Cuba and the Problem of Speculation

Cuba and the Problem of Speculation
July 18, 2013
Fernando Ravsberg*

HAVANA TIMES — The newspaper of Cuba's Communist Party has hit the roof
because Cuban mothers have been left without disposable diapers and lays
the blame on "unscrupulous" venders who hoard products in order to
re-sell them at inflated prices.

In Cuba there is a popular saying about the fellow who buys fish but
then is afraid of its eyes. Any economy that opens up to the market
ought to know its laws well in order to design policies that protect its
humblest sectors from abusive commercial practices.

Hoarding is not something new to Cuba – it is as old as the country's
shortages. But, within the ration-booklet economy, it was an illegal
activity. Today, however, you can't arrest anyone for buying a product's
entire stock, not if they're able to pay for it.

It is not my intention to make excuses for speculators, who generally
pop up during hard times, in all countries and political systems. They
are individuals who take advantage of other people's needs, and make
these people's lives even more difficult, in order to make a quick profit.

It is true that, sometimes, these individuals arrive on the scene for
other reasons. I recall that, during Salvador Allende's short-lived
presidency in Chile, authorities would find warehouses stuffed with
essential products which had been hoarded in order to cause discontent
among the population and incite people to overthrow the elected government.

This doesn't appear to be the case of Cuba, where the opposition is very
small, atomized and devoid of the infrastructure needed for such an
operation. What we are seeing here are simple speculators who create
artificial shortages in order make profits by inflating product prices.

The procedure is simple enough: it is a question of finding a product of
very high demand and with a limited stock at State shops, where,
ideally, one has good contacts that let one know in advance when the
product is coming in – privileged information which allows the
speculator to arrive there first and buy up the entire stock.

There are many people willing to pay double to get their hands on
disposable diapers for their kids or grandfather, mops, toothpaste, a
fitting required to repair the plumbing or the electrical cable they
dearly need to fix a short-circuit.

Whenever there is a shortage of a particular product, the gears of the
speculating machine begin to turn, and in broad daylight. Most
commercial establishments are surrounded by people who approach
customers to offer them products, telling them they will not find them
inside the store.

I am no economy expert, but I can think of two ways of putting an end to
speculation. One is the by now well-known ration card and the other is
the saturation of the market, creating greater offer and preventing the
re-selling of products at inflated prices.

On occasion, the problem is strictly organizational. Many Cubans and
foreigners exchange their euros on the street to avoid the long line-ups
at State currency exchange locales, which sometimes don't even have
enough cash for some transactions.

It seems as though no one has taken the time to calculate how much more
money the State would take in if its Cadecas (currency exchange
facilities) had enough tellers to allow customers to quickly exchange
their money. They save peanuts to lose a bundle.

If a store were re-stocked immediately after being emptied of diapers,
to mention one product, speculators would be forced to sell them at a
lower price, losing a greater part of their initial investment, and this
would probably prompt them to look for another, more lucrative activity.

Many a time, it is not a question of poverty. I don't believe Cuba lacks
the financial resources to import mop heads. It is a question of
bureaucratic delays, brought about by useless paperwork and pompous
committees devoid of any real authority, which specialize in pointless
meetings.

This is the organizational ineptness the State shows and speculators
take advantage of. And the problem could well grow in proportions, for
the government intends to continue opening the economy to the market and
to completely eliminate subsidies for essential products.

If, in the future, the government opts to subsidize low-income peoples
alone, the State ought to think about how to protect these people, so
that they aren't forced to pay prices that have been artificially
inflated by speculators, capable of hoarding, withholding and re-selling
products.

It would be wise to look to Spain, which is going through the most
severe crisis in its history for having been unable to establish market
regulations that prevent financial and real-estate speculation. Learning
from other peoples' mistakes is a clear sign of intelligence.

Cuba's advantage is that its leaders do not "adore" the market. The
disadvantage is that, after half a century of "socialist planning", they
know very little about its rules. And this can give rise to the worst of
temptations: thinking that the problem is solved using the police rather
than the economy.
—–
(*) An authorized HT translation of the original published in Spanish by
BBC Mundo.

Source: "Speculation is common in Cuba when shortages prevail in the
market" - http://www.havanatimes.org/?p=96593