Cuba reports big increase in food prices

Cuba reports big increase in food prices
By Marc Frank

HAVANA | Tue Jan 31, 2012 3:09pm EST

(Reuters) - Cubans paid almost 20 percent more for food in 2011 as
economic reforms, reduced imports and stagnating farm production touched
off price inflation at the country's many produce markets.

The National Statistics Office reported on its website (ONE.CU) that
meat prices rose 8.7 percent while produce prices were up 24.1 percent,
for an average of 19.8 percent.

The report was bad news for President Raul Castro, who has been
loosening the state's grip on farming and retail food services and sales
as it seeks to reform its Soviet-style economy by allowing more private
initiative and market forces to kick in.

The changes are part of more than 300 reforms adopted by the ruling
Communist Party last year to "update" the economy, which authorities
have warned will entail a difficult transition.

Similar reforms in other state-monopolized economies have proved
inflationary in the early stages, but the Cuban government hoped
increased output would mitigate price increases.

President Castro has made agricultural reform and increased food
production a top priority since taking over for ailing brother Fidel
Castro in 2008.

But agricultural output increased just 2 percent last year, after
falling 2.5 percent in 2010 and remains below 2005 levels.

At the same time, Castro has cut food imports to reduce spending by the
debt-ridden government. Because of low farm output, Cuba imports a
budget-busting 60 percent to 70 percent of the food it consumes.

Castro also has allowed farmers to sell a growing percentage of their
production for whatever price the market will bear.

Rising prices have provoked much grumbling from Cubans, whose buying
power has shrunk under Castro's changes.

"Everything is going up, except wages. What I bought yesterday for a
peso, today costs 1.10 pesos or 1.20 pesos, but I continue to earn the
same," said a Havana office worker who gave her name only as Angelina.

While all Cubans get a subsidized monthly food ration, it is not enough
to get by, so they must purchase additional food at the produce markets
or other places not included in the statistics office report.

The increased prices are sure to have a big impact on the estimated 40
percent of the population who rely on state wages or pensions and do not
have access to other sources of income, such as remittances from
relatives abroad.

The average wage increased only a few percentage points to the
equivalent of $19 per month in 2011, the government reported, while
pensions, which average just over the equivalent of $10 dollars per
month, remained the same.

"There is no doubt prices are rising, and from what I can see on the
news the problem is worldwide," Yoandry Leyva, who sells plumbing and
other supplies in eastern Santiago de Cuba, said in a telephone interview.

"But I live in Cuba and the problems are mine. Every day the prices go
up and I keep earning the same. I hope they settle down because every
day is more difficult," he said.

(Editing by Jeff Franks; Editing by Sandra Maler)

http://www.reuters.com/article/2012/01/31/us-cuba-inflation-idUSTRE80U1TS20120131