By Miguel Alejandro Hayes Martinez (El Toque)
HAVANA TIMES – “Sowing ideas to build the future,” a poster reads at the Cuban Association of Small Farmers (ANAP) regional office. It would seem that this motto is the subconscious of state institutions and organizations talking: the phrase synthesizes the focus they have given to food production. If ANAP is sowing ideas, who is sowing seeds?
The measures announced
In April 2021, the Cuban government approved a series of 63 economic measures (some to be implemented immediately) to give a framework to a policy that promotes national food production and self-sufficiency. It is once again a late response to a problem foretold: food shortages (undersupply) and, as a result, widespread inflation in markets, the effects of which have been felt across the entire economy.
For the agricultural world, the measures center around:
1- Cutting production costs and reducing taxes. Electricity and water prices increased significantly after the Currency Reform was introduced at the beginning of 2021. This meant production became more expensive which, combined with price caps, led to a disincentive in production. Plus, there were different kinds of taxes as a surcharge. The response to the problem created by the Tarea Ordenamiento (economic reforms) was to implement lower electricity and water rates for producers, and to reduce taxes.
2- Allowing farmers to sell their produce at a higher price. Producers need to respond to State assignments, as they fix the prices and quantities that need to be delivered. These prices are normally low. Add to this the fact that the Government has capped its prices for private clients, from time to time. For the State as a client, the solution was to increase some prices, such as that of milk.
3- Granting basic economic freedoms. The country’s leadership is still discussing whether farmers can manage themselves. Direct contracts between producers and state institutions are still not a widespread practice. Nor are there a significant number of “natural” operations in the market, such as contracts without intermediaries between producers and the milk industry, or producers being able to buy agricultural supplies directly from suppliers or slaughtering a cow to sell the meat without any obstacles. The authorities that pushed the changes spoke about getting rid of redtape, including some of those mentioned above.
4- The promise of upholding payments. State orders are characterized by their failure to make payments in the expected timeframe. This combined with farmers lack of access to foreign currencies limits access to supplies. In order to resolve this, the Government proposed that ACOPIO (Cuba’s State purchasing entity) pay more for failing to make timely payments, and urged it to meet payments.
5- Funding investments, with state sources. For years now, the lack of a mechanism that allows access to funding sources for investments has forced private economic actors to turn to personal savings. This is an investment scheme that goes against the development of recovery cycles, both in Marx’s work and any economist’s. The consequence of this has been insufficient investments, going hand-in-hand with non-advisable methods, such as funding from third parties – foreign or national – without legal support. The Government has said that they will cover this gap with investment funds, so that banks grant credit.
Six months later, national authorities have begun to communicate some of the results. In meetings held up until now to assess the performance of these measures, these authorities have said that in practice:
- Electricity, gas and water contracts still haven’t been completed. Communist Party leaders have urged them to speed up the process, and the cadres to be more active.
- Prices the State pays for products, such as milk, have gone up. This has still had little impact. Party leaders have urged them to continue to perfect the payment mechanism.
- There is still a bureaucratic process for producers who want to slaughter elderly livestock and sell their meat. Producers continue to be short on supplies. Party leaders have insisted and urged authorities to speed up every process by cutting out intermediaries.
- Before the measures began to be implemented, approximately 43,000 producers were awaiting overdue payment. They are still waiting. In provinces such as Holguin, they don’t have bank cards in order receive these payments.
- For example, the Agricultural Development Bank in Villa Clara has only granted one loan. Party leaders have called upon future producers to apply for credit.
General results don’t seem to differ from more specific ones. Authorities have admitted that:
Production levels have so far been far lower than expected.
Holguin is the province with the largest number of farmers in the country; however, it has a ridiculously large amount of idle land; giving you an idea of the situation in the rest of the country.
In Las Tunas, less than 300 cows were slaughtered, out of the over 600 that were expected to be slaughtered for the province this year. There are provinces with worst indicators.
The beef situation in Cuba is critical, said Sobrino, the minister of Food Industry.
On the other hand, the reality of millions of Cubans doesn’t need to be explained by official discourse. The health of a country’s economy is measured by the purchasing power of its workers’ wages. For them, none of these 63 measures have had a positive impact, when shortages and high prices continue to exist. Supply is short, and we can see this in the long lines nationwide. The inflation admitted by the government is the proof of how much these measures have kept in check the negative effect of the economic reforms (and the systemic crisis) by effectively increasing production.
In the best of cases, these measures are (artificially) based on regular production costs and sale prices, as well as authorizing the appearance of normalized mechanisms in the market, which have proven to be effective: the selection of suppliers, buyers, optimum frameworks such as direct sales, negotiating prices, etc. That is to say, it has tried to allow economic players to do what they do in the market: negotiate and make decisions based on the incentives they have; albeit still in quite a restrictive way.
As a result, economic actors haven’t created mechanisms themselves to kick off production. For example, the Agricultural Development Bank has had very little impact on production, which is proof that it doesn’t offer producers an attractive deal that benefits both the bank and its borrowers. Meanwhile, the unwritten part of discourse (which has been voiced out loud though) bets on solving the inefficiency of these 63 measures in the negotiating capacity of the Party official, which is the economic subject created in Cuba to do the opposite of negotiating: guiding.
However, no economic policy model is based on ensuring economic actors have basic freedom (freedom which should never be missing) and on the market (buying and selling) depending on the capacity of a political boss to motivate economic players to meet and exchange goods. No serious economic theory makes the market exist out of the enthusiasm of a body outside of the market.
In a modern society, a model of economic policy is there to create incentives to reach planned objectives (it isn’t an appeal), even when it redefines the freedom of different actors. For this end, it must also define who are the actors responsible for seeking out and making these incentives enter the landscape, as well as terms of payment and many other factors.
As a result, we are looking at a set of measures which have very little to do with economic theory in their essence. The nature of some measures where the most active role falls upon a political authority can only be ideological.
Thus, we can say that we are looking at a political system, not a system conceived for economic means. The mission continues to be to keep certain power relationships in place.
In the face of Cuba’s food crisis, instead of implementing an economic policy like it should, the Government has launched a series of measures, in which it confuses allowing with incentivizing, stimulating and encouraging. The response the current situation calls for today isn’t that the political power gives permission and encouragement to economic actors.
It would be wrong to come up with an exact formula to fix these problems; yet, we can say that in order to create incentives for todays and future producers, the first thing they need to do is find out what incentivizes them, from them directly. It’s clear that the measures that have been implemented aren’t the incentives that they were hoping for.