THE NEW AGRARIAN REFORMS
The conversion of Cuba’s state-farm sector into a network of workers’ cooperatives, and the reopening of free agricultural markets have given Cubans hope that there might be a way out of the economic crisis.
By Carmen Diana Deere
Two major changes have taken place in Cuban agricultural policy over the past two years. First, in September, 1993, the government announced that Cuba’s huge state-farm sector was to be turned into a network of workers’ cooperatives, thus ending the leadership’s long-term commitment to state farms as “the highest form of socialist agriculture.” In a second policy reversal, in October, 1994, free agricultural markets were reopened after having been shut down eight years earlier for promoting the growth of a new class of merchants and exacerbating inequality.
The moves of the Cuban state toward a mixed economy have been taken reluctantly, only after all else failed to produce a turnaround in domestic and export food production. After the production of sugar cane, Cuba’s critical export, dropped from 7.6 million tons in 1991 to 4.2 million tons in 1993, it was clear that something had to be done. Throughout the early 1990s, the country experimented with a number of new initiatives to maintain agricultural production levels. Among the experiments were large-scale mobilizations of urban volunteers for twoweek stints in the countryside; recruitment of under- and unemployed urban workers for two-year sojourns on state farms; decisive moves towards the decentralization of management on the state farms; and concerted efforts to increase self-provisioning on these farms, including the tolerance of individual parcels for personal consumption.[1]
But these various strategies could not overcome the effect of the dramatic shortfall in imported inputs. While the mobilization of thousands of urban workers led to an increase in food production in 1992, this increase could not be sustained. In addition, neither the decentralization of decision-making to smaller units of production within the state agricultural enterprises, nor efforts to encourage greater self-provisioning on the state farms was applied consistently enough to be effective.
At the same time, under the same adverse conditions, the private-sector production cooperatives (Cooperativas de Producción Agropecuaria, CPAs) were out-performing the state enterprises. In many cases, they were maintaining or even increasing their deliveries to the state, while moving toward their own near total self-sufficiency in foodstuffs. By 1993, it was apparent that only a radical reordering of incentives on state farms, as well as changes in Cuba’s private sector, would halt the continuing decline of the agricultural sector. Under these conditions, and in keeping with its socialist principles, the Cuban leadership chose to turn state agricultural enterprises–which combined state ownership, wage labor and centralized management–into self-managed cooperatives.
Under the cooperative plan, former state-farm workers were given the opportunity to forin Basic Units of Cooperative Production (UBPCs) by leasing rent-free land from the state. While farmers have permanent use rights to this farmland, the lands remain national property. The new cooperative members become collective owners of all plant and equipment that previously belonged to the state farms. The Cuban National Bank has made long-term, low-interest credit available to the UBPCs for the purchase of machinery, for capital investments such as irrigation systems and installations, and where applicable, for the existing investment in perennial crops and livestock.
The members of the UBPCs are the owners of what they produce. They must negotiate their production plans, including the purchase of inputs, with the state enterprise to which they are linked, but any profits they may generate are their own to divide among the membership. The UBPCs elect their own management team from among their membership. Workers make their own decisions about when and how to plant, though what they plant as their principal crop is negotiated with the state enterprise with which the UBPC is associated. Cooperative members themselves, however, are responsible for all decisions regarding their own self-sufficiency efforts on the lands set aside for this purpose.
This reorganization of production was initially implemented on the state sugar enterprises with impressive rapidity, in time for the harvest which began in late December, 1993. Between September and December of that year, 1,576 sugar-cane UBPCs were formed, consisting of 146,524 workers and encompassing 87% of the land previously held by the state sugar agro-industrial complexes.[2] The urgency was due not only to the timing of the cane harvest, but to its importance. The hope was that this new form of organization, by stimulating greater worker effort, would bring about a recovery in sugar-cane production, or at least halt the trend of falling yields and declining production.
At the same time, many non-cane state enterprises began experimenting with the new system. By February, 1995, 1,440 non-cane UBPCs had been created, holding approximately 3.7 million acres of land and consisting of 126,723 members. Almost half of the UBPCs had been formed on the state livestock enterprises, with the remaining UBPCs dedicated to mixed cultivation, coffee, citrus and tobacco production.[3] By the end of 1994, the cane and non-cane UBPCs held 40.6% of Cuba’s agricultural land. State enterprises now fanned only 29.8% of the total.[4]
Interviews in three municipalities revealed that the cooperativization of the state farms was received quite favorably by Cuba’s state-farm workers, who thought the UBPCs offered them substantial potential benefits.[5] Foremost in the mind of most members is that they now expect to produce enough foodstuffs and minor livestock to be self-sufficient. In addition, most have the expectation that their cooperatives will be profitable, and that their incomes will eventually reach a level approximating those of production-cooperative members in the private sector.
Whether the new cooperatives will be able to realize their full potential, however, depends on a number of factors. First. the cooperatives have inherited a highly mechanized, large-scale agricultural system heavily dependent on industrial and chemical inputs. Even under the best of conditions, this system was not very cost-effective, but with supplies of petroleum and other inputs more than halved, the system no longer has any viability whatsoever. While it is still unclear what it will be replaced by, and whether what emerges is more or less productive, it will almost certainly be a more ecologically benign agriculture, as oxen replace heavy tractors and compost substitutes for the use of chemical fertilizers.
In the meantime, it is clear that the UBPCs have been formed under conditions in which the shortages of petroleum, spare parts, tools and chemicals have made real gains from greater labor effort difficult to achieve. In the sugar sector, production fell from 4.2 million tons in 1993 to 4.0 in 1994 and to an estimated 3.3 in 1995. According to Cuban sugar analysts, however, production would have fallen even further had it not been for the increased productivity coming from the new cooperatives.
Preliminary data indicate that under these adverse conditions, the cane UBPCs are performing at higher levels of efficiency than the previous state farms, with many of these generating profits rather than losses. For example, all 23 UBPCs linked to the large Majibacoa Agro-Industrial Complex in the province of Las Tunas generated profits in 1994. When the land was managed as a state farm, the cane operations of this complex were generating an annual loss of two-million pesos. Nonetheless, a recent government report considered only 9% of the cane UBPCs to be performing well nationally, with another 50% performing according to expectations. The remaining 41% were experiencing severe difficulties, with the principal problems being the lack of inputs and spare parts, or insufficient labor to adequately work the assigned land.[6]
A second issue is whether the cooperatives will have sufficient autonomy to become viable production units. Unlike the CPAs, the new cooperatives are directly linked to state agricultural enterprises. In most cases, the management of these enterprises feels responsible for the performance of the cooperatives and does not hesitate to intervene. Cuba’s experience with the private-sector production cooperatives in the 1980s demonstrated that attempts to exert too much state control, which reduced cooperative autonomy and members’ participation in decision-making, usually resulted in membership disaffection and a lowered commitment to the viability of the cooperative.[7] Not infrequently, state directives in terms of what the cooperatives should plant undermined their profitability.
“As long as state enterprises continue to exist, the UBPCs are not going to be successful,” one official confided to me. “This is a problem. The CPAs do not have any intermediary. If the UBPCs are to be autonomous cooperatives, you cannot have state enterprises in the middle telling them what to do. The state enterprises are out of sync, they are parasites. They only produce ‘meeting-itis,’ papers, forms, to justify their own existence. The Direction of the country is going to have to think about this.”[8]
Interviews have revealed that production plans are generally negotiated between the UBPCs and the state enterprises with considerable give and take. Some mixed-cropping cooperatives, for example, have sometimes refused to plant crops which are unprofitable at official prices or which are too labor intensive. It is unclear, however, what would happen if some of the cane UBPCs decide that cane production is too unprofitable under current conditions and attempt to switch to more lucrative crops. Under the regulations governing the UBPCs, they cannot change their main line of production.
In their first year of operation, the UBPCs were regulated by the same rules as those governing the private sector. Under this system, the CPAs contracted to deliver a given amount of produce to the state at the official price. If they exceeded their quota, they were awarded a premium for above-plan production. In the late 1980s, this system provided incentives for the CPAs and individual farmers to produce above the plan and to sell this surplus to the state. But with the explosion in food prices on the black market brought about by the severe shortages of the 1990s, the incentive to sell surplus to the state dramatically declined. It was this price explosion that led to the second dramatic reform, the legalization of free agricultural markets.
By June, 1994, the black market in foodstuffs was totally out of hand. Not only had prices skyrocketed, but a growing amount of trade was taking place only in dollars, leading to an ever-faster depreciation of the peso. The inequality that was being generated between those who had access to dollars, primarily through remittances from relatives in the United States, and those who did not was resulting in tremendous differences in consumption levels. The leadership came to realize that the current inequality far surpassed that which characterized the period from 1980 to 1986 when Cuba experimented with free peasant markets. The latter had been closed down precisely for this reason.[9]
The Cuban leadership also came to recognize that additional incentives would be needed to make the new UBPCs successful. It was hoped that by reopening a free market for above-plan production, the UBPCs as well as the private-sector production cooperatives and individual farmers would be stimulated to produce more, meeting their production plans as well as realizing higher incomes and financial solvency through free-market sales. In response to all of these factors, 121 free agricultural markets were opened throughout Cuba on October 1, 1994, with the number growing between then and January to include at least one in every municipality and in most small towns.
One of the differences between the new agricultural markets and the free peasant markets of the 1980s is that participation in the new markets is not limited to peasants and their representatives. The CPAs, the UBPCs (of the non-cane sector), state enterprises, and all other individuals and collectives who might have self-sufficiency plots are also allowed to participate, though before the first three can sell in the new markets they must receive a certificate that they have met their delivery quotas to the state.
Another difference is that an effective system of taxation has been designed which should allow the state to benefit directly from the volume of market activity. The tax rate ranges from 5% of the value of projected gross sales in the city of Havana to 15% in the small, rural markets of the interior. This differential is due to the government’s objective of channeling the greatest volume of foodstuffs to the capital, where the food shortages are potentially the most politically volatile.
When the markets opened in October, the state enterprises (including the farms run by the military) played a major role in supplying them, hoping to have a significant impact on bringing prices down front their black-market level. The state pork enterprise was successful, immediately bringing down the price of pork in Havana from its June 1994 black-market level of 75 pesos to 45 pesos per pound.[10]
Interviews conducted in three Havana city markets in January, March, and June, 1995, revealed that the overwhelming number of those participating in the free agricultural market were either small-scale farmers or representatives of farmers from Havana province.[11] Representatives of the CPAs and UBPCs from the province were also present. The state presence had diminished considerably, being confined primarily to pork sales, although each market had at least one stand of produce supplied by a state enterprise.
The lower tax rate being charged in Havana city has been successful in attracting suppliers from the interior of the country. These range from smallholders from the province of Pinar del Río who raise pigs for the Havana markets, to farmers belonging to credit-and-service cooperatives in the provinces of Sancti Spiritus and Holguin who bring produce to the capital on a monthly basis. It was evident by January that the new markets had resulted in a greater availability of foodstuffs in Havana city and had had a dampening effect on prices. For example, in June, 1994, rice was selling for 50 pesos a pound in the black market: in January, 1995, it was available in the free market for between 7 and 10 pesos a pound. Yucca, one of Cubans’ favorite foodstuffs, had sold for 15 pesos a pound in June; in January it was readily available in the free market for two to three pesos a pound.
Between January and March, most prices continued to drop, partially reflecting the fact that the winter months represent the key growing season for vegetables and root crops, but also-in the case of pork-reflecting the determined effort of state enterprises. In January, the state was selling pork at 38 to 40 pesos a pound while the prevailing market price was 45 pesos. By March the prevailing price had fallen to 40 pesos while the state pork enterprises were asking 35 to 40 pesos. This practice continued, and in June, the prevailing price was 35 pesos a pound. Prices of several other products, such as rice and beans, continued to fall between January and June. suggesting that the markets have triggered a supply-response on the part of farmers.
One interesting feature of the Havana markets is the large number of people selling prepared foodstuffs, ranging from sweets, soups and drinks, to full meals packaged in a paper box made up of pork steak, mixed rice and beans, yucca, and salad. Moreover, the prevailing price of this full meal dropped from 30 pesos in October, 1994, to 25 pesos in January, 1995, and to 15 pesos in June. The free agricultural market has not, however, totally eliminated the black market in foodstuffs. While most of the ingredients in the prepared meals could be bought in the free markets, some of the processed items contain ingredients such as sugar, which are not legally available for sale.
The existence of these thriving businesses raises the question of who the consumers are, and where the money comes from to purchase these meals and other products. The minimum wage in Cuba is 91 pesos per month while the average state wage is 180 pesos per month. This means that the average Cuban in June could spend his or her whole monthly income on either 12 prepared meals or five to six pounds of pork.
One explanation is the high level of savings which many Cubans have accumulated. This itself is a product of the shortage of consumer goods on which to spend money, and the high degree of state subsidization of the basic foodstuffs made available through the ration card. In addition, utilities and transportation are still highly subsidized, and health care and education continue to be provided free of cost. One of the objectives of the Cuban government in opening the new agricultural markets was precisely to try to tap into this “monetary overhang.” Another was to reverse the depreciation of the peso, which it accomplished. In July, 1994, the dollar reached a peak of 120 pesos in the black market. With the opening of the free agricultural markets, the peso had appreciated to the point where the dollar was valued at between 30 to 35 pesos in June of this year.
While not all Cubans have access to the free agricultural market, and while the majority of those who participate make relatively small purchases, it is clear that the opening of the free markets has met the objective of reducing the potentially explosive level of inequality in consumption levels which characterized the summer months of 1994. The black market in foodstuffs has been effectively reduced in size, and prices for above-the-ration-card foodstuffs have fallen to one-tenth their June 1994 levels. This means that more Cubans now have access to above-the-ration-card foodstuffs and that the privileges of Cubans who receive dollar remittances have been considerably reduced, although not eliminated. Just as important, through the appreciation of the peso, incentives to work in the state sector have partially been restored.
The appreciation of the peso also suggests that the Clinton Administration’s move to tighten the embargo has Iargely been unsuccessful. After remittances from Cubans residing in the United States to those on the island were banned in August, 1994, one would have expected the peso to continue to depreciate. Instead. confidence in the Cuban peso has been restored, both by the opening of the free agricultural markets, and through the ingenuity of Cuban Americans in finding alternatives ways (through Mexico, Venezuela and Canada) to send remittances to their relatives.
While inequality will continue to grow with the opening of the free agricultural markets, it should grow at a slower rate than without a free market in foodstuffs for above-plan production. If the reforms succeed in significantly increasing agricultural production while encouraging private and collective farmers to meet their quotas, the state’s capacity to guarantee a basic bundle of foodstuffs to all at a subsidized price will be enhanced. If so, this will he an important element in enabling the Cuban leadership to maintain social cohesion by guaranteeing the maintenance of basic human needs. Not only will the state be able to supply minimum food supplies, but it will also be able to meet its commitments to social programs through increased fiscal revenues from agricultural sales. The opening of the free agricultural markets has also provided a means for the Cuban leadership to enhance the viability of its collective forms of production.
Undoubtedly, with the opening of the free agricultural markets, the individual farmers of Cuba will continue to be among the wealthiest social group in the country.[12] Yet members of the private-sector cooperatives and the UBPCs should also see their incomes rise. It is unclear, however, what the macroeconomic effect of the reform programs in agriculture will be over the medium term. This largely depends on whether the changes are sufficient to reverse the decline in production levels, particularly those of the all-important sugar-export sector. In the short term, it is evident that the reforms have proved a great stabilizing factor, and perhaps given Cubans hope that there might be a way out of the economic crisis.
ABOUT THE AUTHOR
Carmen Diana Deere teaches economics at the University of Massachusetts at Amherst. She is past president of the Latin American Studies Association (LASA) and a member of the NACLA editorial board.
NOTES
1. These strategies are described in detail in Carmen Diana Deere, Niurka Pérez, and Ernel González, “The View from Below:Cuban Agriculture in the Special Period in Peacelime,” Journal of Peasant Studies, Vol. 21, No. 2 (1994), pp 194-234.
2. Victor Figueroa, “La Reforma de la Tenencia de la Tierra en Cuba y Formación de un Nuevo Modelo Mixto de Economía Agraria,” mimeo, Universidad Central de las Villas, Grupo de Desarrollo Rural y Cooperativismo, April, 1995, p 19.
3. Figueroa, “La Reforma de a Tenencia de la Tierra,” tables 3 and 4.
4. In addition, farms run by the military accounted for 3.2%, CPAs 11.2%, and individual peasants and smallholders for 15.1 % of the reported 6,676 million hectares of dgricultural land. Figueroa, “La Reforma de la Tenencia de la Tierra,” table 2.
5. The author has carried out fieldwork in collaboration with the Rural Research Team of the University of Havana in the municipality of Majibacoa in the province of Las Tunas, in Santo Domingo in Villa Clara, and in Guines in Havana province.
6. Ministerio del Azucar “Categorización de las UBPCs y Principales Problemas,” mimeo, Havana, February, 1995.
7. See Carmen Diana Deere, Mieke Meurs, and Niurka Pérez, “Toward a Periodization of the Cuban Collectivization Process: Changing Incentives and Peasant Response,” Cuban Studies, Vol. 22 (1992), pp. 115-149.
8. Personal interview with the provincial president of the National Association of Small Farmers (ANAP), Las Tunas, June 20, 1994.
9. In addition to generating inequality in consumption and income levels, the free peasant markets were also seen to be hampering Cuba’s collectivization drive of that period. For a full analysis of this experiment, see Carmen Diana Deere and Mieke Menus, “Markets, Markets Everywhere? Understanding the Cuban Experience,” World Development, Vol. 20, No. 6 (1992), pp. 825-839.
10. Cary Torres and Niurka Pérez, “Mercado agropecuario cubano: proceso de constitución,” Economía Cubana, Boletín Informativo, No.18, November, 1994.
11. Niurka Pérez, Cary Torres and the author carried out interviews and collected price data in the markets of Alto Habana, Marianao and Egido (in old Havana) on January 18 and June 10, 1995. The markets were surveyed by Pérez, Torres and Carollee Bengelsdorf on March 30, 1995.
12. See Carmen Dana Deere, Ernel González, Niurka Pérez and Gustavo Rodríguez, “Household Incomes in Cuban Agriculture: A Comparison of the State, Cooperative and Peasant Sectors,” Development and Change, Vol. 26. No. 2 (1995), pp. 209234.
