Apples and the Cuban economy

HAVANA – Last month a note in the Cubadebate website denounced the hoarding of large quantities of apples in La Puntilla, well-known Havana store. The forceful denunciation provoked an unusual commotion that has once again put forth the well-known theme of scarcity and the speculation it creates.

There are no details about the fate of the coveted fruit, namely whether the purpose was for resale at a higher price or creation of a ‘wholesale’ supply stash for select customers such as restaurants and coffee shops; or even, for one of these specific businesses.

Immediately thereafter several articles in our national media and on the web did not hold back in their attacks of those involved and the reprehensible behavior demonstrated for their participation in the act.

Without much detail about what has occurred, it was reported that those responsible have been brought to justice and the Ministry of Domestic Trade (the Cuban ministry in charge of the retail network) has said that a list of essential products that are sold in stores using convertible pesos (CUC) will be restricted as far as quantities purchased — in other words, they will be rationed.

And those directly involved in the case of the apples have been sanctioned and fired from their jobs.

Using this opportunity as a learning tool, let us analyze the situation’s causes and the relevance of the steps taken. 

Firstly, the shortage. We all know that it is one of the distinguishing characteristics of national life. To be more exact, when has there not been a shortage of one kind or another in Cuba? In a way, it is a situation that has become a fact of life for quite a long time. It is also true that it becomes more acute from time to time as a result of some conjunctural shock that affects the country’s precarious external balance.

The fact that this scarcity persists has implications. Residents and businesses alike (for the past 25 years) have learned and developed strategies to deal with the phenomenon. Who has not faced the dilemma of deciding whether to buy in excess to guarantee a future supply, or thought altruistically and purchased only what is needed? 

Now imagine that 15,000 Cubans who set foot in a store on September 9 bought not one, but two or three apples (one to eat on the spot, the other for next day’s snack). In such a case they would have left the unfortunate ones who came after without any apples.

The effect is very similar: the quantity is insufficient to meet all the demand (at the fixed price) and many will not be able to acquire the desired good. The difference would be that a small group would not profit from the sale of the scarce product. But you don’t end shortages by lowering the price. Now suppose that a business offers its customers natural apple juice. There are two alternatives, you either don’t offer them the juice, or you have to buy it in large quantities within the retail network, the only one available for it.

So it turns out that a purchase in large quantities, a common procedure in almost any business, ends up being a criminal act in our context.

Which begs the question: Is scarcity an intrinsic quality of economic models such as Cuba’s? The answer, unfortunately, is yes. And for many reasons. In the first place, it has been widely explained that centrally planned economies are systems where the fundamental restriction is supply; that is, at any given moment, demand is generally placed above the supply of specific goods and services.

“The tyranny” of the producers is clear from the poor incentives that exist that would increase this supply efficiently and sustained over time to meet the needs of the citizens. The limiting factor par excellence in the Cuban case are the currencies, whereby domestic production depends not only on the import of consumer goods, but also of consumables.

The Cuban model — which is obviously not a market system — does not leave the imbalance of currencies in the hands of an exchange rate; in other words, the price of the local currency which would be adjusted to account for this imbalance. Instead it internalizes it and creates a mechanism of rationing of that currency. This is the monetary duality and exchange multiplicity that discretionally signals the scarce availability of currency. The government, using a series of mechanisms, determines which agent receives foreign currency.

This ends in a central administration of the foreign currency allocated for import. Since not everything is prioritized, for this reason certain consumer goods don’t end up at the top of the list. It is understood, for example, that milk and medications occupy the top of the priority list, while apples will not be there.

The fact that the hoarding of apples (as far as we know this is not a staple item, except for those of my fellow citizens that imitate the food patterns of temperate countries) generates a reaction of this magnitude only tells us of how far we have descended.

It is striking that this happened almost immediately after a new consumer protection policy was announced with great fanfare — and after so many years of internal control, with countless decrees, resolutions and others.

The stubborn reality is that those who have to apply these regulations are also citizens of this country.

In any society people tend to devote time and energy to those activities that are lucrative allowing them to generate enough income to be able to live. In our case, if we follow the rationality that the private sector will doom whatever the Cuban model is, citizens in general, and young people in particular, will adhere to the message of “do not waste your time with that,” or what is basically the same, “look for other solutions” (interpreted as: emigrate, or profit from the scarcity, or import merchandise via the slow moving contraband trade). With the incredible colophon of continuing to delay an exit so that the state company comes out afloat. Faced with this reality, controls will be continually mocked.

Although patriotism and / or ideological sacrifice is a powerful force, it does not always work. That is why I suggest that at least 95 percent of persons behave in the aforementioned way. And I am not trying to suggest that behaviors of this kind should be accepted, but they should be put in the context of the reality where they are generated. People are not born hoarders, or resellers, they become that way.

The answer, therefore, is not to condemn their behavior morally or criminally, but to change the environment that created their situation. Otherwise, all efforts will be for naught. No matter how many times one tries them.