The crisis of the Cuban economy is worsening

While power outages remain unaddressed due to the poor conditions of the electrical infrastructure in Cuba, and the SEN is dedicated, day after day, to providing detailed information on discrepancies, impacts, incidents, and more, suddenly a different problem, much more severe, appears on the horizon.

The agonizing crisis facing the Cuban economy will worsen in the coming months, as in addition to the lack of oil to meet the basic needs of the population, there is another threat that the regime lacks the means to address. This threat is the increase in the prices of essential agricultural products, which could reach 8.5% by 2026 due to the conflict with Iran. This is a forecast that international analysts have already begun to include in their reports, as it is widely accepted that the closure of the Strait of Hormuz has dealt a severe blow to the global trade of these products.

In the event that the conflict were to enter a more complicated stage  than what has been experienced so far, and if a closure of the strait were to occur for six months, coupled with the stagnation and paralysis of negotiations between the United States and Iran, the situation could become particularly complex.

In such a case, the sectors most affected by their dependence on oil or oil-derived raw materials, such as the agri-food sector, would find themselves in a highly compromised situation. For instance, the increase in fertilizer prices will directly impact food prices, which are expected to rise significantly by the end of this year.

On the other hand, the increase in energy prices affects various stages of food production, from seed cultivation to harvesting, including processing, storage, and transportation to consumer markets. Some analyses predict that the average global price of key staple agricultural products could rise by 8.5% this year and by 3.8% in 2027, figures that diverge from pre-conflict estimates, which were 0.7% and 2.5%, respectively.

The Cuban economy, highly dependent on external sources to meet the food needs of the population, due to the structural unproductiveness of the national agricultural sector, must prepare to pay higher prices and, above all, seek financing, which is difficult to obtain at this time.

We need to act quickly, as the alternative for the regime, which is grant funding, will become complicated in a global context where many countries will also struggle to acquire food. The higher prices that will need to be paid for food purchases will increase the deficit in the external account, putting pressure on the goal of external balance, which can already be forgotten by 2026.

And if food prices indicate a complicated scenario of rising costs for the Castro regime, the other component of prices that will be most affected by the crisis will be transportation, which in the Consumer Price Index of the Cuban economy has already risen since last February, with increases far above the average that once again hinder the necessary stabilization of the economy, in this case, of prices. For example, the rise in maritime freight costs will make it more difficult for the Cuban economy to handle the payment of the high costs of sea transportation, which are expected to increase by between 15% and 20%.

The review of the GDP growth rate of the economy for 2026, which the government plan anticipated at 1% but which the CEPAL, in its latest forecasts, placed at -6.5%, is closely related to this critical scenario in which the vicious circle of the Cuban economy is tightening, and anomalies are accumulating that the communist regime will not be able to solve with its usual practices. A profound change is required to overcome the severe crisis that is already unfolding. Then, they will blame the blockade.