Hard-Currency Debit Cards: Much More than a Waiting List

Harvesting crops in Cuba. (Bohemia)

14ymedio bigger14ymedio, Elias Amor Bravo, economist, November 1, 2021 — If there is one sector of the Cuban economy with no reason to be grateful for the changes the revolution brought about, it is agriculture. It employs almost one fifth of the nation’s workforce but contributes only 5% to GDP. Productivity is 80% below the economic average. As a result it cannot meet the food needs of the entire population.

None of this was the case before 1959. Responsibility for this serious problem lies with the communist economic model adopted by Fidel Castro. After pushing through a disastrous agrarian reform program, he expropriated all private-sector land and handed it over to an indolent and inefficient state bureaucracy, which is directly responsible for the chaos.

Then Raul Castro came along, acknowledged it was disaster and leased back the land (without granting property rights) to farmers who agreed to play by the new rules. Things still did not work.

Then came the era of agricultural experiments. All kinds of communist tomfoolery was tried without any acknowledgement of what actually had to be done. Many new amendments have been added to the 2019 communist constitution but not the one it so urgently needs. Land cannot be collectively owned by everyone.

It’s absurd to think the state is capable of managing farmland for the public good. It will never be able to produce enough. The experiments were nothing more than patches on faulty marketing, contracting and scientific applications. They did not yield the expected results. Agriculture has remained stagnant, waiting for opportunities to open up in the private sector and for property rights to be restored. Vietnam provided these opportunities and, in little more than five years, famine was a thing of the past.

Recently, the State newspaper Granma has been reporting on the latest experiment. The government now says that agricultural producers whose crops are exported will be guaranteed a percentage of the proceeds in the form of hard currency. This is part of a package of measures (no less than sixty-three) that, the government complains, “farmers do not know about because they do not read them.” Meanwhile, Cuban farmers ignore the new regulations and go about tilling their fields, trying to find a solution to the many obstacles the system puts in their way.

Granma stated, “Some eight months after these measures took effect, changes are beginning to be seen in agricultural and livestock performance, with better numbers in the supply of milk, meat, fruit and honey… yes, though still far from satisfying current demand.” Curiously, however, the economics minister, Alberto Gil, looked at his balance sheet for the first nine months of this year and acknowledged a few days ago that no agricultural production targets were met. So who’s right?

But back to the issue at hand. According to Granma, the measure that has had the greatest impact is the one that gives farm producers a percentage of the proceeds in freely convertible foreign currency (moneda libremente convertible or MLC), which they can use to buy supplies to increase production and support their families.

The question is, why do they only get a portion of the proceeds and not the full amount? What is preventing producers from being able to reap the full rewards of their time and effort? Why is the state extracting all the income and wealth rather than relying on the tax system?

The Granma article describes a situation in Guantanamo where — and here comes the good part — there has been a significant “decline in the number of MLC debit cards issued to farmers who, without these cards, cannot receive the hard currency they have earned from the export of their products.”

Damn! So who has that money now? To provide some idea of the scope of the problem, Granma reports that, of the 20,000 fruit, vegetable and livestock farmers in the province, only 300 have these cards. The numbers speak for themselves.

The regime now requires MLC cards be used for a growing number of retail transactions to prevent foreign currency from circulating freely as cash, as farmers would prefer. One would assume, then, that the regime would see to it that its inefficient state-run banks would get the cards out quickly. Though the cards are essential to the whole MLC operation, that is not happening.

They trot out the usual excuses, which boil down to two things: reduced operational capacity due to Covid-19 and low interest on the part of consumers, who have made little effort to acquire the cards since efforts were made to streamline the process in November 2020 as part of currency unification reforms.

Anything that could stimulate agricultural production, though we have serious doubts this is even possible, is always delayed or stymied by the inertia of the government sector. The same could be said of the banking sector as well, which also has no incentive to make sure things work.

On the one hand, the banks do as they are told. They require farmers to open  accounts in person, in spite of the threat from Covid-19. Small farmers open bank accounts without a clear idea what they will get out of it. When they later encounter roadblocks, chaos is unleashed. Imagine how that turns out. Very badly indeed.

So far, only a few bee keepers and those who pay taxes to the Milk Company have been issued cards. And as Granma points out, many have not gotten them because bureaucratic rules require producers to provide copies of their lease and their ID cards to open an account.

Then the merry-go-round begins. The communists always manage to entangle everyone in their problems. On the one hand, officials say the country wants everyone to get what he or she deserves for his or her time and effort while at the same time claiming that MLC cards will help the economy.

To achieve that objective, every agricultural producer will need extra support because not all farm cooperatives have the computers and infrastructure needed to achieve this. In other words, farmers toiling in the fields will have to be computerized. How many Cuban peasants do you think have access to this technology?

Producers are more interested in being left alone to do what they do, which is tilling the fields. It is not clear to them why they would need a plastic card — many, in fact, are using the cards they already have to run their operations — especially when they are being told from on-high to get one even though it does not address their specific needs.

Add to that the banks’ complicated and cumbersome management of the cards, and delayed payments from the state. The benefit of the new card is that it would allow farmers to receive something from the sale of their exports. But if they are not receiving the full proceeds from those sales, why would they be interested? Then there are the payments producers have still not received for the crops they have already delivered. This further erodes confidence in the state, which has a reputation of not paying its bills and currently runs a deficit equal to 20% of GDP.

Officials should be encouraging economic actors to focus their attention on the things that really matter to them, not on red tape and communist craziness. If there are entities that are selling things online and generating significant hard currency income that they can later use to buy things in government-run MLC stores, let them keep doing it.

If economic actors benefit from entering into joint ventures or other cooperative business relationships, let them do it if they serve the interests of all parties. These are the keys to a functioning economy, which Cuban communists have made impossible for six decades. A return to rationality and efficiency is necessary but it is not enough to overcome backwardness and supply shortages.


COLLABORATE WITH OUR WORK: The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.