Applying price caps on basic products in Cuba, such as powdered milk, detergent, chicken and oil, will likely involve strict government controls to ensure prices remain within set limits. This measure aims to make essential goods more affordable amidst severe economic challenges. However, these controls could lead to shortages if suppliers find it unprofitable to sell at these capped prices. Historical evidence suggests that extensive price controls often result in inefficiencies and reduced production, which may exacerbate the scarcity of goods rather than alleviate it. 

Cuba announced budget cuts and price caps to correct economic distortions, with specific details expected from the Ministry of Economy and Planning in September. The goal is to provide immediate relief to consumers by making essential goods more accessible. “We are facing a food emergency but our historical allies such as Russia will provide us with support to get us out of the emergency,” stated a senior official of the Council of Ministers.

The government must navigate the period of foreign tourism and coordinate with international allies like Russia and China to support importing basic commodities. “The state will check that there are no hoarders and will attack the black market for vital products.” The senior official continued, “It is being investigated that Cuban officials are involved in hoarding goods and in corrupt practices in conjunction with private companies.” 

“The state will check that there are no hoarders and will attack the black market for vital products.”

Senior official of the Council of Ministers, Cuba

Small and medium-sized private businesses, particularly those involved in retail and food distribution, are expected to be most affected by the price caps. These businesses rely on the ability to adjust prices based on supply and demand to cover costs and maintain profitability.

The private sector in Cuba has historically struggled without close ties to the top leadership. Many successful businesses are often linked to the military elite, who, an independent consultant for FAO and various agencies confirmed, “is setting up its own business elite with frontmen.” This connection can complicate the landscape for genuine private entrepreneurship.  

Price caps alone are unlikely to resolve Cubas economic crisis and the lack of access to basic food. While they may provide temporary relief, they do not address underlying issues such as low productivity, insufficient supply and structural economic inefficiencies. “The state has always intervened in the Cuban economy; price ceilings are nothing new, especially when the business system is archaic; it is, as Mexican colleagues call it, “an economy of the ‘Cuates’,” retorted a retired agronomist and geneticist. Critics argue that the Cuban regime “hides the inability of the revolution to meet the three demands of Cubans: breakfast, lunch and dinner.” 

“[the Cuban regime] hides the inability of the revolution to meet the three demands of Cubans: breakfast, lunch and dinner.” 

Retired agronomist and geneticist, Mexico

To alleviate current pressures, the Cuban government could consider broader economic reforms, including increasing support for private sector growth, improving supply chains and incentivising foreign investment. Strengthening food production and developing the business sector are critical areas the government is focusing on.

However, “there will be no answer to the economic crisis until the Cuban regime explodes, and that will come at great cost to the Cubans and the region,” stressed the independent consultant. The brightest minds in agriculture have left the country, leaving those who remain with limited resources in underfunded laboratories and destitute farms. 

International aid and support are crucial in Cuba’s strategy to navigate the crisis. Cuba is in talks with China to import basic commodities and despite some setbacks, it continues to receive energy support from Mexico. This international assistance is vital, yet it may not be sufficient to overcome the deep-seated issues within Cuba’s economic structure. “It’s a terrible rigged state; it’s not revolutionary,” surmised the consultant. “Not even compensating for the oil tankers that Mexico’s President, López Obrador, sends or certain minor imports from Venezuela or Russia will give us the basic incentives for production, especially when China is not interested in being in Mariel and sees the port as insufficient.” 

For consumers, the immediate future may see continued struggles with the availability and affordability of goods, while businesses in the consumer sector might face tighter margins and operational challenges.

“The Cuban case cannot be seen as that of a normal, open economy,” retorted an economist at the University of Havana. The Cuban government’s approach is complicated by the US blockade, which they argue exacerbates the economic difficulties. “We are on this path with the determination to strengthen the revolution and to stop talking about what it is, an economy at war with profound damage to the Cuban people, and all because of the complicity of the Cuban American lobby in Miami with Washington.”   

The Ministry of Economy and Planning is coordinating efforts to strengthen the revolution and address the economic challenges, but the effectiveness of these measures remains uncertain. Ultimately, the economic crisis in Cuba is deeply entrenched, and while price caps might offer short-term relief, they are not a panacea. An independent consultant for various agencies concluded, “It is the greatest cynicism of the current regime, which is a far cry from China or Vietnam, which nurtured a competitive business core from power. Here is a total simulation” and leaves the Cuban people to bear its burden.