Cuba Faces Inflationary Risk as it Seeks Recovery

With a background as Harvard University professor, now retired, Dr. Jorge I. Dominguez served as Harvard Academy for International and Area Studies chair. A major research area for Dr. Jorge I. Dominguez has been Cuban economic and political policy and he follows developments in this sphere closely.

As reported by Reuters in late 2021, Cuba is facing rapidly rising prices and product shortages, even as it seeks a pathway to recovery from an extended pandemic-related recession. In August, the Communist country ended its ban on private businesses, which had been in effect in various forms since 1968. Ending the policy led to the incorporation of nearly 1,000 small- and mid-sized enterprises in a span of three months.

Unfortunately, a new generation of budding entrepreneurs faces a rapid inflation rate that the Cuban government has pegged at 70 percent, but is believed to far exceed that. The US dollar, officially exchanged at 24 pesos, brings as much as 75 pesos on the black market.

With four percent national growth targeted for 2022, Cuba has limited options. Increasing salaries would risk a more severe inflationary spiral, as Cuba does not possess enough hard currency to import inexpensive goods. Recommended measures beyond legalizing smaller private companies center on providing state businesses with more autonomy and the ability to operate according to market principles.