System Dynamics: Introduction



Agriculture is an incredibly important part of the Cuban economy, employing approximately 21% of the country's active labor force and representing more than 20% of Cuba's GDP after accounting for linkages between industries and multiplier effects (eg. the sugarcane and the sugar processing industry). Until the 1990s, Cuban agriculture was mostly characterized by large-scale tobacco and sugarcane production. Today, however, many farmers have entered into a new niche economy, encouraged by the Cuban government, of “organopónicos.” These small-scale, garden-like farms ensure that fresh greens reach most Cuban tables. By employing organic methods to produce foodstuffs—lettuce, herbs, smaller fruits, and vegetables -- the effect of organopónicos on the agricultural landscape and local food economy has been noteworthy. The agricultural system in Cuba is very complex. Although most of the agricultural value chains are still owned and controlled by State enterprises, many aspects have been privatized. Each branch--public and private--has its own formal and informal rules, and actors function in different capacities depending on their region, role in the value chain, and crop production. Here, some of the general trends in each sector and how they interact in the overall agricultural economy will be explored.

Map of Actors and Agents in the Cuban Agriculture System
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Map by: Emily Sylvia and Gary Verburg

State Sector

Ministry of Agriculture (MINAG)The Ministry of Agriculture is the State entity responsible for the direction, execution, and control of government policy toward agricultural and forestry production by both public and private producers. MINAG operates under the mandate of ensuring the sustainable exploitation of land, as well as the fulfillment of the country's policies related to food security, industrial development, and the export of agricultural and processed commodities. It is headed by the Minister of Agriculture, who is assisted by the Secretary of Agriculture and three vice ministers. It has four separate units dedicated to agricultural engineering, economic development, crop agriculture, and livestock production. MINAG has delegations in each of the provinces, where a network of extension workers instruct farmers on their practices and follow up to ensure compliance with their directions. In managing these various agencies, MINAG directs State enterprises, State farms, cooperatives, and private farmers in the coordination of agricultural inputs and products.

Agricultural inputs, including fertilizers, pesticides, and seeds, are provided exclusively by State-owned firms (by law, the State owns at least 51% of any enterprise operating in Cuba). Farmers are provided with a percentage of their total input supply by the government, but this amount is rarely enough to reach maximum yield potential. As a result, farmers supplement this supply with purchases made out of their own pockets from State-operated establishments, which have a limited variety of products, unpredictable supply levels, and generally high prices.

State Procurement Agency (Acopio)Acopio is the State agency responsible for the collection and distribution of all State-regulated agricultural products and payments to farmers. This system is organized into 14 different enterprises, one in each of the provinces, under the direction of the Ministry of Agriculture. The system is plagued with inefficiencies, as delays in the pickup and delivery of food lead to frequent spoilage and waste. Food is also frequently lost in State warehouses, as a result of improper rodent control. The prices that Acopio offers Cuban farmers for their products are usually well below market rates, providing little incentive for cooperatives and private farmers to sell to the State. In the case of fishing cooperatives, for example, most fishermen avoid selling their catches to the State unless they are unable to sell them privately. Furthermore, since the collection of raw commodities from farms is done separately from payment delivery, there are often delays in remuneration, leaving farmers unable to re-invest in their businesses until they have been paid.

State FarmsState farms are large farms that are entirely owned by the Cuban government and managed by State actors. Similar to the State farms that used to be common in the USSR, these farms tend to control vast quantities of agricultural land with a high degree of capital intensity, using a great deal of machinery and agrochemicals. This capital-intense production includes sugarcane, rice, concentrated livestock production, and large irrigated plantation crops. This was the dominant form of production during the period of Soviet cooperation. However, due to their over-dependence on subsidies and inefficient management practices, many State farms became unproductive during the Special Period, and large quantities of State land was subsequently transferred to cooperatives. In 2014, the State sector held 56% of Cuba's total land area, but only 30.9% of the country's arable land. Of the State-owned agricultural surface, only 25.6% was cultivated, leaving more than 1.4 million hectares uncultivated.

Land Distribution by Tenure as of June 2014
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Source: ONEI, 2015

Non-State Sector

As detailed in the section on the historical background of agriculture, apart from State-owned farms, various forms of cooperative production have emerged over the years throughout the country, each exhibiting varying degrees of government control. Since 2008, the government has allowed for the emergence of private farmers. These non-State actors account for the lion's share of agricultural land tenure and agricultural production, altogether holding 69% of arable land as well as 81.4% of the total land area under cultivation.
All farmers, whether private or public, are required to meet a State quota of production. Though this ensures a stable buyer after each harvest, selling a large proportion of production (depending on the crop) back to the State leads to very small margins of return, which keeps farmers from expanding their operations and investing more in their production process.

Basic Units of Cooperative Production (UBPCs)UBPCs are an innovation that came into being in 1993, when many State farms became unproductive, and the State could no longer afford to provide them with inputs or employees with government salaries. While the land was still State-owned, the means of production were transferred to agricultural workers, who were given the opportunity to sell produce in excess of their production quotas in private markets.

Agricultural Production Cooperatives (CPAs)CPAs are another form of cooperative production that has existed longer than UBPCs, having been established in 1975. These are essentially cooperatives formed by smallholders who unite their lands in order to acquire inputs and produce collectively, combining their individual means of production for better yields.

Credit and Service Cooperatives (CCS)Credit and Service Cooperatives, with respect to agriculture, consist of individual private producers who enter into a voluntary agreement with each other in order to share installations, support services, credit, or to collaborate in the commercialization of their products. The difference between CCS and other types of cooperatives is that the land and means of production remain in the hands of the individual producers and are not managed collectively.

Private Farmers (Particulares)Since the passage of Decree-Law 259 in 2008, the number of private farmers who produce for themselves has largely increased. These private farmers, or particulares, sell a required portion of their yield to the State in return for the use of the land, and are also allowed to commercialize excess produce independently in free agricultural markets. The most recent figures indicate that private farmers now occupy 35.5% of agricultural land in Cuba, from which they produce close to 60% of the country's total agricultural output. While they do not fully own the land, the law allows them to acquire a lease for the usage rights of the land for a period of 10 years, no matter what the farm produces. Farmers are able to sell their own produce at roadside kiosks, where they can sell directly to customers or to merchants who stock markets in urban centers. These farmers have grown in number closer to large urban centers, and have become one of the main sources of fresh fruits and vegetables for urban food markets. However, encouraging the spread of this model in more remote areas, where vast quantities of State land remains idle, will be an ongoing challenge.

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A stall in a government-run food market in Havana. Photo by: Emily Sylvia

Conclusion

The challenges of navigating the agricultural system are clear. As Cuba begins to open up to foreign companies and foreign markets, this system will have to adjust to allow for the emergence of a true private sector with the freedom to operate outside of State ownership or sponsorship. The greatest challenge for the agriculture sector is the ability of the government to relinquish complete control over the market and production systems in order to foster growth and healthy competition.
Written by: Emily Sylvia and Gary Verburg