Cuban companies criticize government policies in audio leaks

The Cuban government has halted a proposed price cap on chicken and other staple foods after Cuban private entrepreneurs opposed the measure and warned officials that the population would starve, a rare revelation of the influence of an emerging private sector that has flourished despite tight government controls.

The group of private entrepreneurs fiercely contested the decision and made surprisingly outspoken objections to government control and high taxes on their businesses during a June 28 meeting with government officials, according to a recording of the meeting obtained by the Miami Herald.

The Deputy Minister of Finance and Prices, Lourdes Rodríguez, and the head of imports at the Ministry of Foreign Trade, Roberto Fulton, called the owners of small and medium-sized private businesses that import food to inform them that the government had decided to impose restrictions on six of the most popular products – chicken legs and thighs, cooking oil, powdered milk, pasta, sausages and detergent – in order to contain soaring inflation.

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But the meeting took an unexpected turn when several entrepreneurs objected, saying the new prices were too low, did not take into account their costs and would force them to stop importing food at a time when society was bearing the brunt of a severe economic crisis and widespread shortages.

“Let people eat,” said the irate business owner, who said during the recorded meeting that he was a former lieutenant colonel in the Cuban Revolutionary Armed Forces.

Another issued a stark warning: “There will be no chicken or milk powder. As a revolutionary, I want you to tell the highest levels of government that they should know that in the middle of summer there will be a complex supply problem.”

It looks like the warning worked.

On July 1, when the limit was set to go into effect, some local governments posted a note on social media saying the measure was suspended pending negotiations between the government and the private sector to establish “fair prices.” Deputy Minister Rodríguez gave a similar explanation on state television later that day.

It was a rare, if temporary, victory in a country whose leaders are accustomed to top-down decision-making.

The exchange exposed the dynamics of a nascent private sector subject to the whims of a communist government that tolerates it only out of necessity but is ready to crush it at a moment’s notice. But it also shows, unexpectedly, that private entrepreneurs are becoming more open to confronting officials about policy and can use their limited power to try to shape it, especially when the government is bankrupt.

Cuba’s centrally planned economy is in such bad shape that the government has had to significantly reduce subsidized food rations distributed to Cuban families. It is increasingly relying on donations from abroad and the private sector to feed the population. Last week, Granma, the Communist Party newspaper, reported that the government was adjusting this year’s budget to the conditions of a “war economy.”

Meanwhile, small and medium-sized businesses have been buying millions of dollars in food, other essential goods and even cars from the United States and other countries since they were authorized in 2021. But Cuban authorities have not been pleased with the private sector expansion and recently arrested some private business owners on charges of tax evasion and corruption.

The Biden administration has eased some embargo restrictions to allow Cuban independent private entrepreneurs to open bank accounts in the United States and has issued several authorizations for U.S. companies to invest in private companies in Cuba. However, the Cuban government has not yet allowed any foreign investment in the private sector.

Government restrictions fuel high prices

Cuban authorities have also taken other measures to curb the growth of these companies, which have been widely questioned by entrepreneurs during meetings with government representatives.

Business owners complained that the government forced private companies to deposit money into Cuban banks, limiting the daily cash they could withdraw from their accounts. They also questioned the calculations beyond the price limits, saying they were distorted because a “fictitious” dollar exchange rate was used.

The government doesn’t sell dollars to private companies at the official rate of one dollar for 120 Cuban pesos — or any other rate, for that matter. That leaves business owners to buy dollars on the informal market — where the dollar is three times more expensive — so they can pay suppliers abroad.

“You force us to commit illegal acts and invent new things,” the former lieutenant colonel said.

Cuban authorities have also required private companies to use the official exchange rate for accounting and tax purposes, forcing them to record “fictitious costs” on their books, one accountant working for a private company added during the discussion.

An effective tax rate of as much as 55 percent, rising transportation costs in a country where gasoline is in short supply, and other fees charged by state import agencies, port facilities and warehouses also contribute to high prices, say private business owners who have asked officials to suspend a 10 percent sales tax that went into effect this year.

Higher food costs in the United States, where many meeting participants said they were buying their supplies, also resulted in higher prices, they argued. None of those factors were taken into account when calculating price caps, they said.

Officials claimed that the prices were calculated based on real data and “actual costs” and responded to the avalanche of complaints with silence, admitting that the government would analyze their arguments more closely.

“Nothing works well here”

Ultimately, the exchange exposed the government’s credibility crisis.

The former lieutenant colonel in the Cuban Revolutionary Armed Forces said he ran a profitable business that involved importing, distributing and selling food products and paid $132 million in Cuban pesos in taxes. At one point, he mentioned having a fleet of about 30 distribution vehicles.

The fact that a former military man built such a large company is an example that has caused so much concern among human rights advocates and Cuban-American politicians about the private sector in Cuba. But he was also the most outspoken critic of the government during the exchange, illustrating why the Biden administration believes that supporting capitalism on the island may be the quickest way to change views in Cuba.

“They’re always hunting us to see where they’ll catch us,” he said, referring to the government. “And who solves the problem of people’s hunger? Mipymes,” he said, using the Spanish abbreviation for these private companies.

“If we don’t tell the truth, we’ll continue to be mired in this big lie that we’re living in,” he said. “Nobody here believes in anybody anymore, because it’s a lie. Nothing here works well.”