Agricultural reform flirts with capitalism

Agricultural reform flirts with capitalism - Cuba
Published: Monday, July 21, 2008 17:40 (GMT -0400)
By Renzo Dasso, Business News Americas

Cuban President Raúl Castro passed a decree on July 18 allowing private
farmers to take over idle state land under a concession scheme designed
to increase production while giving farmers a chance to make profits.

With agricultural imports to the island going up 35% between 2005 and
2007, President Castro declared increasing land production a national
imperative.

The island faces daunting challenges to meet this goal. According to
official statistics from 2006, around 75% of Cuba's 6.63mn ha of
farmland, accounting for 60% of all of its territory, are degraded in
one way or another due to overuse from the sugarcane industry.

In addition, low production capacity, low organic content and excessive
saline concentration are widespread problems.

As a result, only 3.12mn ha are cultivated with crops such as sugarcane,
rice and other agricultural products.

At the same time, the island has one of the highest freshwater
extraction rates in the Caribbean, since sugarcane and rice crops are
heavy water consumers.

POLICY CHANGE

As Cuba slowly begins to open up to the rest of the world, the new
decree poses a clear departure from what has been the island's policy on
property for nearly five decades.

With the passing of the decree, the Cuban government looks to boost food
production and avoid depending on external suppliers.

But how will the island's socialist regime fund all the irrigation
projects needed to meet this goal?

Since the majority of Cubans do not have capital of their own, as most
means of production are owned and run by the government - and most of
the labor force is employed by the state - the logical answer is through
international financing.

However, due to the embargo imposed by the US since 1961, few countries
or multilateral financial entities are willing to do business with the
island. That may change, of course, if Cuba shows a clear disposition to
change its policies.

THE DECREE

In 1959, the government gave 200,000 people 20% of the country's farmland.

Raúl Castro's decree allows up to 13.4ha to be handed over to farmers
who are not landowners, while permitting proprietors to accumulate a
maximum of 40.3 ha.

The state will maintain ownership of the land, which concessionaires
will not be able to transfer, cede or leave as inheritance.

The concessions will be taxable and have a maximum term of 10 years,
with the possibility of an extension.

If a concessionaire cannot continue working the land, it will be
transferred to another operator.

POTENTIAL EFFECTS

If foreign capital were to enter the island more freely, as is already
happening in the oil and mining sectors to mention just two, what effect
would this have on Cuba's socialist economy?

The situation could be likened to releasing an infectious pathogen in a
quarantined area.

Or could it be that the Castro brothers' government has lost its
traditional aversion to the concept of profit, by passing a decree
allowing farmers to amass the fruits of their labor?

It is also foreseeable that in time these earnings will be accumulated
and reinvested in the farms to increase production and profits, thus
planting the seed of capitalism on the island.

At the same time, the fact that landowners are allowed to exploit more
land than those who are not creates potential social divisions that
could reflect the class system that is predominant in the rest of the world.

Maybe the government believes that landowners have more experience or
means to optimize farm production. Whatever the reason, it is clear that
this policy could alter one of the most cherished principles of the
Cuban revolution: social equality.

Whether or not Cuba manages to smoothly and successfully integrate
aspects of capitalism into its economic and political system remains to
be seen.

However, one thing is certain: things are changing on the island, and
they are not going back to the way they were.

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