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