Cuba and the Problem of Speculation

Fernando Ravsberg*

Cuban State stores are always surrounded by a group of individuals offering customers products hoarded the day before. (Photo: Raquel Perez)
Cuban State stores are always surrounded by a group of individuals offering customers products hoarded the day before. (Photo: Raquel Perez)

HAVANA TIMES — The newspaper of Cuba’s Communist Party has hit the roof because Cuban mothers have been left without disposable diapers and lays the blame on “unscrupulous” venders who hoard products in order to re-sell them at inflated prices.

In Cuba there is a popular saying about the fellow who buys fish but then is afraid of its eyes. Any economy that opens up to the market ought to know its laws well in order to design policies that protect its humblest sectors from abusive commercial practices.

Hoarding is not something new to Cuba – it is as old as the country’s shortages. But, within the ration-booklet economy, it was an illegal activity. Today, however, you can’t arrest anyone for buying a product’s entire stock, not if they’re able to pay for it.

It is not my intention to make excuses for speculators, who generally pop up during hard times, in all countries and political systems. They are individuals who take advantage of other people’s needs, and make these people’s lives even more difficult, in order to make a quick profit.

It is true that, sometimes, these individuals arrive on the scene for other reasons. I recall that, during Salvador Allende’s short-lived presidency in Chile, authorities would find warehouses stuffed with essential products which had been hoarded in order to cause discontent among the population and incite people to overthrow the elected government.

This doesn’t appear to be the case of Cuba, where the opposition is very small, atomized and devoid of the infrastructure needed for such an operation. What we are seeing here are simple speculators who create artificial shortages in order make profits by inflating product prices.

The procedure is simple enough: it is a question of finding a product of very high demand and with a limited stock at State shops, where, ideally, one has good contacts that let one know in advance when the product is coming in – privileged information which allows the speculator to arrive there first and buy up the entire stock.

There are many people willing to pay double to get their hands on disposable diapers for their kids or grandfather, mops, toothpaste, a fitting required to repair the plumbing or the electrical cable they dearly need to fix a short-circuit.

Whenever there is a shortage of a particular product, the gears of the speculating machine begin to turn, and in broad daylight. Most commercial establishments are surrounded by people who approach customers to offer them products, telling them they will not find them inside the store.

I am no economy expert, but I can think of two ways of putting an end to speculation. One is the by now well-known ration card and the other is the saturation of the market, creating greater offer and preventing the re-selling of products at inflated prices.

This State currency exchange locale, without different denominations of currency, is an example of why many people opt to exchange their money in the black market. (Photo: Raquel Perez)
This State currency exchange locale, without different denominations of currency, is an example of why many people opt to exchange their money in the black market. (Photo: Raquel Perez)

On occasion, the problem is strictly organizational. Many Cubans and foreigners exchange their euros on the street to avoid the long line-ups at State currency exchange locales, which sometimes don’t even have enough cash for some transactions.

It seems as though no one has taken the time to calculate how much more money the State would take in if its Cadecas (currency exchange facilities) had enough tellers to allow customers to quickly exchange their money. They save peanuts to lose a bundle.

If a store were re-stocked immediately after being emptied of diapers, to mention one product, speculators would be forced to sell them at a lower price, losing a greater part of their initial investment, and this would probably prompt them to look for another, more lucrative activity.

Many a time, it is not a question of poverty. I don’t believe Cuba lacks the financial resources to import mop heads. It is a question of bureaucratic delays, brought about by useless paperwork and pompous committees devoid of any real authority, which specialize in pointless meetings.

This is the organizational ineptness the State shows and speculators take advantage of. And the problem could well grow in proportions, for the government intends to continue opening the economy to the market and to completely eliminate subsidies for essential products.

If, in the future, the government opts to subsidize low-income peoples alone, the State ought to think about how to protect these people, so that they aren’t forced to pay prices that have been artificially inflated by speculators, capable of hoarding, withholding and re-selling products.

It would be wise to look to Spain, which is going through the most severe crisis in its history for having been unable to establish market regulations that prevent financial and real-estate speculation. Learning from other peoples’ mistakes is a clear sign of intelligence.

Cuba’s advantage is that its leaders do not “adore” the market. The disadvantage is that, after half a century of “socialist planning”, they know very little about its rules. And this can give rise to the worst of temptations: thinking that the problem is solved using the police rather than the economy.
(*) An authorized HT translation of the original published in Spanish by BBC Mundo.

5 thoughts on “Cuba and the Problem of Speculation

  • Speculation relies on scarcity: real or perceived.
    In Cuba scarcity is real.
    It is real in the most essential areas of life: food, housing, medicines, access to health services, …
    While some physical products can be hoarded easily, others are merely trafficked in a corrupt way (like access to health care).
    In a good working system markets ensure that additional goods arrive to the markets or that more service centers are created.
    The Cuban regime just can’t afford to do either. It basically is unable to pay for the goods and services the Cuban people needs even after 5 billion dollars in remittances each year.
    As such hoarding, speculation, corruption and repression are an inevitable part of the system.

  • Well said, despite your initial attacks on today’s YouTube pop music icon.:)

  • A brief craze for a popular item (Justin Bieber tickets & etc…) is not the same thing as Fernando describes above. The only people who are affected are those who chose to be affected. If you’re not a Belieber, then who cares? That’s just a case of supply and demand within a narrow but highly motivated niche market. In time, they won’t be able to give away Justin Bieber tickets.

    The problem in Cuba with diapers, or eggs, or toothpaste or real meat (as opposed to that nasty ground beef-soy mix), is that the people absolutely need these things. The production, supply, distribution and sale of these things in an inefficient centrally planned economy is prone to the corrupt practices of bureaucrats and underpaid employees of state enterprises.

    The Cuban practice is not really speculation, as true speculation involves a buyer making an purchase now in anticipation of future higher prices when he will then re-sell it at a profit. That sort of speculation requires a free market. What’s happening in Cuba is the deliberate monopolization of production, distribution and sale of essential goods to a desperate captive market. In other words: extortion, or socialism Cuban style.

  • Speculation and hoarding exists in even the richest countries. Justin Bieber concert tickets, iPhone 5G, and the Tesla Model S electric car to name a few recent victims of speculation. But disposable diapers??? If the Castros would worry less about ‘refurbishing” 50-year old anti-missile systems and antiquated Russian fighter jets and focus on the basics, these inanities would stop. Who can really take these guys seriously?

  • The artificial economy constructed by the Castro regime is fertile ground for this sort of speculation. When production and distribution are controlled by bureaucrats instead of economic forces of the market, supplies of products can easily be manipulated to maximize profits for the powerful and connected.

    When the people have endured shortages for so long, they may be desperate for supplies they fear may soon disappear from shelves again. This makes them vulnerable for victimization by these speculators.

    The obvious solution is to free the economy to take advantage of market forces. When manufacturers, suppliers, distribution channels and retailers are forced to compete for the same customers, the quantity of products available will rise and the prices will fall.

    Of course, to do that would threaten the very existence of the oligarchy which now rules Cuba. So they will instead resort to the economic idiocy of oppressive laws, propaganda and institutionalized corruption that has characterized life in Cuba for more than 5 decades.

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