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Structural Change in Cuban Agriculture in the 1990s1 William A. Messina, Jr.2 1. This is EDIS document FE 296, a publication of the Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. Published August 2001. Please visit the EDIS website at http://edis.ifas.ufl.edu. 2. William A. Messina, Jr., coordinator of economic analysis, Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, Florida. The Institute of Food and Agricultural Sciences is an equal opportunity/affirmative action employer authorized to provide research, educational information and other services only to individuals and institutions that function without regard to race, color, sex, age, handicap, or national origin. For information on obtaining other extension publications, contact your county Cooperative Extension Service office. Florida Cooperative Extension Service/Institute of Food and Agricultural Sciences/University of Florida/Christine Taylor Waddill, Dean. Introduction The 1990s was a time of reform and transformation for Cuba's agricultural sector. This was accomplished by creating the Basic Units of Cooperative Production (Unidades Bsicas de Produccin Cooperativa or UBPCs) from the former State farms in 1993 and establishing new agricultural markets (Mercados Agropecuarios or MAs) in 1994. This report reviews the most current available data on Cuba's agricultural sector to assess the impacts that these two policy changes have had on Cuban agricultural production, consumption, and import patterns. [Note: This report is a summary of a longer document entitled "Agricultural Reform in Cuba: Implications for Agricultural Production, Markets, and Trade" which is available online http://www.lanic.utexas.edu/la/cb/cuba/asce/cuba9/ messina.pdf.] The Changing Structure of Production Legislation authorizing the creation of UBPCs from the former State farms in late 1993 marked the beginning of a rapid transformation in the structure of agricultural production in Cuba. By the end of 1995, over 2,800 UBPCs had been created, encompassing about 42% of the total agricultural land in Cuba. State farms, which accounted for nearly three-quarters of the total agricultural land area in Cuba in 1989, represented only about one-third of the total agricultural land area by 1995. Between 1989 and 1996, agricultural land area for all "private" farms increased from 230,600 hectares to 269,200 hectares (17%). While this expansion may reflect the influence of government programs in providing rural land for UBPCs to produce coffee, cacao, and tobacco, Nova Gonzlez's 1998 report indicated that approximately 100,000 hectares of land had been distributed for UBPCs means that only a minority of the distributed lands were in the "private" farm category. Also between 1989 and 1996, agricultural land area for Cooperatives of Credit and Services (Cooperativas de Crditos y Servicios, or CCSs) increased from 739,100 hectares to 782,700 hectares (6%). While this increase represents only about one-third of the percentage increase in agricultural land area experienced by "private" farms, it represents a larger absolute increase in land area since CCSs represent a larger proportion of total agricultural land area than do "private" farms.
Structural Change in Cuban Agriculture in the 1990s 2 Despite the expansion in agricultural land area for UBPCs, "private" farms, and CCSs, agricultural land area for Agricultural Production Cooperatives (Cooperativas de Produccin Agricultura, or CPAs) decreased from 769,800 hectares to 620,200 hectares (20%) during the 1990s. This is a continuation of the steady decline in land area for Cuba's CPAs since the mid-1980s. In their work based on Anuario (1989), Puerta and Alvarez (1993) documented how CPAs, CCSs, and "dispersed private" farms cultivated higher proportions of their agricultural land areas than did the State farms in the late 1980s. This trend continued through 1996, with the UBPCs showing higher cultivation rates than the State farms. On average, State farms cultivated 44% of their available agricultural land in 1996, compared to 57.9% for CCSs, 61.2% for CPAs, 64.5% for UBPCs, and 68.3% for "private" farms. The creation of UBPCs brought about an important shift in average farm size in Cuba as UBPC farm sizes approached those of CPAs. In the case of sugarcane, livestock, and tobacco, average UBPC size was less than 10% of the previous State farm size. The average size for UBPCs for production of vegetables, roots, and tubers was only slightly more than 10% of the previous State farm size, and rice UBPCs were less than 20% of the size of previous State rice farms. The contention in Cuba is that the decrease in scale of agricultural production that the UBPCs have brought about will be the basis for more efficient and sustainable production systems under the conditions of limited availability of agricultural inputs. Shifting Production Patterns Table 1 contains an 11-year time series of Cuban production data for selected agricultural commodities used primarily for domestic consumption (as opposed to export crops). This data series provides a detailed examination of the extent of the deterioration that occurred in Cuba's non-sugar agricultural production following the loss of Soviet support and subsidization. All commodity production volumes fell to their lowest levels in 1993 and 1994. By the 1993 and 1994 seasons, production of staple crops such as rice and vegetables were only 33% and 48%, respectively, of the peak production levels achieved between 1988 and 1990. Table 1 also documents the recovery in rice and vegetable production that occurred following the formation of the UBPCs and MAs. While rice and bean production clearly showed some recovery, productions of malanga, peppers, guava and papaya remained well below the levels achieved in the late 1980s. By 1996, root and tuber production had recovered and increased to levels higher than the peak achieved between 1988 and 1990. This trend, however, reflects substantial increases in potato production, which largely occurred as the result of concessional sales and donations of seed potatoes from Canada and France. While the 1996 potato production was higher than the peak volume achieved in 1990, when potato production figures are deducted from total root and tuber production, the 1996 net production of other roots and tubers was only about 75% of the peak volume achieved in 1990. Production of corn, beans, bananas, and plantains were higher in 1996 and 1997 than the peak volumes achieved in the period 1988 to 1990. In fact, the 1996 plantain production was more than twice as high as the highest production volume over the previous 25 years. Corn production in 1997 also was higher than at any time in the previous 25 years, and almost twice as high as the peak volume achieved between 1988 and 1990. These production trends presumably were the result of initiatives to expand production to offset the loss of food import capacity experienced after 1990. One way of providing a very broad assessment of the overall shifts in the staple crops listed in Table 1 is to total the production volumes for all crops by year. An examination of these totals shows that total production for 1994 had fallen to 63% of the peak production level of 1988. By 1996, total production volume had recovered to about 95% of the 1988 peak level, suggesting that, while the composition may have changed somewhat, food volumes moving through Acopio (the state food collection agency) in 1996 should have approached those in 1988. While production volumes in 1997 fell below those of 1996,
Structural Change in Cuban Agriculture in the 1990s 3 reports from Cuba indicate that this was due, in part, to crop damages caused by Hurricane Lili in late 1996. In 1997, just four years after their formation, the UBPCs reportedly produced more than 70% of Cuba's sugarcane, 42% of its milk, 38% of its rice, 36% of its citrus, 32% of its staples, 22% of its tobacco, 16% of its tropical fruits, 12% of its vegetables, and 7% of its tobacco ("Las soluciones", 1997)thus emphasizing the important role of the UBPCs to Cuba's agriculture. However, the Cuban government acknowledges that the UBPCs still have far to go to become "efficient" producers. The Role and Function of Agricultural Markets The tremendous importance of the Mercados Agropecuarios or MAs (agricultural markets) in Cuba is perhaps most clearly demonstrated by Nova Gonzlez (1998), who estimates that the ration markets in Havana only supply about 60% of the daily caloric consumption for the population. "Social meals" (meals provided for workers and students, or sales to workers) provide another 8% of the total caloric consumption in Cuba. This means that most people in Havana must rely on the MAs and other sources for about one-third of their caloric requirements. Such purchases represent a relatively high proportion of the total monthly income of the average Cuban household. This serves to highlight what may be the quintessential enigma of Cuba's agricultural economy: How is it that food supplies in the MAs, which are supposed to be "surplus" production (i.e., production in excess of quota obligations for sale to Acopio), remain high while food supplies in the ration stores are insufficient to meet the needs of the population? The Cuban government offers no explanation for this condition. While the full explanation for the situation is undoubtedly complex, shifting food import patterns may explain part of problem (as discussed later in this report). In 1994, the author heard a Cuban scholar refer to the opening of the MAs as an attempt by the Cuban government to, among other things, "bleach" the black market. Empirical evidence suggests that the MAs have been somewhat successful in this regard. (Although it is likely that food volumes moving through the black market are now smaller than in 1993, there is no reliable information on which to base estimates of current black market food sales). The MAs also serve an important role in broadening the availability of food outside the ration system within Cuba. Before the opening of the MAs, black market sales were conducted almost exclusively in dollars. As a result, individuals and families without access to hard currency were unable to obtain food or other products through the black market. Opening the MAs enabled purchases of "surplus" food supplies for pesos, which was an important development. Nova Gonzlez (1998) refers to how re-opening (an implicit reference to the previous experience with free agricultural markets in the early 1980s) the free market for agricultural products in October 1994 deflated the prices of products previously sold in the underground economy or black market. This was accomplished by reducing the risk premium for sales conducted through the underground or black markets. Nova Gonzlez (1998) also refers to a series of financial measures adopted by the government during the second half of 1994 that influenced the prices of agricultural products in the MAs. Specifically, he cites how the increase in prices of other goods and services and the imposition of a tax system reduced the amount of discretionary money held by citizens, as well as the volume of money in circulation, which, in turn, decreased the demand for sales in the MAs, thus helping to hold down prices. It is impossible to disaggregate the two factors (reduction in risk premiums and the impact of these financial measures) to determine the extent to which each influenced the establishment of prices in the MAs. MAs exist throughout Cuba. Havana's 49 agricultural markets represent approximately 64% of the value of sales of all MAs in Cuba. For this reason, the agricultural markets in Havana often are considered to be the most representative even though prices in Havana's markets are generally the highest in the country. Markets in Havana are attractive for producers and sellers for the following reasons: market size; higher income levels in Havana; the lowest sales taxes (5%), compared to sales tax rates
Structural Change in Cuban Agriculture in the 1990s 4 for MAs in townships (15%) and provinces (10%); and generally higher prices. During the first three years following the establishment of the MAs, sales of agricultural products and meats steadily increased. Between 1995 and 1996, there was an increase of 19% and 5%, respectively, in sales of agricultural and meat products in the MAs. In 1997, the slight decreases in the sales of agricultural and meat products were again attributed to the effects of Hurricane Lili. Nova Gonzlez (1998) provides some very interesting statistics regarding the main suppliers to the MAs. The "private sector" has been especially active and important in the MAs since its "re-opening" in October of 1994, holding a 40-62% market share for agricultural products and a 60-79% market share for meat products. Interestingly, the State has been an important market participant through Acopio. Between 1995 and 1997, the State's market share steadily increased to 40% for both agricultural and meat products. This is presumably part of an effort by the government to keep prices in the MAs low and food supplies outside the ration stores accessible to the populace, since ration stores are unable to supply all food needs. Meanwhile, there has been a steady reduction in the presence of cooperatives as participants in the MAs. However, these trends may be a bit misleading. As Nova Gonzlez reports, it is likely that some of the increase in the activity of the State (Acopio) in the MAs represents purchases from cooperatives that have decreased their direct participation in the MAs. Nevertheless, even if all the products supplied to the MAs by Acopio were from stocks normally destined for the ration stores, this would only provide a partial answer to the question of why there is extensive "surplus" production in the MAs when ration requirements cannot be met. Prices of representative products sold in the MAs have generally shown little change over time. MA prices in other provinces are lower and fluctuate less than in Havana. Agricultural and Food Imports Shifting import patterns must also be examined to have a full perspective of the changes in Cuba's agricultural and food situation. Table 2 contains data on the value of Cuba's food imports and total imports from 1989 through 1996. The value of Cuba's food imports fell nearly 50% between 1989 and 1994. However, over the same period, the value of Cuba's total imports fell more than 75%. As a result, food imports doubled their share of total import value from 11% to 23%. This clearly demonstrates that the government of Cuba placed some priority on maintaining food import volumes to the extent possible during crisis of the Special Period. It also highlights the importance to the Cuban government of maintaining food import volumes to meet domestic food requirements. Because of Cuba's chronic trade deficits and economic difficulties, it is questionable whether Cuba will be able to sustain the level of food imports seen in recent years. This is a very important and pressing issue for the Cuban government. Conclusion The Cuban government has done little to remove the obstacles that hinder the efficient functioning of the agricultural sector in Cuba since the establishment of UBPCs in 1993 and the opening of MAs in 1994. Nevertheless, both of these institutions play important roles in Cuba's agricultural economy at the present time. Increases in the production of staple food crops experienced in Cuba after 1994 are not entirely attributable to the formation of UBPCs. Even the Cuban government reports unprofitability of a large proportion of the UBPCs. And, while not a topic addressed in this report, it is widely recognized that the results for UBPCs in the sugar industry have been disappointing. The fact remains that the large scale, highly mechanized, input-intensive State farms were no longer viable following the loss of Soviet support. In light of that situation, the UBPCs appear to have achieved some level of success in terms of providing food for the Cuban people, despite the fact that many structural rigidities remain in place in Cuba that have prevented the agricultural sector from responding as
Structural Change in Cuban Agriculture in the 1990s 5 efficiently as it could have. However, stable food production patterns in Cuba, over the last few years, and the lack of further internal adjustments indicate that there is little reason to expect any significant expansion in production the near future. With the MAs providing about one-third of the caloric requirements of the Cuban people, these markets have played, and are expected to continue to play, an important role in feeding the population even though food costs in the MAs remain expensive relative to general income levels. Thus the opening of the MAs would appear to be another successful, and perhaps even pivotally important, policy change implemented by the Cuban government. An examination of Cuban food import patterns suggests that the decreasing food import volumes offer a partial explanation of the shortfalls being experienced in the food rationing system in Cuba at a time when "surplus" food supplies (supplies in excess of quota requirements for sale to Acopio) in the MAs appear relatively plentiful. However, because of its chronic trade deficits and economic problems, questions remain regarding Cuba's ability to continue its present level of food imports. The evidence presented in this report suggests that the establishment of UBPCs and the opening of MAs have had positive impacts on food production and availability in Cuba from the critically deficient levels experienced in 1993 and 1994. However, their influence has been insufficient to offset all the problems experienced as a result of the loss of Soviet aid. While the food and agricultural situation in Cuba at the present time does not appear to be as difficult as it was in 1993 and 1994, the aforementioned factors suggest that the present equilibrium (such as it is) may indeed be fragile. References Alvarez, Jos and Ricardo Puerta. "State Intervention in Cuban Agriculture: Impact on Organization and Performance." World Development 11 (1994): 1663-1675. Anuario Estadstico de Cuba 1996. La Habana, Cuba: Oficina Nacional de Estad(ONE). 1998. Anuario Estadstico de Cuba 1989. La Habana, Cuba: Comit Estatal de Estadsticas. 1991. "Las Soluciones Estn en Cada Colectivo Laboral." Trabajadores 22 (September 1997). Nova Gonzlez, Armando. "Nuevas Relaciones de Produccin en la Agricultura." Paper presented at the XXI Congress of the Latin American Studies Association October 1998. Nova Gonzlez, Armando. "Cuba: Modifacacin o Transformacin Agrcola?" La Habana, Cuba: Centro de Superacin del MEP. 1996. Nova Gonzlez, Armando. "Mercado Agropecuario: Factores que Limitan la Oferta." Cuba: Investigacin Econmica 3 (1995). Oficina Nacional de Estadsticas. Estadsticas Seleccionadas. June 1997. Oficina Nacional de Estadsticas. Ventas en el Mercado Agropecuario. May 1998. Oficina Nacional de Estadsticas. "Caractersticas de las UBPC y Algunos Cambios Producidos en el Sector Agropecuario con su Introduccin." 1994. Puerta, Ricardo and Jos Alvarez. "Organization and Performance of Cuban Agriculture at Different Levels of State Intervention." International Working Paper No. IW93-14. International Trade and Development Center, Department of Food and Resource Economics, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. June 1993.
Structural Change in Cuban Agriculture in the 1990s 6 Table 1. Non-sugarcane agricultural production in Cuba, selected commodities, 1987-1997 (Units = 1,000 metric tons). 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Roots & Tubers 633.0653.2681.2702.3690.4753.9568.7484.5624.2742.3675.5 Potato 249.7276.8281.7202.7237.6264.5235.2188.3281.6365.0326.1 Boniato 188.2163.5194.8208.8192.5205.8130.4133.4151.6149.4145.2 Malanga 41.841.737.622.214.171.1240.77.27.810.3 Vegetables 549.6675.5610.2484.2490.8513.7392.9322.2402.3493.6471.3 Tomato 210.5335.0260.0165.0175.0197.2127.895.9140.4162.9163.6 Onion 22.326.921.6126.96.36.199.32.96.08.4 Peppers 50.750.353.242.632.119.815.06.98.110.6 Cereals 509.5525.0583.9538.7483.0416.9226.2299.7303.8472.9 Rice 466.0488.9536.4473.7427.6358.4176.8226.1222.8368.6388.1 Corn 42.235.547.165.055.358.549.473.681.0104.3125.7 Legumes 12.915.314.612.011.89.78.810.811.514.0 Beans 12.514.814.112.011.89.78.810.811.514.015.7 Bananas & Plantains 284.4345.1291.4324.2357.1514.6400.1360.7399.9539.4382.7 Bananas 166.3202.6182.5201.8214.0245.9169.9143.1166.0179.0 Plantains 118.1142.4108.8122.4143.1268.7230.1217.6234.0360.4 Other Fruit 223.3269.4218.9219.0257.6127.468.389.1112.3102.6113.3 Mango 81.0120.980.872.5122.039.218.144.470.950.4 Guava 38.053.544.833.132.8188.8.131.52.410.4 Papaya 40.736.130.539.932.3184.108.40.2060.215.1 Total 2,212.7 2,483.6 2,400.2 2,208.4 2,290.7 2,336.2 1,665.0 1,567.0 1,854.0 2,364.8 2,172.3 Source: "Anuario Estadsticos," 1989 and 1996. 1997 figures from "Estadsticos Seleccionadas 1997." Table 2. Value of Cuban Food Product Imports, 1989 1996 (Units = 1,000 pesos). 1989 1990 1991 1992 1993 1994 1995 1996 Food Product Imports 908,762827,341825,377498,569474,146467,331610,883689,108 Total Imports 8,124,2247,416,5254,233,7522,314,9162,008,2152,016,8212,882,5303,480,608 Food Imports (as % of Total) 11.2% 11.2% 19.5% 21.5% 23.6% 23.2% 21.2% 19.8% Source: "Anuario Estadstico" 1989 and 1996.