Why Do Prices at Cuba’s Markets Continue to Rise?
Erasmo Calzadilla
HAVANA TIMES — On October 11, 2014, Cuba’s Juventud Rebelde newspaper published a long article by journalist Rene Tamayo dealing with the price of different products at agricultural and livestock markets. The columnist tells us these prices continue to rise, though less quickly than before: 4% this year, as opposed to 20% in the previous season. Such “good” news can have only one explanation: “the reform measures in the agricultural and livestock sector are starting to develop and yield positive results.”
I wonder whether journalists who write for Cuba’s official newspapers are obliged to be optimistic and speak well of government officials. I say this because there are in fact many reasons that could explain a slower rise in prices.
In fact, it was impossible for them to continue rising at the startling rate of 20% a year. Another year like that and prices would have simply become unpayable.
In this post, I would like to bring you up to date on the situation and discuss the policy being applied by government leaders to solve the problem.
My perception as a buyer is that prices continue on an upward trend. Every season, several products go up by one, two or three pesos, and no price ever drops. Organic vegetable gardens in the city have a major role in the rising prices – the notion that they are community gardens is a tall-tale for credulous tourists.
Let us try and make sense of what’s happening. Is it that the measures implemented by Cuba’s Minister of the Economy Murillo have not been successful?
According to the data quoted by the journalist, the reforms have indeed managed to incentivize our decadent agricultural production system. Last year, we witnessed 25 % growth in comparison to the previous. If they’re not inflating these figures, it is a startling feat. Let us assume it is true and continue with our analysis.
The above begs the question: how is it that such positive results aren’t being reflected in product prices?
To explain this contradictory phenomenon, the columnist advances two theses:
1. Bad weather affected the production of tomatoes and other high-demand products.
2. The demand is far too high and is still not being met by production.
The drop in tomato production was an isolated incident without significant repercussions. I believe the profound and systemic cause has more to do with the second thesis: persistent shortages.
Non-Linear Trends
If offer and demand were kept in relative balance, production and prices would maintain a healthy relationship of inverse proportionality. But Cuba’s agricultural and livestock market is anything but balanced, as the supply is always well below the demand (the journalist demonstrates this with statistics). As a result of this, prices become detached from the actual offer and remain inflexibly tethered to a limit value.
The question that comes up now is: why, despite significant investments in the sector, the new liberalizing measures and the high prices paid by consumers, does agricultural production not manage to satisfy demand?
A series of historical and economic circumstances could help explain this. The economic blockade imposed on Cuba by the United States, massive migrations from the countryside to the city and strict State control over agriculture (a combination more toxic than Agent Orange) stand out for their destructive effects.
But the worst, dear friends, is yet to come: the marabou-ridden Cuban countryside is already feeling the noxious effects of the inevitable decline in fossil fuel supplies and the advent of climate change. These faceless enemies are mercilessly destroying the technocratic dream of importing the Green Revolution to Cuba, thank god.
“Our” leaders, however, do not appear to understand the delicate situation we’re in and continue to bet on the Chinese model: prosperity, development and the freeing of productive forces and the market, under the guidance of the Party. With such formulas, they hope to revert several decades of State-imposed paralysis.
The one, tiny problem with this is that, within the context of chronic shortages, a free market inevitably turns into a captive market controlled by mafias. This is already happening: despite government efforts to supply wholesale markets without the intervention of intermediaries, products continue to arrive at consumers with monopolistic prices (Tamayo mentions this phenomenon in his article).
Conclusions and Solutions
The architects of our socialist reforms and probably many readers believe that high product prices, and the black market in general, will disappear when production manages to catch up to demand.
This would be a sound supposition, perhaps, if we were not at the very threshold of the energy crisis and suffering the effects of climate change – but we are, and setting our sights on prosperity now is a major historical mistake that we will pay dearly for.
Laxer police and social control mechanisms will facilitate the emergence of local mafias (this is already happening). In addition, “liberal” measures will bring about inequality, social disintegration, heartless and individualistic values…the last thing we need on the eve of a social crisis.
In view of the above, I would like to invite discussion on three ideas aimed at overcoming Cuba’s food problems:
1. Putting a stop to the process of privatizing the Cuban countryside, but without returning to State monopoly. The key to ensuring resilience in the countryside may be found in small, farming communities.
2. Rescuing the ration booklet as a means of distributing essential food products. Only thus will we be able to avoid massive under-stocking at large urban centers. A solution could be to raise ration booklet prices to somewhere between current ones (which are ridiculously low) and those of the “free farmer’s market,” such that neither producers nor consumers are forced to depend on State subsidies.
3. Encouraging emigration to the countryside and the ruralization of cities. If this process isn’t planned and executed with enough time, it will happen in the most chaotic and terrible of fashions. A movement known as “Transition Communities” – involving towns and cities that are actively preparing for the energy crisis and the effects of climate change – is already underway around the world. The more developed countries are its chief promoters. Communist leaders, however, have greater faith in capitalism than capitalists themselves. I think whoever discovered the dialectic deserves a warm round of applause.
I just want people to understand at this the Cuban government is the holding things back. Many people have failed in Cuba and will continue to fail until the Cuban goverment makes changes and these are not happening and when in Cuba stand up and fight they can end up in jail.
Steve you have repeated numerous times your efforts to do business in Cuba and the obstacles you have encountered. Enough’s enough. Try and add something new to the discussion.
We have been trying to lease government underused land for 5 years . The Cuban government has been very slow to allow small scale farmer the right to import seed and other crop inputs duty free from other countries. The government would 30% of the crop for free and the rest sold on the open market at fair prices. Food processing coops and machinery sharing groups with help from foreign investors who would make their money back plus interest as items are exported from Cuba have been blocked.
I’m not qualified to say either way.
Ok, so by your on admission then, Cuba is lying!
Figures are massaged everywhere in order to make people look better. Hospitals in the UK re-designate trolleys as beds, corridors as wards and refuse to make appointments in advance in order to keep their waiting lists down. Police get criminals to take responsibility for crimes they haven’t committed just so their clean up figures look good. I’m not disputing that those things happen but your hearsay evidence doesn’t say how much, or how much it affects the figures.
There is an independent agency which monitors the situation – the WHO. Like I said they have offices in Havana and would soon be able to ascertain whether there was widespread malnourishment or significantly lower life expectancy rates. They are experts in the field.
The argument is not as “piss pour” as you think. Cuba often submits false data. Doctors who have left the profession to start their own business selling popsicles are counted among the island’s practicing physicians. Abandoned Health Clinics are included in Cuba’s medical facilities. Women who give birth to babies stillborn are denied birth certificates that would document the death. Abortions are undercounted as well. You are correct that other countries self-report as well. However, false or misleading statistics in a free country would trigger the medical professionals who are reflected in these statistics to publicly question the data. Imagine the New York Times response if the US Dept. of Health submitted bad numbers? However, in Cuba, there is no independent agency to question the Castros, at least not publicly. My best buddy in Cuba is a surgeon. I have heard stories about all kinds of false data. You are right about the fact that I can’t provide any more reliable data. The Castros have made sure of that.
I agree with a lot in this article. However they can’t just raise the price of the ration booklet without finding the money from somewhere. What I would do is remove the facility from people who receive a lot of money from remissions abroad, those in front line tourist occupations. I would also legalize/tax and regulate the sex industry and remove the ration book from those people as well. Also probably remove it for the farmers.
With a smaller stock it will be possible to increase the value to a decent level. But it is also necessary to clamp down on the losses in distribution. This shouldn’t be that difficult. Can’t someone collect the tickets from the endpoint and only pay for the number of tickets that the endpoint has taken. Also create a mechanism that if a person can’t get the item on the ration booklet they can get a redress from those responsible. That would soon flush out the leakages.
On your first point I would like to have more information on what exactly you mean by small farming communities.
Every country self-reports its data. Most statistics everywhere are gathered that way. How else could it be done — it would need someone collecting stats at every hospital and every barrio.
It doesn’t mean that the WHO takes everything that the Cuba government says at face value. They aren’t stupid. They have people on the ground and they make the best estimation that they can. To quote from their site.
“Many of these datasets represent the best estimates of WHO using methodologies for specific indicators that aim for comparability across countries and time; they are updated as more recent or revised data become available, or when there are changes to the methodology being used. Therefore, they are not always the same as official national estimates, although WHO whenever possible will provide Member States the opportunity review and comment on data and estimates as part of country consultations.”
It’s a piss pour argument to dismiss data whenever it doesn’t suit your argument, when you can’t provide any more reliable data.
Cuba self-reports its data to the WHO. ‘Nuff said.
The World Health Organization says there are no cases of child malnutrition in Cuba.
This means sufficient food is being distributed more on the human- need level than on the for-profit level as it is in capitalist Third World countries in which some millions of people, mainly children, starve to death while the stores there are full of all kinds of food. .
Erasmo,
I thoroughly agree with you on the three points at the conclusion of your column .
I especially would like to see some sizable cooperatives put into operation either under a government start-up plan that would be island wide or by large local groups developing their own coop with the financial and material support of the government . All land should be owned by all the Cuban people however .
It can be leased permanently by a cooperative as long as it serves a social need .
(The decisions as to what is “social need ” would be determined in a democratic /majority- rule fashion)
Such workplaces and farming coops were the way of humanity for tens of thousands of years, employed “mutual aid ” as is the intrinsic cooperative nature of humans and all thriving communities of animals and insects.
Once we’re rid of capitalism ( 15-20 years at the latest) and the state ( a few years or decades later) humanity should return to that unselfish, democratic way that is the natural state of human beings.
A cooperative ,even a huge one is not much different from what our ancestors had as a day-to-day way of life .
It requires a well-educated and well-informed public operating a participatory democracy without the corrupting influence of electoral politics or government or capitalism.
It’s the anarchist ideal .
I like it.
Who told you their was equitable distribution of anything in Cuba?
…..”Marxist- socialist system like Cuba…”
The only socialist aspect of Cuban society is the equitable distribution of essential goods and services . That’s it and that one aspect is insufficient for anyone to term Cuba a socialist or Marxist country/society.
All the rest of the workplace and government is totalitarian and for that one reason, the lack of democracy from the bottom up, by the workers, Cuban society cannot be seriously defined in a blanket manner as a socialist or Marxist system .
The totalitarianism of Cuba’s state capitalism is at fault.
Not a non-existent socialism.
The author forgets one thing: the Cuban regime lies.
There is no 25% growth in production. His assumption that this is true is where he goes wrong.
The market were prices are set by supply and demand show that the same (desperate) demand is chasing less supply. that means an increase in prices.
Economics 101. Erasmo should look at reality instead of ignoring it in his analysis.
Erasmo is confused about the causes and in his proposed solutions. I suppose one of the effects of living in a marxist-socialist system like Cuba is that the basic principles of economics are utterly unknown or at best, seriously misunderstood.
The reason prices rise is because either demand outstrips supply, or there is an oversupply of pesos which dilutes the value of the currency. Most likely, it’s a combination of those two influences.
Cuba’s dual-currency system distorts the economy and amplifies both of those contributing causes. That fact is well known. But less understood, yet equally true, is how the rations booklet system, allegedly introduced to cope with shortages, actually produces shortages. Under the ration system, the State buys food from producers at artificially low prices. The goods are then distributed (inefficiently) and sold for local pesos at subsidized prices. Because of endemic corruption involving everyone from lowly clerks to high officials, diversions of these rationed goods to the black market is a profitable way to make a few extra dollars. Why sell tomatoes for pesos when you can sell them to a casa particular for CUCs?
Erasmo is worried that a free market will create an opening for a so-called “mafia” to control the supply and therefore prices of produce. That’s where he has it completely backwards. As I have shown above, the supply mafia already exists and has existed for 5 decades. It is a creature of the Cuban economic & political system. The Cuban political system, with no method of public oversight or redress, creates the opportunities for corrupt officials to exploit the controlled supply of goods for personal profit.
Erasmo points to the limited and highly regulated set of economic changes introduced in the past few years and erroneously labelling these as “liberalizations”, blames them for either failing to fix the problem, or worse, actually causing the problems in production and supply.
Clearly, Raul’s economic reforms which have allowed a small self-employed sector to appear under the very heavy hand of extensive regulations, licensing fees and high taxation cannot be called “liberal”. The State still controls distribution, the wholesale, import & export markets and the supply of fuel and fertilizer. There is nothing free or liberated about it. The chains on the the slaves’ may have been lengthened, but the chains still remain and the Master still calls all the shots.
In the 1950’s, Cuba imported 30% of their food. Today, they import over 70%. and most of it from the US. These facts alone tell us the embargo is not a factor in Cuba’s struggling agricultural sector.
If Cuba really wants to improve their productivity, increase supplies and lower prices, then the State must get out of the way. Open up the agricultural sector to small private farms and large co-operatives, run by the farmers, not the government. Allowing small kitchen gardens to sell produce at retail markets is not enough. The government must liberalize the whole agricultural sector, including the transportation system, the supply of fuel, seed & fertilizers, and the wholesale and the import and export markets. All of it.
Of course, if the government did that, they would be surrendering a major source of revenue and a powerful system of political and economic control over the Cuban people. The extensive network of corrupt officials will lose their source of income. Which is why the Cuban government will never readily contemplate such a thing.
Erasmo only discuses supply issues. Might increased demand be the main factor? Are the remittance-receiving / casa particular-owning class doing better, and feeling more optimistic given recent political developments?
Does Erasmo live in a cave somewhere? What energy crisis is he talking about? Where has the use of a rationing book ever solved distribution issues? If he thinks moving back to the countryside is a good idea, why doesn’t he do it first? I enjoy Erasmo’s free thinking essays. Even if his ideas are a little nutty and ill-conceived.