The situation in Cuba - Rebellion
1 . A math riddle
Surely many tourists already did the numbers with the Cuban salary. In 2009 the average salary was 415 Cuban pesos. It is the equivalent of 12 euros, it seems ridiculous. It seems even more absurd when you know that an entire salary is spent on buying a pair of jeans or a pair of shoes. So one wonders, what the hell does a Cuban do to make ends meet? Let's look at Ricardo's example. He is 52 years old, married and has two daughters. He works as an employee in a state company. The equivalent in euros of his salary is less than what they give my 14-year-old cousin to buy some sweets. Looking at it this way, Ricardo belongs to the poorest on this planet. However it is not true. Because despite his meager salary, Ricardo owns a three-bedroom house. The two daughters are studying at the university and, according to statistics, Ricardo will live 20 years longer than his neighbor in Haiti. Last year he had heart surgery, an operation that is reserved for the richest in the rest of Latin America and Ricardo is no exception, it is the rule.
How is that possible? He charges almost nothing and yet he can afford things that in other Latin American countries only the richest layers of society can afford. This apparent contradiction has to do with the fact that the price of goods and services can vary greatly from one country to another. Cuba is an extreme case because many goods and services such as education, health, transportation, culture, and basic food are free or very cheap. The salary in Cuba does not have the same function as in a capitalist society. A good understanding of the Cuban situation is made even more difficult by three complications. First of all, there is the double currency system: there is the Cuban peso and the CUC. The peso is mostly used for basic goods and services, the CUC is used for extras. Tourists in general only pay in CUC. The CUC has more or less the value of a dollar (it varies a little against the euro). For some years it has a fixed value of 24 Cuban pesos. A product in the peso circuit is worth much less than in the CUC circuit. A drink, for example, or a meal in a restaurant with pesos, is easily 10 or 20 times less than in an establishment where you pay with CUC. In the nineties, the CUC was part of the tourist circuit, but that changed. It is no longer unusual to find a menu with prices in both currencies. A second complication is that many families complete their income with foreign currency, sent by relatives abroad or with CUCs because they work in the tourism sector or in a mixed company where they collect tips, because they are self-employed, etc. In addition, there are many workers and employees who receive products and/or exchange bonuses to obtain certain goods in addition to their salary itself. The third complication is that there are also goods and services that are offered very cheaply to staff through the company. The same device costs much less when purchased through the company than when purchased in a store. For example, it is a television, but it can also be a week of vacation.
The above makes it very clear that it makes little sense to calculate the equivalent of a Cuban salary in euros or dollars. The result of that calculation only gives us what a Cuban could buy abroad, not what he will have access to in his own country, except in CUC stores (and still).
To really know what a Cuban can buy with his salary, or in other words what his standard of living is, one must calculate the “real purchasing power”. In theory it is very easy, in reality that calculation is not so easy. It is done in the following way. Take a basket, for example, of one hundred products and goods. First calculate how much this basket costs in Cuba in pesos. Then the value of the same basket in a reference country is calculated. We take Belgium, but we could choose any "developed" country, because there are hardly any differences in the price structure between rich countries. The results in other words do not depend on the country of reference, in this case Belgium. Suppose that the basket is worth 200 pesos in Cuba and the same basket is worth 300 euros in Belgium, then with 200 Cuban pesos, you can buy both in Cuba and with 300 euros in Belgium. In this example, the real purchasing power of a Cuban peso is equal to 1.5 euro. This result allows us to calculate the real value of a Cuban salary in euros.
2. Some figures
In reality, the average parity is 1 peso = 1.6 euro or 53 times higher than the nominal exchange rate. You will find the explanation of our calculation in the annex. It closely approximates the information found in the CIA's public document: CIA World Factbook. i The calculation shows us that an (average) Cuban in Cuba can buy with a Cuban peso what a Belgian can buy with 1.6 euro. The CIA mentions: 1 peso = €1.6 ppp (Purchasing Power Parity or purchasing power parity). Note, this is an average. There are huge differences depending on the products and services. Some examples: a visit to the doctor or an admission to the hospital costs zero pesos, a bus ticket 0.2 pesos, a visit to the hairdresser 3 pesos, the monthly electricity bill 25 pesos, a train ticket (100 km) 8 pesos , a book more or less 25 pesos. Those are examples of cheap services or goods. At the other extreme we find that a new pair of shoes costs 240 pesos, a fan 1,000 pesos and a microwave 2,000 pesos.
When we differentiate between various types of products and services, we get an even better idea of what comparable services or products would be worth in our country. For basic products – the vast majority of what Cubans consume – there is a parity of 1 peso = €4.15 ppp, or 141 times higher than the official exchange rate. For the products of the CUC stores or services of private persons (to be paid in CUC), the parity is 1 peso = €0.025 euro ppp. That is even less than the official change, that is to say 0.8 times. In the back annex you will find a list of basic products and services, and others.
The figures and examples show that the price structure in Cuba is completely different from the one we manage. This is a consequence of the heavy subsidies for basic products and services and the fact that Cuba, after the fall of the Soviet Union, had to start paying for its imports at world market prices. Some examples of surprising prices in Cuba: the monthly fee to pay the mortgage on the house is less than 10% of the salary, but a pair of shoes in a CUC store is easily worth a whole salary. On the other hand, the monthly energy and water bill is worth the equivalent of two beers in the CUC sector. A pack of cigarettes is worth the equivalent of the basic monthly food basket for the whole family. It is possible to go several times to the theater, to the cinema, or to a baseball game (comparable in popularity with soccer here) for the price of a liter of gasoline, etc…
Therefore, a difference must be made between basic products and services, and others. The first are subsidized and are free or very cheap. Studying at the university or a long revalidation after hospitalization are free or very cheap. A bus ticket costs 170 times less in Cuba than here in Europe, the same is worth a visit to the theater. With a basic ration one can buy a very cheap amount of clothing and food, but the supply is limited. For extras or luxury goods, Cubans pay prices governed by the domestic market for food and by the world market for the rest. Compared to basic products, those prices are sky-high.
Now let's put the pieces of the puzzle together. We take a family where both parents work and have two children. One son is studying at the university and the other is in secondary school. This first category of families only has their salary in pesos and does not have access to additional income in CUC. 40% of the Cuban population is in this situation. They have an average income of 830 pesos. To be able to buy what these Cubans can buy in Cuba, here in Belgium we need 2,220 euros. It was recently calculated that a family with two children studying in Belgium needs a minimum of 2,150 euros to make ends meet. The Cuban family will not need loans so that their children can study, they will not have to postpone any hospital operation despite their relatively low income. Acquiring your own home will not be a problem either: more than 80% of the population owns their home. There is also room for a refrigerator, a washing machine, a television or a radio in this family's budget. However, eating meat every day will be impossible and you have to be careful with your shoes and clothes. For home repairs you will have to take out a loan or you will have to save until you have enough money. A dinner in a restaurant where you pay with CUC will be rather exceptional or impossible at all. This family has a very tight budget, but it can hardly be called poor, much less when compared to the norms of other Latin American countries.
Graph 1
The second family is made up in the same way, but it does have additional income. 60% of Cubans fall into this category. This family has average, in addition to their normal income, an additional income of 70 CUC or 1680 pesos; that is, a total of 2,510 pesos of income for the family. When we calculate it in pesos, this family triples the income of the first family, but those CUC or extra pesos are not dedicated to the purchase of basic products, they are dedicated to extras. Those goods are much more expensive, sometimes even 100 times more expensive than basic products and services. Those 70 CUC gives you a purchasing power equal to the average 480 euros in Belgium, which brings the purchasing power of this family to €2700 PPP. In pesos, the salary tripled, but due to the price structure, this means only a modest growth of 22% in purchasing power. This family will have little trouble getting meat on the table or buying clothes or an extra pair of shoes. A microwave or a hairdryer are not a problem and a beer in the CUC circuit from time to time will be possible. By saving a little, they can buy a DVD player or a mobile phone. The acquisition of a computer is not obvious. Considering European standards, this family is not rich, but it lives much better than an average family in any Latin American country.
Graph 2
Within the 60% group, which has access to CUC, there are relatively wealthy families in Cuba that have additional income that is above the average. These are Cubans who have a very profitable trade (legal or illegal) or who receive a lot of money from abroad. This is a very small percentage of the Cuban population, some tens of thousands of people. In addition to all the products that we mentioned previously, they can easily acquire a laptop, a mobile phone, a second television, very expensive branded clothes, etc. However, that does not mean that these families would be significantly richer. To double their real purchasing power, they would have to have an extra 3,000 CUC a month, or 170 times the average salary in pesos.
Graph 3
With this piece we still haven't completed the puzzle. Within the 40% group that does not have access to CUC, we are talking about an average family where both parents work, but that is not the case for everyone, of course. There are also the unemployed, retirees and people who live alone. As in the rest of the world, this category of people is a fragile category. 20% of the Cuban population is in this category. A single mother has to survive with an average of 1,700 euros ppp, that is, some with less. Recent studies in Belgium calculated that a single person with two children needs between 1,500 and 1,900 euros, depending on the age of the children. The minimum salary established by law in Belgium is between 1,000 and 1,300 euros. An average Cuban retirement in 2006 was worth around 800 euros ppp. It corresponds more or less with the figure for Spain. In Belgium the average retirement becomes 200 euros more and stands at 1,000 euros.
In all, they are still low income, but it must be taken into account that in Cuba practically all basic products and services are (almost) free and largely rationed, that is, fairly distributed. The shortage therefore does not come to light in the same way as in Europe. In Belgium, one in ten families says they postpone medical visits due to lack of money, and that our country has one of the best health systems in the world. In Cuba that is unthinkable. No one, no matter how "poor" they are, stops going to the doctor or buying medication. No one from the three categories will have any problem sending their children to university. However, this does not imply that you have to envy their living conditions. The meals of these fragile groups are usually austere. There is enough food (calories and protein) but it is monotonous: a lot of beans and rice. Cubans like pork, but little is eaten. They like to cook with oil, but these layers of the population are rarely able to do so. Hygienic products are also a problem. Worn-out shoes are no exception. Arrangements in the house are almost inaccessible, so they are far from paradise. But also far from the deep poverty of the rest of the continent.
3 . Some observations
3. 1. Economic development and social development
In Belgium the median for a family of two children is €3,010. In Cuba the median income is €2,500 ppp; a family without CUC has to live with €2220 ppp or respectively 83% and 73% of the Belgian average. Despite the fact that Cuba is not an economically developed country like Belgium and has a very weak position in the world market, it is able to offer a decent standard of living to its population. Kofi Anan said that 'Cuba demonstrates that even for a poor country, it is not necessary to expose its population to the worst privations. Cuba has a level of health that does not exist in most poor countries. In that aspect we can learn everything from the Cubans.
The following graph shows very clearly that a poor (economically) country can have very high-level social indicators. It is calculated based on UNDP (United Nations Development Program) data.
Graph 4ii
The dotted line is the results of the OECD countries, (Organization for Economic Cooperation and Development), the club of the 30 richest countries. In terms of infant mortality, life expectancy, nutrition (underweight children) and education (percentage of primary and secondary education), Cuba obtains results that compete with the OECD average. However, when we look at GDP per inhabitant, we see that Cuba is much lower. This graph demonstrates how even from a very weak economic situation, it is possible to develop a society based on social or socialist principles. An additional problem that Cuba has is that it has to develop it in a hostile climate. The Cuban example teaches us that a weak position in the world market can be almost completely compensated by making the right decisions for society. The weak economic base is obviously an obstacle to being able to provide enough food, a decent education and an adequate health system, but that show can be beaten. Social development is not determined by economic development. Cuba is not the only country that demonstrates it. Kerala, a state in India, ranks far below other states in the country economically, but ranks far above others socially. iii
Inversely, a high GDP does not guarantee social development either. Let's take two countries with a per capita GDP nine or ten times higher than Cuba's: the US and Great Britain.
Of course, this is not the "promised land" that US propaganda presents to Cubans to demonstrate the superiority of their system.
High social development despite a weak economic base also has its drawbacks. The high social, cultural and intellectual development obviously causes high expectations in the population, but these lack an economic base, which in turn causes frustration in the population. The development of the tourism sector further reinforces this sentiment. Cuba must be the only country in the South where the degree of schooling of the local population is higher than that of tourists. But that tourist does have much more purchasing power. Therefore, the biggest challenge for the Cuban revolution is to make this economic backwardness disappear. We already developed this point in another article .x
In short: development and the fight against poverty are, first of all, a question of distribution, of power relations and therefore of politics. Poverty is not a matter of fate, but a consequence of the power relations that exist in a society.
3.2. Compare with Latin America
The calculations we made of the real purchasing power in Cuba were made by comparing them with Belgium. We did it for educational reasons, so that a European could see what situation he would find himself in if he lived in Cuba. However, there is a danger both in this exercise and in the spontaneous comparison that a tourist makes when he is in Cuba. This is an unfair comparison, therefore the conclusion cannot be other than unfounded. If we want to judge a society, we have to do it based on its (economic) possibilities, its history, its conditions, etc... and not based on ours. It makes much more sense, it is much more correct to compare Cuba with the other Latin American countries. xi
Graph 5
First of all the economy. In order to measure the production of services and products, GDP per capita is usually used. If we measure it according to the official exchange rate in 2007 it was 4,580 dollars in Cuba compared to 3,610 in Latin America. If we express it by volume (according to purchasing power parity) it was respectively $12,000 ppp and $9,780 ppp. The preceding graph places Cuba in front of the rest of the Latin American countries. In both calculations, Cuba is more or less 25% above the Latin American average. In the years 2004-2009, annual economic growth in Cuba was 3.2% higher than in the rest of Latin America. On top of that, it must be taken into account that -if Cuba had been able to maintain the level of growth it had in the years 1959-1989, after the fall of the Soviet Union- the GDP would now be at least 75% higher still. xii Without the economic blockade - the longest in the history of the planet - we could add another 75%. xiii In this case, Cuba would be positioned as in the following graph.
Graph 6
We always talk about averages, that means we have to keep in mind that the Latin American continent is the continent where the difference between rich and poor is greatest. In other words, a large part of the Latin American population is below this average. According to Cepal, (United Nations Economic Commission for Latin America) 35% of Latin Americans in 2007 considered themselves poor, and 13% extremely poor. xiv These are the inhabitants of the huge slums in the capitals.
And Cuba? Our calculations based on figures from the beginning of the millennium show us that the weakest group in Cuban society (the poorest 10%) in terms of real purchasing power was still above the Latin American average. xv Meanwhile, various salaries and pensions were increased considerably. As basic services and products are free in Cuba, one cannot speak of poverty of money. The most recent UNDP reports estimate that the number of Cubans who are below the threshold of "human poverty" (the HPI-1 index) is between 4 and 5%. This index measures life expectancy, schooling index and social living conditions (access to drinking water and underweight). In the case of Cuba, the figure measures social marginality, that is, the percentage of people who for one reason or another "disconnect" and live on the margins of society. This figure for Cuba is among the lowest and therefore the best in the world.
Cuba's advanced social position compared to the rest of Latin America is well reflected in the following figures:
Poverty in Cuba has nothing to do with it, but wealth in Cuba has nothing to do with that of Latin America either. Rich Latin Americans are organized as a class, often described as the oligarchy. They control a large part of the economy and the media and have enormous influence in the state and in political parties. In most cases they can count on the support of the high command of the army and the church. In order to achieve great social progress for the benefit of large parts of the population, it is necessary to break the power of this oligarchy. Recent developments in Latin America clearly demonstrate this. In Cuba the situation is totally different. The rich don't form a class, they don't control any part of the economy, and they don't employ anyone. Nor do they have the slightest influence on political decisions or the media.
3.3. The internal abyss in Cuba
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In 1993 the use and possession of the dollar was authorized. Subsequently, the dollar was replaced by the CUC. As a result of this double monetary system, an abyss was born between Cubans with access to CUC and those without. Because of the low value of the peso against the dollar, this gap was quite large in the mid-1990s. In those days it was necessary (on the black market) to pay 150 pesos for one dollar. A monthly salary was then "worth" a dollar and a half. That situation was explosive and during the summer of 1994 there were rebellions in the streets of Havana. Meanwhile, the value of the Cuban peso multiplied by seven and a greater part of the population has CUC or received a salary increase or a higher income. Right now the gap between Cubans with and without CUC is no longer so big in terms of purchasing power: the difference is only 20%. In addition, those who live at the bottom of the scale do not lack any basic product or service, as is the case in the rest of the world - even in the rich world -. Despite the double monetary system, Cuban society remains very egalitarian. It is also noticeable in the street: there is no extravagant decadence, nor horrible poverty, as is common in the rest of Latin America.
And the gulf with tourists? Undoubtedly the two million annual tourists have a demonstration effect that cannot be underestimated. The expensive cameras and the other knick-knacks, the way of spending CUC as if they were pesos, surely catches the attention of Cubans. The purchasing power of tourists who visit the tropical island is indeed much higher than that of an average Cuban. But this situation must also be seen in its context. The real purchasing power of the average tourist will easily be 1.5 times higher than the purchasing power of a Cuban. But when we look at what tourists spend on, we see a very different picture. Many travelers stay in private houses, paying 20 to 25 CUC per night. One night in Varadero, on the other hand, is easily worth between 200 and 300 CUC all included, that is, 10 to 12 times more. Varadero is not for every tourist. In this context there is another necessary observation. During the visits we have made in recent years, we have seen how Cuban consumers are increasingly mixing with tourists. In many restaurants, bars and buses you can see tourists consuming mixed with Cubans. Would it be an exaggeration to say that the gap between tourists is bigger than the gap between Cubans?
Don't underestimate the psychological effect anyway. The basic ration is too tight and Cubans who live on pesos hardly have access to new clothes, they cannot change their diet and they can barely move in the CUC sector. They see their Cuban colleagues with CUCs with expensive sports shoes, cell phones, mp3 players, etc… In a society that gives so much importance to equality like the Cuban one, that stings even more. But an even more problematic point is that of the salary structure.
3.4. Social uprooting
The low value of the peso against the dollar and other foreign currencies not only translated into very unequal prices, but also into very unequal income. A taxi driver or a waiter in the tourism sector easily multiplies the salary of a teacher or a doctor. In Miami, which is barely 200 km away, you can earn tens of times more. In a country like Belgium, this situation would have horrifying social consequences. The difference in salaries is much lower than that of Cuba at the moment, however, Romanian and Filipino nurses are already being brought to Belgium to remedy the lack of personnel in hospitals. Let's not even talk about sectors such as horticulture, construction or hotels, restaurants and bars. In this sense it is a small miracle that hospitals and schools in Cuba still have enough staff.
It is very clear that this problem causes tensions. The teacher's son, who is 16 years old, for example, can earn more than his father's monthly salary in one night, taking tourists to a certain restaurant. Your sister might earn double if she seduces a tourist for one night. That explains why certain girls love to be in the weak meat business and also why some try their luck on the other side of the ocean. But the biggest problem lies in the work ethic. If someone only has pesos, they have to pay exorbitant prices for a pair of shoes, an extra piece of meat, or a microwave. This seriously undermines work motivation, increases corruption and endangers the entire production system. In the long term, this situation is unsustainable and therefore constitutes a second and very important challenge for the revolution. The series of reforms that are being carried out at the moment is an attempt to respond to this concern. xx
In general, the rate calculated in PPP does not vary much over the years. Only when there is a large difference between inflation in the two countries compared will the rate change significantly.
Schedule:
Calculation of purchasing power by parity (ppp) :
We made our calculation based on a basket that contains almost all the goods and services that an average Cuban family of two children and two adults purchases over the years. It all comes down to a cost per month of this or that product or service. If a table costs 600 pesos and lasts 20 years, that table costs 2.5 pesos per month. (600 divided by 20 and the result in turn divided by 12). The same goes for the calculation of the table in euros. Therefore, the part that that product or service occupies in the entire budget is taken into account. The CIA World Factbook calculates that 1 peso ~ 1.96 dollars ppp, in euros: 1 peso ~ €1.4 ppp (data from July 2009).
Basic products and services : house (rent or mortgage payment), energy (water, electricity, gas), basic food (book), maintenance products, public transport, medical and pharmacy expenses, school expenses, basic purchases of clothes and shoes, (book or second-hand), newspaper and magazine, tv, cinema, theater, sports game.
Tv, washing machine, refrigerator, gas stove, etc… bought by the company where you work.
Other : extra food in rural markets or in CUC stores, tobacco, alcohol in the CUC sector, extra clothing in CUC stores; maintenance and use of the car, extra fuel, microwave, stereo, computer, cell phone, …Tv, washing machine, refrigerator, gas stove, etc.. in a CUC store.
Sources :
Cepal, http://www.eclac.org/ .
UNDP, Human Development Report, Washington, years 2007-2008 and 2009.
Vandepitte M., De gok van Fidel. Cuba tussen socialisme en capitalisme?, Berchem 1998.
Vandepitte M., ‘Armoede, rijkdom en socialisme’, in Demuynck K., e.a., Cuba, een andere wereld ís mogelijk, Brussels 2002.
Notes
i The figures mentioned are the product of a comparative study of purchasing power carried out in the summer of 2009. CIA, The World Factbook, https://www.cia.gov/library/publications/the-world -factbook/geos/cu.html .
ii Calculated based on UNDP, Human Development Report 2009, Washington 2009.
iii See Vandepitte M., '15 jaar na de val van de Muur: het onbekende Kerala', http://archive.indymedia.be/news/2004/11/90238.html .
iv World Bank, Attacking Poverty. World Development Report 2001/2002 New York 2000, p. 46.
v http://www.frac.org/html/hunger_in_the_us/hunger_index.html ; http://www.fundmymutualfund.com/2009/11/nyt-1-in-4-children-and-1-in-8.html ; http://www.livescience.com/culture/090110-illiterate-adults.html .
vi http://edition.cnn.com/2009/US/03/10/homeless.children/index.html ; http://www.postandcourier.com/news/2009/oct/12/new-normal-includes-work-after-retirement/
vii http://en.wikipedia.org/wiki/Poverty_in_the_United_Kingdom ; http://www.theyworkforyou.com/wrans/?id=2005-06-20a.807.h.
viii http://www.poverty.org.uk/81/index.shtml .
ix http://www.freerepublic.com/focus/f-news/1918914/posts .
x See Vandepitte M., 'The economic and social challenges of the Cuban revolution in 2010', http://www.rebelion.org/noticia.php?id=106387&titular=los-desafíos- economic-and-social-of-the-cuban-revolution-in-2010- ; 5/23/2010.
xi Figures from UNDP, Human Development Report 2009 and 'Health Report', Financial Times, March 26, 2009, p. 26-7.
xii After the fall of the Soviet Union, the Cuban economy collapsed. It took 15 years to return to the GDP that Cuba had in 1989. At the growth rate of 1959-1989, that means a loss of 75%. For the growth figure for the first thirty years, see Herrera R., Cuba revolutionaire. Take 2. Économie et planning, Paris 2006, p. 93.
xiii Calculation made by Alejandro Aguilar Trujillo, emeritus professor at the University of Havana.
xiv http://www.eclac.org/publicaciones/xml/5/30305/PresentacionPSE-2007versioncortafinal.pdf , p. 12.
xv Vandepitte M., ‘Armoede, rijkdom en socialisme’, in Demuynck K., e.a., Cuba, een andere wereld ís mogelijk, Brussels 2002, p. fifty.
xvi UNDP, Human Development Report 2009, p. 171-4.
xvii Calculation based on unicef, State of the World’s Children 2009 , New York 2009, p. 117.
xviii fao , The State of Food and Agriculture 2007, Rome 2007, p. 189-193.
xix uneSco / llece , Student learning in Latin America and the Caribbean: Executive Summary of the First Report of Results of the Second Comparative and Explanatory Regional Study, Santiago, Chile, June 2008, p.24 at 29; Unesco, Education for All in 2015. Will we reach the goal?, Paris 2008.
xx See Vandepitte M., ‘The economic and social challenges of the Cuban revolution in 2010’.
Rebelión has published this article with the permission of the author under a Creative Commons license, respecting their freedom to publish it in other sources.