Saturday, January 23, 2016

Cuba’s Dangerous Crusade against Intermediaries

Cuba's Dangerous Crusade against Intermediaries
January 23, 2016
Osmel Ramirez Alvarez

HAVANA TIMES — As the popular saying goes, "where there's smoke, there's
fire." Since the problem of high produce prices was discussed at Cuba's
National Assembly in December, all fingers have been pointing at a
would-be culprit: the middleman.

Raul Castro publicly committed to lowering prices and, the day after,
markets in the capital were already under-stocked. Fearing
confiscations, which were frequent before self-employment licenses were
authorized, many sellers did not dare operate. The immediate result of
that sensitive commitment was empty markets, desperate customers and
products at risk of rotting at farms.

The issue has been addressed by all media every day since. They
interview farmers, sector leaders or dissatisfied customers. All,
incidentally, happen to blame intermediaries. It's natural, then, that
the latter should be very afraid and laying low, waiting for the "blow"
to come.

The State has proven incapable of maintaining a steady supply of produce
and livestock items. Acopio, the State purchasing entity responsible for
this, has never been efficient and hasn't disappeared because Cuban
State companies never go broke. Only private suppliers have done a good
job of this in recent years, despite the fact they do not have the legal
and logistical advantages of Acopio.

The State authorized non-State markets to set prices on the basis of
supply and demand. The law stipulates that only production surpluses
(quantities Acopio isn't entitled to) can be sold in these markets. That
is to say, only 30% of production.

This is of course not the case in practice. State entities nearly never
fulfill their contractual obligations towards famers and do not have the
moral authority to demand delivery. Sometimes, they lack the means of
transportation. So, the figures are shifted around a bit and the private
sector, ever ready to secure profits, ends up selling a much larger
volume of products.

Are high prices truly owed to the speculation of intermediaries?

In part, they are, but that is not the mean reason. Speculation is a
widespread ill affecting Cuban society and it is owed to the same
reason: a lack in the supply.

Produce and livestock products are like the basic products sold at hard
currency stores. Since the offer is always beneath the demand, we get
speculation. A person with money and commercial skills takes advantage
of the State's shortcomings to secure profits by reselling at the
expense of the public. It's a means of surviving, of making ends meet,
even though it proves unfair and abusive.

The main cause behind speculation and the high prices of farm products
is to be found in underproduction. Underproduction is owed to the
inefficiency of Cuba's economic model, and the inefficiency of Cuba's
economic model is owed to excessive planning and centralization. The
culprit is orthodox socialism, which still reigns in our country;
despite the "changes" we've seen. The latter are pure, cosmetic touchups.

A farmer sees production costs go up because he is forced to buy nearly
all of his supplies on the black market. You can find just about any
(stolen) thing there. Such illegal dealings are encouraged by the
State's inability to provide services without countless obstacles and
regulations that only lead to corruption.

On the other hand, the majority of supplies the country buys or produces
are aimed at the State sector, which, controlling more lands and
resources, produces less than the private sector. A large part of these
supplies end up on the black market, because wages are so low that
workers have to make additional money selling things under the table.

This is a depressing state of affairs, and intermediaries are mere
capitalists after profits, not charity workers. They do not hesitate to
take advantage of the opportunities available and the people suffer the
consequences, paying higher prices. Of course that a State measure aimed
at reducing the profit margin or establishing price ceilings would be
well received, but that would only alleviate the situation, never
overcome it.

Speculation is the result of the dysfunctional Cuban economic model, not
the cause. If we want to overcome this problem and truly help the
people, we must address the cause, not the symptom.

Intermediaries fulfill a social role of the utmost importance. While
Acopio discourages production because of its inefficiency, the private
middleman provides incentive through efficient trading and quick
payments, in cash. If they were able to grow competitively and set up
infrastructure, Cuba's agricultural production would no doubt be
bolstered and we would start seeing fairer prices.

To lynch the intermediaries and make them the scapegoats of an economic
model that does not work is unjust and a very dangerous mistake,
particularly for "Cuban tables." The people, desperate over shortages,
may support a drastic measure, but we must not forget the tragic
consequences that eliminating of supply and demand farmer markets in the
80s brought about.

Cutting people's heads off, or beating these with a club, will never be
a reasonable way to get rid of a headache. There are other options

Source: Cuba's Dangerous Crusade against Intermediaries - Havana -

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