban pesos are held in around 15 percent
of the bank accounts.

When the fall of the Soviet Union plunged Cuba into its worst crisis in
the early 1990S then President Fidel Castro bitterly announced that the
U.S. dollar would become legal tender alongside the Cuban peso.

State foreign exchange shops opened, family businesses were allowed and
the country opened up to foreign tourism and investment as Castro tried
to stave off a complete collapse of the economy.

He said he had no choice if Cuban socialism was to survive, despite the
inequality and social problems the measures would create.

According to Cuban sociologists, that may have been an understatement.

The foreign exchange shops and services did around $1.5 billion in
business last year, excluding hotels and directly related services.

Cuba's Gini index of income inequality rose from .24 in 1986 to .38 in
2000, according to Havana professor Myra Espina in a paper published in
Cuba. Perfect equality would earn a 0 on the index and complete
inequality a .99.

The index is an international standard widely used to measure
inequality, though it does not take into account health care and
education, which are universal and free in Cuba.

Most local experts say Cuba's Gini index has risen further since 2000,
although no new figures are available and they believe it is still less
than other countries in Latin America, which tend to come in between .50
and .60.

(Reporting by Marc Frank, Editing by Michael Christie and Kieran Murray)

http://www.reuters.com/article/GCA-Cuba/idUSN1033501920080410?sp=true