Price Caps Lead to Increased Shortages and Inflation, Admits Díaz-Canel

In a significant admission during the closing of an Extraordinary Plenary of the Central Committee of the Communist Party of Cuba, Miguel Díaz-Canel acknowledged that the price caps implemented by his administration not only failed to curb inflation but also had unintended adverse effects. He announced that Cuba would abandon this policy of widespread price controls.

Speaking to the Extraordinary Plenary, the Cuban leader conceded that the measure resulted in outcomes the regime had previously denied or downplayed for years.

"In practice, the price caps did not succeed in controlling inflation. They often led to product shortages, illegal market shifts, increased prices, reduced tax revenue, and a futile race between actual market prices and administrative decisions that were perpetually delayed or inflexible to the changing economic landscape," stated Díaz-Canel.

This self-criticism carries substantial political weight, as the government had been a staunch advocate of these controls in recent years. This includes Resolution 225/2024, which in July 2024 set maximum prices for six essential products—cut-up chicken, cooking oil, powdered milk, pasta, sausages, and powdered detergent—a directive the government suspended before implementation while negotiating with private sectors.

At the time, the Food Monitor Program cautioned that price caps might exacerbate shortages and expand the black market, while economist Pedro Monreal predicted that such controls typically result in suppressed inflation coupled with scarcity. Two years later, Díaz-Canel validated this assessment from an official platform.

"Therefore, we will not continue to impose general price caps," declared the leader, referencing Manuel Marrero Cruz, the Prime Minister, who introduced a series of over 20 economic transformations approved during the Plenary.

Instead, the regime announced a tax reform aimed at eliminating distortions that increase production chain costs. "We will progress towards a value-added tax (VAT) that is creditable and gradually supported via electronic invoicing to avoid cascading tax impositions," Díaz-Canel explained.

These measures are contingent on a simultaneous transformation of the social protection system, shifting from product subsidies to direct subsidies for individuals. "These decisions can only be implemented alongside a more direct, effective social protection system, transitioning from subsidizing products to subsidizing people, and with efforts to restore the purchasing power of wages and pensions," he specified.

The economic context surrounding this acknowledgment is dire. Prices in Cuba continue to rise, according to official statistics: by May 2026, the annual inflation rate had reached 15.89%, with food and non-alcoholic beverages increasing by 19.24%.

In early June, the informal market saw the U.S. dollar reaching an unprecedented high of 600 Cuban pesos.

The National Assembly has been called to an extraordinary session this Thursday to ratify the reforms approved by the Communist Party, including the cessation of generalized price caps.

"This is not about leaving anyone to fend for themselves against the market; it's about providing better protection, increasing production, regulating intelligently, and organizing realistically," concluded Díaz-Canel regarding the new approach that, according to the regime, will steer Cuba's pricing policy.