Economist Pedro Monreal points out that this measure “entails the risk of corrupt markets.”
14ymedio, Madrid, 28 June 2024 — Cuba’s private sector will be able to obtain a maximum profit of 30% on the goods and services it sells to the State as of July 1. This Thursday, the Cuban Government made public a resolution – dated Tuesday – in which this limit is established with the objective of “containing the expenses of state entities in their economic relations with non-state forms of management.” The measure is, as economist Pedro Monreal summarizes, a variant of “price caps,” which not only have not shown their effectiveness, but can even be harmful.
“State entities, in the process of economic contracting with non-state methods of management for the acquisition of goods and services, agree on prices and rates whose maximum profit rate does not exceed thirty percent (30%) of the total of costs and expenses, as well as the amount corresponding to the application of taxes on Sales and Services,” details the resolution published in the Official Gazette.
The text, which emphasizes the containment of inflation as its goal, urges lower-level administrations (provincial and municipal) to approve the maximum prices and rates of the goods and services they select based on the needs of each territory.
Private sector retail sales account for just 4.1% of those of the country as a whole. Although it is not known what part of them end up at the state sector
The impact of the measure, provided it works, would be more than limited. As Monreal points out, private sector retail sales account for only 4.1% of those of the country as a whole. Although it is not known what part of these sales ends up in the state sector, the percentage is too negligible to have any type of significant consequence.
“In addition to the fact that the base of ‘savings’ in state expenditures by l
