The renowned Cuban economist Pedro Monreal has analyzed the potential consequences of implementing price caps on six high-demand basic products through a resolution published this Monday in the Official Gazette of Cuba.
In the expert's opinion, Resolution 225/2024 from the Ministry of Finance and Prices "instead of using the market to make the 'plan' more flexible, it paralyzes the market with the plan."
"It's not just that the ineffective price 'caps' are being insisted upon, traditionally applied to agricultural products, but that national private companies are being forced to adopt the Soviet pricing method," Monreal stated on his X profile.
For the specialist, "it is a gross error to persist with an 'economic calculation'—a process to arrive at the most effective combination of resources at the level of the entire economy—that is bureaucratic in nature instead of one supported by market prices."
Centralized Planning Critique
He also asserts that "centralized planning is much more than a doctrine about an approach to economic regulation or the ownership of assets," reflecting "intervention in multiple dimensions of social life, dictated by a 'vanguard' party."
According to the economist, "the eventual reform of the state-owned enterprise in Cuba ignores the historical evidence that in the long run, the 'economic calculation' of centralized planning was not sustainable. It is absurd to bring the nascent private enterprise into this losing game."
In the long term, the path seems similar to that taken during the "reordering," which was a complete economic failure.
"The recent experience of the 'reordering' justifies skepticism regarding the grand visions in which the bureaucracy self-assigns capacities for systemic regulatory efficiency that it has never demonstrated in the long term," he concluded.
Monreal's warning had been anticipated in recent days by actors from the small and medium-sized private enterprises in Cuba, who held a tense meeting with Lourdes Rodríguez Ruiz, the Vice Minister of Finance and Prices of Cuba.
A recording accessed by the independent media outlet elTOQUE revealed the tense atmosphere in which the meeting took place, with critical interventions from the "new economic actors" and expressions of dissatisfaction with the government's policies to contain inflation.
"If you want essential products to keep coming in, this is not the way," warned an entrepreneur about the decision to cap the prices of six basic products marketed by the private sector. "I am not going to transfer the uncertainty to the foreign supplier," he argued.
The recording, published exclusively by elTOQUE, captured the discontent of the business people, the bewilderment of the authorities, and other important information not previously acknowledged or assumed by the Cuban government, such as the fact that inflation in 2024 maintains a trend similar to that of 2023, despite all the "measures" and "efforts."
Understanding the Impact of Price Caps in Cuba
This section provides a deeper look into the questions and answers about the implications of price caps in Cuba, particularly focusing on the insights provided by economist Pedro Monreal.
What are the potential consequences of implementing price caps on essential products in Cuba?
According to economist Pedro Monreal, price caps can paralyze the market instead of making it more flexible. This forces private companies to adopt inefficient Soviet-style pricing methods.
Why does Pedro Monreal criticize the "economic calculation" process in Cuba?
Monreal criticizes the "economic calculation" process for being bureaucratic and not supported by market prices. He argues that it is a gross error to rely on this method rather than market-driven approaches.
What historical evidence does Monreal cite regarding centralized planning?
Monreal points out that historically, centralized planning and its "economic calculation" were not sustainable in the long run. He believes it is a mistake to involve the nascent private sector in such a flawed system.
What was the reaction of private sector representatives to the price cap resolution?
Representatives from small and medium-sized private enterprises expressed significant dissatisfaction and skepticism. They warned that such measures could hinder the availability of essential products and create uncertainty for foreign suppliers.