Cuban Government Imposes Strict Price Controls on Construction Sector

In a move aimed at reorganizing Cuba's construction industry, the Cuban government has implemented the Construction and Assembly Pricing System (PRECONS III), a legal update designed to address "distortions" and curtail unjustified budget increases in state projects. These new regulations, issued by the Ministry of Finance and Prices (MFP) along with the Ministry of Construction (MICONS), were published in the Official Gazette No. 45 on May 12th and will take effect in July.

PRECONS III not only replaces previous regulations—Resolutions 104/2021 (MFP) and 38/2021 (MICONS)—but also introduces a new approach. It standardizes the price calculation for all entities involved in state projects, whether state-owned or private, and mandates a direct correlation between prices and technical-economic feasibility studies. The new system sets clear caps: a maximum profit margin of 15% on direct costs, labor rates up to five times the current rates, and limits on indirect expenses (a maximum coefficient of 1.0 on direct labor costs and 0.3 on equipment usage). Additionally, all costs must be verifiable and subject to audit.

The regulations require each project's total budget—whether for new investments, major repairs, or maintenance—to be contained within the approved state funding. Lourdes Rodríguez Ruiz, Deputy Minister of the MFP, noted that the new policy serves to regulate both state and non-state economic actors in the proper use of state budgets for construction activities. According to the official state newspaper Granma, she emphasized the goal of establishing a construction pricing system that allows state and non-state economic actors to operate on equal terms.

One of the most contentious aspects of the reform is the removal of previous exemptions for the private sector. Moving forward, all participants—state or private—must adhere to the same rules when involved in state projects. Furthermore, the payment to contracted workers is restricted, and investors are now directly responsible for preparing budgets and feasibility studies.

Antonio Amaury Medina Morante, Deputy Minister of MICONS, clarified that state entities must agree on prices with non-state management forms but must stay within the approved budget and project scope. He also mentioned that six months after these regulations take effect, their outcomes will be reviewed to refine or correct any discrepancies.

This reform introduces a new pricing model detailed in Annex I of Resolution 153/2025, comprising 19 components ranging from raw materials to taxes. It includes an updated technical methodology (Annex II) and new standards for budget adjustments in ongoing projects.

PRECONS III follows years of complaints about the sector's disorganization and numerous violations in price formation. Despite the previous system being in place for four years, the government acknowledged persistent "concerns, violations, and budget calculation increases," necessitating this update.

While the MFP views the new system as a "key tool to combat inflation in construction services, fostering a more favorable environment for project development," its real impact may exclude private SMEs and builders from public sector opportunities due to an inability to cover even basic costs under the new framework.

Most construction materials in Cuba are imported and bought in foreign currency. Without an official exchange market, private construction firms must purchase foreign currency on the black market, where the U.S. dollar trades at more than triple the official rate (370 CUP compared to the official 120 CUP). This disparity, along with a forced banking process without real conditions, inflates material costs and makes it economically unfeasible for SMEs to undertake public projects without incurring losses.

Initial reactions on social media from private entrepreneurs suggest that PRECONS III, rather than revitalizing the sector, imposes unsustainable barriers for SMEs and private builders. They warn that caps on wages, profits, and expenses will make any commercial ties with the state unviable.

By enforcing "equal rules for all" and tighter budget control, the government aims to prevent each public investment from becoming a financial drain. It remains to be seen if this system, unlike its predecessors, will endure beyond paper.

On Wednesday, the Cuban government also announced a significant rise in wholesale cement prices for domestically produced material. This measure, justified as necessary to ensure the industry's financial sustainability, comes amid a severe economic crisis, high inflation, a shortage of construction materials, and unmet housing demand.

State and private builders, as well as ordinary citizens, are likely to feel the impact of increased cement prices, affecting both public project costs and individual efforts to build or repair homes. The sharp decline in housing construction in Cuba is a clear indicator of the ongoing economic and social collapse in the country: in 2024, the number of homes built was 5.5 times fewer than in 1984 and 15 times fewer than in 2006. Even in the worst year of the Special Period (1992, according to economist Pedro Monreal), nearly three times more homes were built than last year.

During the first quarter of 2025, only 1,344 houses were built in Cuba, amounting to just 12.4% of the planned 10,795, underscoring an alarming setback in the deteriorating state housing construction program. This highlights the structural collapse of the sector and the government's inability to address one of the population's most critical needs.

In contrast, comparative statistics from recent years reveal a persistent trend: since at least 2014, tourism-related activities have been increasingly prioritized in national investment. Despite the prolonged stagnation of the sector and the severe shortages affecting the population in key areas such as public health and food production, the Cuban regime continues to focus on tourism investments.

Economist Monreal comments, "The contradiction between a declining tourism sector that continues to voraciously consume scarce investment resources and a floundering food crisis... reflects, at the very least, an immobile policy."