Prices in Cuba’s Produce Markets
Finding a way for farmers to earn more and consumers to pay less.
HAVANA TIMES — Last week I went to the “El Trigal” wholesale market and returned home laden with food and amazement. Prices of the farm products are incredibly cheaper than the retail produce markets where most Cubans do their shopping.
A large bunch of bananas goes for 25 pesos (1 USD), a large sack of bell peppers 130 pesos, and I paid 150 pesos for a packed box of premium tomatoes. This is less than a third of what they cost at the stands of the retail produce markets.
“El Trigal” is located within the city of Havana, however, by the time the farm products reach the retail produce markets the prices have tripled virtually accross the board at all stands.
That’s to say, the vender sells it to the public earning twice what the farmer and transporter earn together, even though it is they who produce the food and move it from the countryside, sometimes even from other provinces.
Supply and Demand Prices?
Today it isn’t the supply of producers and consumer demand that determines the prices of farm produce, but instead the speculation of vendors. Isn’t it in these types of cases where the state should have to intervene?
The market economy should not be blamed for the way the produce markets function because they are just one example that highlights the worst of its features: a trafficking of food where workers and consumer are equally exploited.
It is true that anyone can buy at the “El Trigal” wholesale market, but it is a half-truth, since the only way to get there is by car and you need to buy products in bulk, by sacks and boxes.
Cuban independence war General Maximo Gomez [a Dominican himself] said that Cubans always fall short or go too far. Today the state exercises strict control over some aspects of the economy while leaving the prices of transport and food to the market.
The pendulum does not have to go from one extreme to the other, there are experiences in the world of strong states successfully guiding far more complex economies. And in Cuba there is no shortage of economists who are aware of these examples.
The opening of spaces to the market is a must but clear rules for commercial activity are needed to prevent speculation and usury, especially anything having to do with basic food products.
They could start by setting an example in the state’s hard currency stores by putting a brake on the price increases of staple foods and instead applying hikes on less essential products, such as rum, beer or tobacco products.
It also would be a good idea to intervene in some way at the retail produce markets to cut down on speculation, establishing fair prices for the farmers and affordable to consumers, along with a reasonable profit to the distributors and vendors.
In California they have opted to bring producers closer to consumers, using a system of street fairs that avoid the usual commercial chains. In doing so, an act of magic occurs, farmers earn more and consumers pay less.
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(*) Visit Fernando Ravsberg’s blog.
Cuba has two currencies, one is the regular peso (CUP) which trades at 24/25 to one CUC
The other is the CUC which is the dollar equivalent. (Note if you exchange a cash dollar you will recieve .87 cents CUC as there is a 10% penalty assessed on cash dollars. The other 3% is the exchange commission.
Can you tell me the exchange rate? I thought one Cuban peso was equivalent to one U.S. dollar. So, how does 25 pesos = 1 USD? A little confused.
Thank you.
I find your comments to be the most well thought out and to the point. I only read your responses.
Your proposed solution misses the mark. The problem is much broader and deeper. The entire Cuban economic system is ideological, arbitrary & irrational. It fails to realistically price products and labour. Under such a system, it is inevitable that production will decline, quality will drop, distribution will be haphazard, corruption will flourish and prices will be high.
If Cuba’s rulers are interested, there are some historical examples of countries with Soviet-style agricultural systems which have managed to reform and modernize their farms. The lessons learned from the post-Soviet states of Eastern Europe indicate the best way to increase agricultural production is through private farm ownership and trade liberalization. As yet, Cuba has not ventured to include either of those policies in their reforms.
“ESTONIA’S POST-SOVIET AGRICULTURAL REFORMS: LESSONS FOR CUBA
The implementation of new technologies and new production techniques, in many cases supported by the government, was a key element of Estonia’s extended “agricultural reform package” during the transition period (1990–2000) (Raig, 1993). Profit provided the necessary incentive for efficient resource allocation, and redirected technological resources (e.g., machinery, equipment, and infrastructure) to the private agricultural sector. At the same time, international trade was liberalized, as Estonia radically altered its trading patterns as a result of the collapse of socialism in the early 1990s. The combination of these factors contributed to a notable increase in the number of (small) private farms and agricultural enterprises during the transition period (1990–2000).”
http://www.ascecuba.org/publications/proceedings/volume23/pdfs/gonzalezcorzo.pdf
It is hard to criticize comments like yours because they seem so heartfelt but the truth is the truth. You suggest that Cuba EXPORT citrus and vegetables to the US? Cuba does not produce enough of these produce to meet its own needs let alone export. Do your research. Cuba is a leading producer of grapefruit, yet the countries which produce more grapefruit than Cuba each produce more than 10X the amount Cuba produces. Looked at another way, overall, the US consumes more than $1 trillion in produce each year. Cuba struggles to produce $1 billion (if you believe their reports) in produce over the same period. Even if Cuba were to go without produce entirely and sell their entire crop to the US, it would amount to less than 1/1000 of US demand. The proverbial drop in the bucket. As it is Cuba must import as much as 80% of their food to survive. Believe me few Cubans are guilty of overconsumption. How did you even imagine they could begin to export to the US in any amount that would affect US prices?
A lack of trucks to deliver the produce, a lack of produce to be delivered and finally, a lack of will to make it any easier for the final consumer to purchase lower cost produce. Don’t forget this is Cuba we are talking about. Your question smacks of the “capitalist” notion that if it works, do it again and it it works well, do it again and more of it. Socialists seem to think that doing it once is enough so as to avoid the risk of waste or failure.
Looking at the foto accompanying this story reminds me of the current spike in the prices for citrus and vegetables in the U.S.A. In Florida, the “greening disease” is decimating both orange and grapefruit crops. (another article about this in yesterday’s–Sun.May 4th–Sunday N.Y. TIMES.) Also, with the ongoing global warming related drought in California’s Imperial Valley, the prices of peppers, onions, tomatos, etc. are also climbing rapidly. Since Cuba is closer to the eastern U.S.A. than many parts of Mexico and Central America, it would be to our advantage to end the embargo and allow the importation of Cuban citrus and vegetables. Also, the incentive of Cuban farmers earning hard currency would increase their incentives to clear away areas covered in maribu and expand production. During a visit a few years back, I I noted that the areas surrounding Aguacate (in what is now the Province of Mayabeque) which during my stay there in 1969-1970 was mostly planted in sugar cane, has now been planted in a variety of vegetables and legumes. More trade with the U.S.A.. could further expand this, since transportation costs to markets in the eastern U.S.A. would not be as much as that from California, Mexico and Central America, hence decreasing the cost of these products.
Finally, one method of encouraging the end of the embargo would be for Cuba to offer (a token) amount of free citrus and vegetables to food banks feeding the poor and homeless in the U.S.A. (much as Venezuela, through Joe Kennedy’s charity, sent free, or low-cost, heating oil to heat the apartments of poor Americans). If the U.S.A. refused such aid, it would reveal once again the cruel nature of the embargo!
Calling for more state intervention in the form of price controls, rationing and additional regulations is the wrong approach. That’s how the Cuban economy became such a mess in the first place. More of the same won’t cure it. All you have to do is look at Venezuela, where similar measures introduced over the past few years have lead to high prices and shortages. Any measures which artificially distort costs and pricing will result in inefficiencies, shortages, speculation and corruption.
Allow farmers to set the prices they sell their produce at. Allow competition among the wholesalers & shipping (currently controlled by a state monopoly) and competition among retail vendors. Farmers will produce more. Wholesalers & retailers will get the products to markets where people can buy fresh produce at the lowest possible prices.
“Finding a way for farmers to earn more and consumers to pay less.” is rather easy: eliminate the state controls that create costs and inefficiency. Farmers that have to sell the largest part of their production to the state at loss making prices make up for that by charging more in the free market. that sets prices at the source. They themselves suffer from lack of or high prices for all inputs (seeds, fertilizers, equipment,, …) which increase scarcity by low production. Problems with transport and often near monopolistic power of intermediaries increases the prices between producers and wholesale market. High taxes and transport plus warehousing problems insure high price increases at the retail end.
Eliminate the state and inputs will flow freely and timely to the farmers, transport will be ensured and competition will ensure adequate price levels.
But that is just the story of one part of Cuban society: agriculture. unless real living wages for economically sound work are given purchasing power will be limited to the level of the remittances.
Unfortunately, if/when Cuba sees more economic freedom, that disparity in pricing will only increase. That basement price at “wholesale” will also either rise, or be restricted to retailers only. At least, that’s the way it tends to go in Canada and the US. Real wholesale places are usually off-limits to the general public, and the prices at wholesale club stores (like Costco) are generally quite high — it’s the variety and availability of the products they carry that is their actual selling point.
A large range from the true wholesale price to the mass retail one is the norm, because there are usually several levels of middle men that each need their mark-up. If the wholesalers in Havana are letting the general public enjoy those prices, be thankful! The solution is almost never that the retail price will come down, only that the access to the wholesale is cut off!
Fernando Ravsberg, thanks for this critical article. Fortunately, this is a problem that can be readily improved upon if not solved. Yes, the administrators of the governmnet agencies involved should be called upon, but in the mean time, there are other options that may help. If the current coops are too expensive or don’t exist, then why not circulate a purchase list among a building or block and bulk purchase from the “wholesaler.” This is so important, I hope your efforts will be “fruitful.”
Food is one of the most important part of survival and this is incredibly good news for those who are near “El Trigal!” Thanks for the info and hope this expands rapidly for all Cuban’s!
What is preventing such markets, where producers meet consumers directly to exhange their goods, from opening in neighborhoods all over Habana? We have a somewhat similar situation in my home town. The Saturday and Wednesday (psuedo-) “farmers’ market” is heavy on high priced organic veggies, plus many discretionary goods, such as home made soaps, jewelry, new-age “manipulations” of the spine, etc. thus limiting its clientel to trust funders, upper- and upper-middle-class folks. Ditto the local “food coop,” where prices are so high they’re laughable. Until recently, the only alternatives were the big box supermarket chains, or to drive out to the farmstands run by the local farmers. Fortunately, now,an ALDI’s has opened, offering fruits,vegetables, and a limited supply of other food, at much lower prices (for cash or debit card only, thus eliminating charges to third parties).