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ECONOMY-CUBA: Speculate No More

Patricia Grogg

HAVANA, Sep 30 2008 (IPS) - The Cuban government is seeking to curb excessive food prices in farmers’ markets by cracking down on speculation and theft, which will benefit consumers but may discourage producers, according to economists.

An article published Monday in the state newspaper Granma says that “no price increases for basic goods, either rationed or sold at (regulated) prices in Cuban pesos or hard-currency stores, are envisaged, despite generally higher import costs.”

“In the case of the supply-and-demand markets, the maximum prices for a range of basic produce are to be provisionally set at those existing before the hurricanes,” while in the case of other farm produce outlets, these goods will continue to be priced as agreed with the authorities, the article says.

In the wake of hurricanes Gustav and Ike, which devastated the country between Aug. 30 and Sept. 9, the availability of tubers and root crops at food stalls has begun to dwindle.

At the same time consumers are complaining about generalised food price increases, especially in the farmers’ markets created in the 1990s, where most prices are set by supply and demand.

“Now they have to get up early. People have been queuing since early morning to buy lettuce and other products. As you can see, nothing is left now,” a farmer from outside Havana, who comes to the city on Sundays to tend his stall in one of the agricultural markets, told IPS.

Located in the Havana neighbourhood of El Vedado, this market has been dubbed “The Boutique” because of its expensive produce that, in normal times, crams the stalls. But towards midday on Sunday, many were empty.

“I used to buy very good onions and garlic here, but they were imported and now they are no longer on sale,” a woman customer said.

Better informed, a vendor at another farmers’ market told IPS that during the week he nearly got into trouble because of a surprise inspection. “The police even came, and searched our storage spaces. They were looking for stolen produce and checking up on our prices,” he said.

“Those persons who have violated the law on the pretext of resolving certain personal needs, placing that above the collective interest, have been rigorously dealt with in the courts. For the exceptional cases of individuals who have incited others to follow them in their crimes, the punishment has been greater,” the Granma report says.

“This will be the invariable action taken against such crimes and against any manifestation of privilege, corruption or theft, all the more so when it concerns resources for those affected by the hurricanes,” adds the article in Granma, the official newspaper of Cuba’s governing Communist Party.

The article titled (in the original Spanish version) “Information for Our People,” a formula Granma uses for issues the authorities regard as sensitive for the island’s population of 11.2 million, appeals to the conscience of vendors, producers and intermediaries to keep the markets and sales outlets supplied with food.

In addition to administrative measures, “the agencies of internal order will continue acting energetically, in line with what is established in law, and the courts will apply the existing penal code with maximum rigour to those committing criminal acts in the current special circumstances,” the newspaper says.

On Sept. 20, former President Fidel Castro devoted one of his regular opinion columns to the issue of food supplies, and called on the Communist Party, of which he continues to be first secretary, to “fight relentlessly” against theft, corruption, cronyism and hoarding that might become widespread after the impact of the hurricanes.

Five days later, Attorney General Juan Escalona and his deputy Rafael Pino said on television that they would rigorously apply the law to punish crimes related with “food, the black market, and sky-high prices.”

The Criminal Code provides for fines or prison sentences, according to the seriousness of the crime, and confiscation of goods.

Some economists warn that freezing prices is not necessarily a good solution at a time when the market needs to be supplied with food. “A positive outlook characterised by incentives, rather than uncertainty, ought to be created for producers,” said an academic who chose to remain anonymous.

He said that the measures announced by the government fail to provide a stimulus for those who have submitted applications this month to be granted the use of idle lands, in order to make them productive. “Many of these people might now think that farming will not be profitable, because the plots of land they are to receive will require investments, which drive up production costs,” the academic said.

In a recent article, economist Pavel Vidal argued that controlling prices in the agricultural markets operated according to supply and demand is “the worst” of all possible options, because it might stimulate the black market and restrict the signals and incentives that prices transmit to producers.

But Ariel Terrero, a commentator on economic topics on state television, said last week that in the context of the difficulties faced by the country, with its crops badly damaged by Ike and Gustav, no measure can be counted on to stimulate production over the next few months.

He advocated freezing prices for a few months while the emergency lasts, and said “the farmers’ markets are not a magic wand for solving the problems of agriculture,” a sector the government wishes to strengthen in order to replace food imports.

The government of President Raúl Castro announced months ago that high international food prices would increase the cost of Cuba’s food imports to 2.5 billion dollars this year, to furnish the basic basket of subsidised goods that every Cuban family receives once a month.

Granma says “planned imports of cereals, grains and other products have been guaranteed, and others are being quickly contracted as a sales option to the population, given the temporary reduction in supplies of root vegetables and fruits that will persist over the next few months.”

The authorities’ preliminary estimate of the cost of damages caused by Gustav and Ike in Cuba is five billion dollars, but independent calculations put the figure at twice that amount.