The Cuban agricultural sector and relations with the United States

There are several scenarios being lived and discerned for food security on the Caribbean islandbased on its ties with the United States, in a new context of relations for the two nations. Regarding the first rapprochements and intentions for the definite elimination of the blockade several stages have to be gone through, not exempt of advantages and challenges.

Foto: Jorge Luis Baños_IPS

December 17, 2014 marked a new stage in Cuba-U.S. relations, as the start of a solution to the dispute between both countries which has lasted for more than 57 years.Starting then measures have been taken geared at the future normalisation of economic relations between both nations. Undoubtedly, there is still a long road ahead not free of obstacles but with the spirit and will of seeking and finding the most suitable and mutually advantageous solutionson the table of negotiations and in conditions of equality.

The most recent measures include the flexibility for U.S. citizens to travel to Cuba through the approval of a general licence covering 12 categories, among them visits for family, religious, educational, scientific, business missions, humanitarian and cultural purposes.The entry to the United States of Cubans products for up to 400 U.S. dollars per traveller, of which 100 dollars can be in alcoholic beverages and cigars, has been approved.However, U.S. citizens still cannot freely travel to Cuba as tourists.

 

Other steps have been the authorisation of the export of a group of goods by the United States, specifically directed at promoting the private sector in Cuba, among themequipment and agricultural inputs; the participation of U.S. companies in the area of information technology; the increase in the quarterly figure for authorized personal remittances, which range from 500 to 2,000 dollars every three months, which makes it possible to preview their increase in upcoming years and the creation of a lobby to promote the export of agricultural products to Cuba (U.S. Agriculture Coalition for Cuba). This new context has awoken greater interest among tourists and businesspeople from other countries.

 

Other favourable decisions have been to not penalise for six months the ships touching Cuban ports[1] —even though this resolution is not wide-ranging and does not cover all aspects – and authorising the arrival of ferries as well as credits, except for the purchase of food.

 

On the other hand, the regulations that allow the use of the U.S. dollar in the economic transactions carried out by the Cuban economy, despite the announcement of the elimination of that ban, have still not been instrumented.

 

However, a variable to take into account and that could have an incidence in one way or the other during the events is the policy that next U.S. President Donald Trump will carry out and its practical application with respect to Cuba-U.S. relations.

 

Possible scenarios for the agricultural and livestock sector

 

The aforementioned panorama can be identified as a first scenario, which is going through challenges that, at the same time, can lead to certainimpacts, positive as well as risky with regard to the four cores that make up food security: availability (national production+imports-exports), access, innocuousness and systematization in the supply.

 

The analysis of the availability, in the first scenario, holds the following challenges:

  • Increasing national production of food products and all the measures and domestic, productive and value linkingit implies.
  • Being able to have access to food products on the international market.
  • Avoiding and stopping the degradation of natural resources and the environment.

For the access core the looming challenges are:

  • Achieving a correspondence between supply and demand.
  • Meeting the needs not covered of some micronutrients in the population basedon income increases.

 

Regarding availabilitypositive aspects are previewed, which could result in:

 

The increase of incomes due to a greater arrival of U.S. visitors (see table 1), which could be partly devoted to the agricultural and livestock sector to increase the national production of food products and achieve a favourable impact on the substitution of imports.

 

Table 1

Tourist arrivals 2014 and 2015

 

Country 2104 2015
UK 123,910     155,802
Germany 139,138     175,262
France 103,475         138,474
Italy 112,076     137,727
Spain 77,099     107,368
U.S. 350,091 551,869

*Total of tourists 2015: 3,524,779

Source: ONEI: “Turismo, llegada de visitantesinternacionales”, published on January 2016 andother sources.

 

If the possibility of importing inputs and equipment for the non-state sector materialises, the levels of production could be increased since this sector has a majority participation in national agricultural and livestock production:the credit and services cooperatives (CCS) and the private sector bear the biggest weight, since between both they produce 77.5 per cent of the vegetable production, 34.8 per cent of cattle ranching and 68.5 per cent of the production of milk. In the same way, the mass of cattle ranching is concentrated in the non-state sector, as well as the holding and management of land.

 

An undercapitalisation accumulated for several years as a consequence of a limited and scarce investment is registered in the agricultural and livestock sector. The ways in which the investment is oriented in the sector will have to correspond to the process of decentralisation begun with the economic transformations, taking into account the necessary opening of a market of inputs, equipment, machinery and tools for the sector. In addition, the necessary and active participation of foreign investment in direct relation to the producers and other actors throughout the production and value chain (domestic-external). The aforementioned must translate into an increase in production, together with the introduction and application of science, technology and technological innovation.

 

A greater rapprochement to information technology and telecommunications is a favourable aspect, applicable to the acquirement of valuable knowledge for the production and marketing of food. Having better systems of communication will facilitate the relations between actors (producers, sellers, haulage contractors, among others) that make up the agricultural and livestock productive system and comprise the diverse productive chains, which in addition will avoid losses and will decrease costs.

 

A greater availability of food products, national as well as imported, will allow for facing the growth in the demand of tourism and the population.

 

Meanwhile, by having greater financial resources the possibility would open up to devote a part of them to the improvement and conservation of natural resources (land, water) and the environment, particularly in the agricultural and livestock sector.This is translated into a positive aspect, taking into account that the conservation and improvement of natural resources and the environment is a current and future challenge.

 

In terms of access, in search of a correspondence between supply and demand of food products, the increase in incomes due to a greater number of U.S. and Cuban-American visitorsas well as from other countries will motivate a growth in demand. In addition, an increase in the incomes of the population that receives remittances would also expand the possibilities of access to food of the population segment. Both considerations motivate positive impacts.

 

Faced by the absence of an immediate response from national production, a part of those incomes could be devoted to the purchase of food abroad, even when a correct policy of import substitution is not achieved, which would represent a potential risk for the Cuban economy.However, it should be considered that certain food products cannot be produced in the country, be it for climatological and biological reasons or due to low economic efficiency, which would necessarily implytheir import.

 

As part of the core of access to food products, certain micronutrient needs which are not covered are present in the current national context. In the first scenario, having greater incomes would enable a greater availability of those food products that meet those needs for micronutrients, fundamentally iron, calcium, vitamins A and from the B complex.

 

The necessary innocuousness and quality of food products throughout the productive chain, for fresh as well as for processed products, is one of the challenges of the first scenario, but at the same time derives as positive referring to the potentials for development of the food processing agribusiness. The latter will have to respond to the most demanding markets (tourism, exports and population) on aspects like: traceability[2]of the products, their labelling, the existence of nutritional information, the demand for differentiated foodstuffs, among others. In any case, it should be taken into account that agricultural and livestock production is the point of departure.

 

This processing agribusinesswill require considerable investments for its expansion and modernisation, under a systemic focus, which includes the domestic and external value chain (agriculture-transportation-industry-transportation-conservation-marketing-packaging). In the same way, the food processing agribusinessrequires inputs that must be taken into account in order to successfully close the productive cycle.

 

As said before, the undertaking of the first scenario can generate a series of impacts that could be manifested as risks. With respect to the core of availability, possible risks include:

  • In the face of an increase in incomes, the first tendency to meet the demand could be oriented toward food imports, because it is considered a more expedite means.
  • On the other hand, the need to cover the tourist sector’s consumption with non-planned imports of beverages, juices, milk and others can be generated.
  • There exists the potential danger of promoting production practices aggressive to the environment, like the indiscriminate useof chemicals or some that are not internationally accepted. Taking into account that the relations will take place with the non-state sector, an adequate supervision of the inputs and means used is required.

 

With respect to access, in the context of this first current scenario, following are the possible risks that are being projected:

  • Greater tension to meet the population’s food needs due to the increased demand by the tourist sector. The population’s fundamental incomes come from wages and pensions.
  • An increase in demand, without the backing of a greater availability of food products, can motivate an increase in prices.
  • An increase in obesity and overweight. The average food consumption habits of the people in the United States generally are not a very healthy point of reference, since they are inclined to consume fast food, abundant in carbohydrates and fats.

 

Since the aforementioned can harm the food culture andnutritional education of the Cuban population and, therefore, its health, it worthwhile warning of the increase in obesity and its subsequent health problems, with an increase in cardiovascular, osteoarthritic diseases, among others.

 

Asecond scenariocould be framed based on the elimination of U.S. citizens’ ban on travelling to Cuba.

 

This is verysimilar to the previous one, but more extensive, due to the arrival of a greater number of tourists.It is estimated that, once the restriction to travel to Cuba is eliminated, it is possible that a million U.S. citizens will visit during the first year and subsequently an increase of 500,000 tourists a year is projected.

 

This would imply, according to preliminary estimates, obtaining gross incomes of a bit over a billion dollars during the first year of the elimination of the travel ban and subsequently an increase of half a billion U.S. dollars due to the arrivals.

 

In mid-2015, some U.S. senators presented a bill to eliminate the travel to Cuba ban, but that proposal was stopped in the Senate by extreme right-wing representatives, including those of Cuban origin. As a result it has remained postponed.

 

However, before the elimination of the economic blockade a third transit scenario can be previewed. This one is based on the possible opening to U.S. and Cuban-American investors to carry out direct investments in the Cuban economy through modalities like:

  • Joint venture, with the participation of U.S. and Cuban capital, with diversity of proportions in the participation.
  • With the participation of 100 per cent U.S. capital.

 

The most immediate investments to be implemented, with less capital and rapid results, are forecastedfor the agriculture and livestock sector, fundamentally directed at the export to the U.S. market (taking into account that the Cuban economy requires incomes to assume imports, invest and pay credits)and the domestic market (population, tourism, substitution of food imports).

 

It is to be supposed that, based on these considerations for this scenario, an increase in the availability of food products for the population is achieved; while this would expand the capacity for the purchase of inputs, equipment, machinery and technology from the U.S. market, new employment sources would also be created and the incomes of the farmers would increase. These aspects can be achieved through presidential directives and decisions by the U.S. government, without waiting for the total elimination of the blockade.

 

In the sphere of this possible scenario, it corresponds to the Cuban economy to apply a greater decentralisation in the export and productive forms so that direct producers and/or associations of national producers (credit and services and agricultural production cooperatives, usufructuary-private, Basic Units of Cooperative Production) could be created assuming the management of the chains in which they are inserted. These forms must be agile, systematic and dominate the logistics in the search for greater efficiency in all senses. The products of organic and/or almost organic origin (the latter, until now, without international certification) can constitute a valuable niche in the U.S. market and for tourists arriving to Cuba.

 

The Participatory Guarantee Systems (PGS)[3]can constitute an immediate way, without having international certification of organic products that accredits them for the time being. This PSG establishes a guarantee of origin, content and quality of the almost organic agricultural products, only not identified as organic because they do not have an international certification, but which in their content are, because of their traceability, subsequently on the way of obtaining a total organic certification.

 

The implementation of this transit scenario could attenuate or avoid some of the possible impacts pointed out as negative in the first scenario and also in the fourth (the following), while preparing an adequate way to assume in practice the total elimination of the blockade, which could be attained in a greater period of time (between five and seven years).

 

It is probable that between the third and fourth scenarios a potential value of some 2.5 billion U.S. dollars be reached as a result of the annual commercial exchange between both countries, in both ways.

 

Afourth scenariois that of the elimination of the U.S. commercial, financial and economicblockade on Cuba

 

Taking into account that the elimination of the blockade does not dependon a presidential decision, but rather on the U.S. Congress, and that a strong opposition by the extreme right-wing segment of Cuban origin is forecast, it should be expectedthat it will not take place immediately. However, it is valid to analyse it as a future scenario and consider the possible impacts to be generated.

 

According to diverse experts’ predictions, it is expected that on the threshold of this fourth scenario (based on the second scenario of eliminating the travel to Cuba ban) there will be close to four million U.S. visitors to the island, fundamentally for tourism.

 

Based on the already mentioned cores which comprise food security, and starting with availability, there would be significant challenges such as:

  • Increasing the national production of food products.
  • Being able to have access to food products on the international market.
  • Avoiding and stopping the degradation of natural resources and the environment.

With respect to access:

  • Achieving the correspondence between supply and demand.
  • Meeting the needs not covered for some micronutrients in the population based on the increase of incomes.

In relation to availability, there are positive impacts very similar to those pointed out in the first scenario – but with greater reach – and others proper of the new one with respect to the increase in the levels of the national production of food products provided by the advantages that would result from the growth of incomes through the arrival of U.S. tourists, in this casein terms of agriculture, for:

  • The modernisation and improvement of infrastructure (telecommunications, roads, services, among others), more wide-ranging than in the first scenario.Greater access to telecommunications and information technology in favour of acquiring relevant knowledgefor research, technology and innovation. At the same time, better communication systems will facilitate the relations between actors from the agricultural and livestock system and, therefore, would favour the flow of products and a greater interconnection in the productive chain to avoid losses and decrease costs. In addition, they would allow the localisation of more favourable commercial offers in the United States and the international market.
  • Greater possibility of acquiring inputs and machinery abroad, in the United States fundamentally, with the advantages of its nearness, technology and credit facilities.
  • Attraction of capitals through possible U.S. investments and creditsand from other origins, without the objective and subjective restrictions imposed by the blockade at present. This will make it possible to modernise the sector (technology, management, research, collection, industrial processing, conservation), improve its productivity and yields.

A possible favourable effect on the value chains coordinated for agricultural exports, with a more effective organisation and interrelated with the domestic productive and value chains, considering those for domestic consumption:

  • Greater possibilities of gaining access to the international food market than those pointed out in the first scenario. The cost of imports considerably decreases if the risk of trade with Cuba implied for exporters and those who grant associated creditsis eliminated. Transportation costs could also substantially decrease if the sanction regulations for ships arriving in Cuban ports are eliminated.
  • Significant increase of incomes through the development of bilateral trade in agribusiness products, in both ways, between both nations.
  • In the same way, assessed as positive is what has already been said in the first scenario with respect to the possibilities of increasing incomes would contribute to devoting resources for the assimilation and exchange of technologies, avoiding degradation of natural resources and favouring their improvement, as well as the protection and conservation of the environment.
  • The expansion of agro-ecological production already mentioned in the third transit scenario, with a view to meeting the demand of tourism and directed at exports (U.S. market and other countries), is connected with the improvement in hard currency incomes and the nutritional and health conditions.

With respect to the core of access and positive impacts, this fourth scenario is rather similar to the first and could bring with it certain challenges with respect to the correspondence between supply and demand; that is to say:

  • It could increase the availability of food products based on productive and/or import increase.
  • In addition, the possible entry of U.S. supermarket chains to the country can bring about a greater supply through the franchise of fast food chains, joint investments with the non-state domestic sector, among other forms.

In this fourth scenario micronutrient deficiencies in the population’s consumption could still be faced, which could be covered in similar conditions as those in the first scenario.

 

Already in the first scenario there wereissues pointed out that are valid for the fourth, like the innocuousness and quality of food products throughout the agricultural production chainand regarding the food processing agribusiness. In the first scenario, the agribusiness is assessed as a challenge that also has a positive impact due to the entailed development potentials and the consideration of the productive and value chains. It is also previewed in the fourth scenario, but with much more possibilities due to the elimination of the restrictions imposed by the blockade, taking into account the opening to foreign investment, especially from the United States.

 

In this fourth scenario, referring to the core of availability, a series of risks can be manifested with greater emphasis, some of them already predicted since the first scenario, such as:

 

  • Deactivation of national productions considering imports more efficient, be it because of the speed to obtain them as well as the quality and lower costs with respect to national production. To a certain extent this could lead to the country’s return to a position prior to 1959, when the island was consolidated as a provider of agricultural and livestock raw materials and an importer of processed food products.
  • Low availabilityof food products for the population if the major part of potential investments is devoted to agricultural exports and/or the supplies for tourism.

 

The core referring to access to food productson the international market is closely related to the aforementioned, in the face of improvements in the levels of incomes through diverse sources. This could derive in certain risks for the national economy, especially for the agricultural and livestock sector:

  • A tendency to cover the availability of food products based on imports as a faster means.
  • Deterioration of the commercial balance of goods. Even though there might emerge possibilities for the export of agricultural and livestock products, it is probable that imports from the United States will be greater.Some authors estimate this could originate an anticipated commercial deficit of between 15 and 30 per cent.
  • The aforementioned could increase the dependence of imports of U.S. food products due to the advantages this offers in terms of costs, shipping fees and promptness in supplies. This would guarantee a greatervulnerability, which could endanger the availability of food products from the point of view of greater food dependence.

 

If not adequately foreseen there could be greater risks associated to the degradation of natural resources and the environment (also present in the previous scenarios)with the opening of this fourth scenario. That is why it is valid to warn about:

  • The possible potential dangerthat the implementation of more aggressive production practices entails, like the indiscriminate use of chemicals or the employment of some not accepted internationally.
  • The need to supervise and orient adequately about the applied technologies and agricultural chemicals, taking into account how extensive and diverse the agricultural production sector is, particularly the one made up by the CCS and the private sector, bearing the fundamental weight of the production of agricultural and livestock food products.

 

In all the presented scenariosthere emerges a challenge of great impact that, even when not linked directly to the cores that make up food security, are indirectly related and undoubtedly can be manifested as an important risk. It is the increase of the activity of tourism and its attractive variants of employment, better paid – in Cuban pesos as well as in CUC (Cuban convertible pesos) – and that require less effort with respect to agriculture’s hard work.

 

Some general considerations for all the scenarios

 

  • There are non-used potentials to achieve increases in the national production of food products.
  • The agricultural and livestock sector demands a greater opening to foreign investment. Agriculture and the food processing industry require a strong investment process that favours modernisation and expansion of its capacities.
  • It is necessary to speed up the transformations in the agricultural and livestock sector based on a greater decentralisationand complementation between planning and the market, paying attention to it (domestic and exterior) and with a greater opening to the market abroad. The question emerges: is the Cuban agricultural and livestock sector prepared to face the approaching challenge, with the resumption of economic relations with the U.S.?
  • It is indispensable to export and it is necessary to foresee the access and insertion into the international food market, the U.S. value chains and other countries.
  • The strengthening of national production must be prioritised in the face of tempting import options to meet the demand.
  • A warning about the necessary instrumentation and supervision with a view to protecting the health of consumers and the sustainability of the environment.
  • Avoiding a greater deterioration of the food culture through educational and communication systems that counteract the influence of patterns and habits of consuming not very healthy food.
  • Taking into account the necessary diversification in international commerce to avoid the concentration and dependence on economic, commercial and technological relationswith a single country. History has pointed out, with facts, that a high dependence – first as a Spanish colony, later with the United States, subsequently with the extinct Soviet Union or with Venezuela -, based on the import of a product (oil-energy), is not the most advisable for the economic model we are aspiring to: autonomous, prosperous and sustainable. Above all it is necessary to develop a growing, solid and more autonomous national economic foundationin which diversity in all its extension is the top priority. (2017).

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Minag, National Centre for Land Control, Bulletin III: “Balance de uso y tenencia de la tierra”, Dec. 2015.

Nova A.: “El modeloagrícola y los Lineamientos de la políticaeconómica y Social en CUBA”, CienciasSociales publishers, 2015.

“El mercadoagropecuario.Políticase impacto”, in magazineTemas, Catalejo, http://temas.cult.cu/, 6/30/2016.

“Producción y comercializaciónagropecuaria: recientesmedidas yposiblesimpactos” IPS www.ipscuba.net,feb., 2016.

ONEI: “Sector agropecuario. Indicadoresseleccionados“, Jan.-Dec. 2015, April 2016.

Project for the Support of a Sustainable Agriculture in Cuba, “Manual de diseño e implementación del sistemaparticipativo de garantía en Cuba (SPG), Minag, ACTAF, COSUDE, HIVOS, May 2016.

Rodríguez, J.L.: Relacioneseconómicas Cuba-EEUU: Actualizandoalgunasconsideraciones, on http://www.cubadebate.cu/noticias/2015/08/04/cuba-recibe-mas-turistas-estadounidenses-desde-diciembre-ultimo/, consultedDec. 2015.

Notes:

[1]Under the condition that the ships arrive first to U.S. ports and afterwards can reach Cuban ports, on the contrary they will be sanctioned.

[2]Identifying the origin and different stages of a production and distribution process of consumer goods.

[3]The PGShave in agro-ecology their scientific and practical foundation, based on a group of participatory methodologies that are able to combine the knowledge of farmers and that of renowned scientists. It constitutes an alternative to the systemof certification prevailing internationally. The PGS share the same end, generate guarantees, but are different in the process as well as the concepts of certification.

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