Cuba grapples with growing inequality

Thu Apr 10, 2008 12:27pm EDT

By Marc Frank - Analysis

HAVANA (Reuters) - Reforms passed by new President Raul Castro to allow sales of computers, DVD players and cellular telephones and let Cubans stay at tourist hotels are a recognition of growing inequality in the communist country.

The goods and services are available only to Cubans who have the hard currency to pay for them, in convertible pesos, or CUCs, that are worth 24 times more than the Cuban pesos that most salaries are paid in.

Most of the items and services were previously available on the black market for those willing to break the law to buy them and risk the products being confiscated.

By putting them on legal sale, it makes life easier for those Cubans with access to CUCs, which are pegged at $1.08, but it also highlights the inequalities in a country where the average wage is equivalent to about $17 a month.

While professionals like doctors and teachers have very low state salaries, those Cubans who receive remittances from family overseas, tips from tourists, run small businesses, go on government missions abroad, receive CUC bonuses, or sell goods on the black market have much higher purchasing power.

That could change soon, however, with a new labor code that for the first time does not put a limit on an individual's state wages as long as they are tied to productivity.

Cubans were not shocked by the steps taken by Raul Castro within weeks of succeeding his ailing brother Fidel Castro as president, but some felt frustrated.

"I refuse to buy an electric moped for 98 CUCs. It is priced like a limousine in any other country, at more than four times my monthly salary," a doctor said after visiting a shop where new consumer items were on sale.

INCENTIVES

Sugar worker Ernesto Martinez said most people supported the measures despite the inequality they revealed.

"Everyone realizes these measures could in one way or another expose differences, but if we do not take them what's going to happen?" he said in a phone interview from the countryside.

"People have to work in any society, but if there is no incentive in life they don't work, at least the majority."

Cuba prides itself on being the most egalitarian society in Latin America but inequality is not new here. Around 85 percent of the country's private savings in Cuban pesos are held in around 15 percent of the bank accounts.

When the fall of the Soviet Union plunged Cuba into its worst crisis in the early 1990S then President Fidel Castro bitterly announced that the U.S. dollar would become legal tender alongside the Cuban peso.

State foreign exchange shops opened, family businesses were allowed and the country opened up to foreign tourism and investment as Castro tried to stave off a complete collapse of the economy.

He said he had no choice if Cuban socialism was to survive, despite the inequality and social problems the measures would create.

According to Cuban sociologists, that may have been an understatement.

The foreign exchange shops and services did around $1.5 billion in business last year, excluding hotels and directly related services.

Cuba's Gini index of income inequality rose from .24 in 1986 to .38 in 2000, according to Havana professor Myra Espina in a paper published in Cuba. Perfect equality would earn a 0 on the index and complete inequality a .99.

The index is an international standard widely used to measure inequality, though it does not take into account health care and education, which are universal and free in Cuba.

Most local experts say Cuba's Gini index has risen further since 2000, although no new figures are available and they believe it is still less than other countries in Latin America, which tend to come in between .50 and .60.

(Reporting by Marc Frank, Editing by Michael Christie and Kieran Murray)