The rise of Cuba’s new entrepreneurial class

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The recent congress of the National Association of Small Farmers (ANAP) dragged into the light a new Cuba — a country that aims to be middle class and entrepreneurial.

Raising food production has become a matter of national security, and that puts the small farmers and ANAP in a politically powerful position. And ANAP is using this moment, raising issues that makes the organization look like a trade association rather than a mass movement.

As Progreso Weekly analyst Jorge Gómez Barata put it very eloquently: The 860 ANAP delegates during the high-profile meeting at the — of all places — Revolutionary Armed Forces ministry in Havana didn’t petition the government for clinics, schools, roads or electricity, as the ANAP had done for decades. They already have all that. This time around, ANAP asked for space to do business, and be allowed to get more involved in the distribution and sale of what Cuba’s 300,000-plus small farmers make. 

That’s an amazing shift of focus, coming from a mass organization.

What’s behind this shift is a story of unintended consequences. When the revolution won in 1959, Cuba’s countryside was firmly in the hands of a tiny group of large landowners and foreign corporations, Economy Minister Marino Murillo pointed out during his opening speech at the congress. Most small farmers belonged to the illiterate masses of the Cuban precariate.

Fast-forward half a century, and the picture has changed dramatically. Many of the state farms that took over the large sugar estates and cattle ranches have disappeared, and most of the remaining ones are woefully dysfunctional. Privately owned co-ops and small farmers have picked up the slack, producing the majority of food in Cuba. 

At the same time, we’re witnessing the rise of a well-educated, rural well-to-do class. Thanks to direct distribution arrangements, a dairy farmer with two dozen cows near a city can now make $7,000 a year, an astronomical income compared to the few hundred bucks a neurosurgeon or cabinet minister earn in salaries. And these small farmers are increasingly entrepreneurial.

Now, the 37 resolutions ANAP passed during the recent congress — suggesting direct produce sales to hotels and restaurants, direct cattle sales to slaughterhouses, an expansion of suburban agriculture with direct distribution to cities, and farm-based micro-processing plants that can freely sell their products — are just suggestions. The biggest concession the government has announced so far is allowing private farmers to buy their implements on state markets, instead of having to cope with centrally allocated supplies. The top brass is all for allowing freer play of entrepreneurial forces; in fact, no one in Cuba is speaking out publicly against reforms. But there’s passive resistance that shouldn’t be underestimated: Mid- and low-level party functionaries are suspiciously eyeing the rural new rich, and I bet my retirement funds that bureaucrats at Acopio, the state food distribution monopoly, are ferociously defending their turf.

ANAP President Orlando Lugo Fonte knows that all too well — and here is how he reacts to it: By sending a clear signal to the country’s leadership that his organization wants reforms to be confined to the economic realm. While the 37 resolutions of ANAP’s economic commission are eye-catching, another work group produced an elaborate document highlighting small farmers’ unwavering allegiance to party and revolution.

Oil, positive fallout

The oil spill in the Gulf — terrible as it is — also brought movement into U.S.-Cuban relations. For one, U.S. diplomats are apparently briefing Cuban officials about developments surrounding the spill. Also, Cuba has actively sought information from U.S. institutions such as Texas A&M University’s Harte Institute for Gulf of Mexico Studies. But the event with the biggest implications for the embargo and U.S. business has been this: The Obama Administration granted the Houston-based International Association of Drilling Contractors and license to travel to Cuba and brief officials there about U.S. technology and standards. If this trip happens, it will make the U.S. oil industry’s increasingly public anti-embargo stance obvious for everyone.

Cuban officials maintain they don’t expect Cuban waters and beaches to be affected by the Deepwater Horizon spill. However, should Cuba beaches be soiled, another challenge to the U.S. embargo will arise: How will the U.S. subsidiary of BP compensate Cuba? 

The absurdity of the embargo is becoming more evident by the day, but this would be a crowning moment.

Restless money, discovering Cuba

Sign of the times: Within a short time period, I have been contacted by three groups of investors from three different countries that are putting together modest funds to invest in all things Cuban. Money is in an increasingly restless search around the globe to find those 10-percent-plus margins investors have grown accustomed to. 

The biggest obvious challenge to these potential Cuba investors: The island doesn’t offer any ready-made institutional investment vehicles. My answer: Don’t expect to see anything like it within your lifetime. The Cuban state has a different set of economic priorities. Foreign investors shouldn’t expect to make a clever pick, lean back, and reap 20 percent at the end of the day. Even though it’s in desperate need of hard currency, Cuba isn’t about derivatives, short-selling or golf course condo flipping. It isn’t even about interests and dividends (even though a handful foreign investors have made handsome profits bankrolling hotel construction in Cuba). It’s about producing milk, yoghurt, rice, ethanol, sugar, nickel and oil and gas, about making cholera, hepatitis and HIV drugs, about developing cost-effective medical systems, about generating electricity at low cost in a sustainable way, about efficiently coping with disasters, about rebuilding a deteriorated infrastructure, and about building workforce housing and tourism infrastructure.

If you want to bet your money on such down-to-earth undertakings, Cuba is your market. But that requires finding a well-positioned foreign company to invest in, imagination and flexibility as to being reliably compensated, a long-term perspective, rolling up your sleeves and getting entrepreneurial, rather than being a passive investor.

Disappointed? Think about the possibilities: Because Cuba is cutting-edge in many areas, it is becoming a gateway to other developing markets. 

Johannes Werner is editor of Cuba Standard

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