Friday, August 22, 2014

The Causes & Consequences of Cuba’s Black Market

The Causes & Consequences of Cuba's Black Market
August 21, 2014
Fernando Ravsberg*

HAVANA TIMES — The Cuban press is out to get re-sellers, as though their
existence were news to anyone, as though they just now realized there is
a black market that's on every street corner in the country, selling
just about everything one can sell.

In a news report aired on TV, they went as far as insinuating that some
employees at State stores are accomplices of those who hoard and re-sell
products. They are now "discovering" that the black market stocks up, in
great measure, thanks to the complicity of store clerks.

The reporting remains on the surface, addressing the effects but not
daring to go to the root of a problem that has burdened the country for
decades as a result of the chronic shortage of products – from screws to
floor mops.

During the early years of the revolution, these shortages could be
chalked up to the US embargo. Today, however, Cuba maintains trade
relations with the entire world and can purchase the products people
need in other markets.

It doesn't even seem to be a financial problem, because the products
become available and disappear intermittently. Shaving foam can
disappear for a couple of months and reappear at all stores overnight.

These ups and downs are what allow a group of clever folks to hoard up
on and later re-sell these products at higher prices. A lack of
foresight and planning when importing is what creates these temporary
shortages that make the work of hoarders easier.

There is no doubt Cuba has a planned economy. The question is whether it
is actually well planned. The truth is that, for decades, the country's
domestic trade system has functioned in a chaotic manner and no one has
been able to organize it minimally.

A foreign journalist I know recently noted that, when toilet paper
disappeared from all State shops, a supermarket in Havana had a full
stock of pickled partridge that no one buys.

Who would decide to buy such a luxury canned product at a time when most
store shelves are practically empty? The story brings to mind that
anecdote involving a government official who imported a snow-sweeper to

The Market and Consumption

Cuba's domestic trade system doesn't require "reforms", it demands
radical change, a new model. Such a change should begin with Cuba's
importers, bureaucratic companies that are ignorant of the interests and
needs of consumers and buy products without rhyme or reason.

Many of their employees receive [under the table] commissions from
suppliers and therefore prioritize, not the country's interests, but
their own pockets. They are the same people who received money from the
corrupt foreign businessmen recently tried and convicted in Cuba.

To plan the country's economy, the government should start by conducting
market studies and getting to know the needs of consumers, in order to
decide what to purchase on that basis. It Is a question of buying the
products people need and in quantities proportional to the demand.

Planning means being able to organize import cycles such that there is
regular supply of products, without any dark holes, like the ones that
currently abound in all sectors of Cuba's domestic trade, from dairy
products to wood products.

Sometimes, this chaotic state of affairs has high costs for the
country's economy, such as when buses are put out of circulation because
spare pieces were not bought on time, there isn't enough wood to build
the crates needed to store farm products or a sugar refinery is shut
down because of lack of foresight.

Even the sale of school uniforms at State subsidized prices experiences
these problems owing to a lack of different sizes. This is a problem
seamstresses are always willing to fix, charging the parents a little
extra money.

Cuba's entire distribution system is rotten. Importers are paid
commissions, shopkeepers sell products under the counter, butchers steal
and resell poultry, ration-store keepers mix pebbles in with beans,
agricultural and livestock markets tamper with weighing scales and
bakers take home the flour and oil.

In the midst of this chaos we find the Cuban consumer, who does not even
have an office he or she can turn to and demand their rights (when they
are sold rotten minced meat, and old pair of shoes or a refrigerator
that leaks water, for instance).

Speculation is no doubt a reprehensible activity, but it is not the
cause of the black market. The country may launch a new campaign against
hoarders, but it will be as unsuccessful as all previous one if an
efficient commercial system isn't created.

Source: The Causes & Consequences of Cuba's Black Market - Havana -

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