Cuba's subsidized cigarettes going up in smoke

HAVANA Wed Aug 25, 2010 5:54pm EDT

A man smokes a cigarette near a mural with a Cuban flag in Holguin August 21, 2010.REUTERS/Enrique De La Osa

A man smokes a cigarette near a mural with a Cuban flag in Holguin August 21, 2010.

Credit: Reuters/Enrique De La Osa

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HAVANA (Reuters) - Cuba is phasing out its longstanding monthly allotments of subsidized cigarettes as President Raul Castro works to jump-start the island's sputtering economy.

Beginning next month, some 2.5 million Cubans over the age of 54 no longer will get their four packs of cigarettes as part of the country's ration program, the government announced on Wednesday.

"The Council of Ministers has resolved to eliminate cigarettes from the rationed family basket as of September as part of the measures gradually being adopted to limit state subsidies," an official statement said.

The cigarettes "are not a primary necessity," it said.

Castro has said that communist-ruled Cuba's ration system eventually will be eliminated as he moves to modernize the economy.

Monthly allotments of chickpeas, potatoes and a pound (0.45 kg) of sugar were removed from the system this year.

Many subsidized items were cut in the 1990s after the collapse of former benefactor the Soviet Union plunged the island into a deep recession.

But allotments of inexpensive cigarettes for Cubans born before 1956 were kept in place.

TRIMMING STATE PAYROLL

Local economists estimate the ration of rice, beans and other staples provides enough food for less than two weeks, leaving many Cubans to turn to state-run stores and markets.

Castro, since taking over from his ailing elder brother Fidel Castro in 2008, has pushed to restructure the centralized economy, which has been battered by hurricanes, the global financial crisis and chronic inefficiencies.

He has called for the elimination of all subsidies, and such things as state-sponsored honeymoons and vacations already have been cut. But Cubans would still enjoy free health care, education and social security.

Castro recently announced plans to lay off 1 million workers over five years, or a fifth of the labor force, and has called for more family farming, self-employment and small business creation to make up for cuts in the state's payroll.

Cuba is an important tobacco and cigar producer and boasts one of the world's highest per-capita rates of smokers.

Unlike many countries where cigarettes are heavily taxed, Cuba sells unfiltered black tobacco cigarettes for as little as 7 pesos a pack at state stores, or around 40 cents, while the allotted packs cost just 2 to 3 pesos.

Retirees can often be seen on Havana's streets selling their subsidized cigarettes for 5 pesos a pack.

"This is a blow for the elderly like me," 82-year-old Esperanza Rodriguez said. "It was like a little bit of money they gave us each month."

(Additional reporting by Marc Frank; Editing by Kevin Gray and Xavier Briand)

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