Where are the eggs? Challenges in Cuba’s economic development
On my taxi ride from Havana’s airport, I passed by a run-down building where thousands of egg cartons lay visibly stacked on the floor. These eggs sat in an open-air, visible from the street, unrefrigerated building on a hot Caribbean island. Counterintuitively, this was the first sign of the egg shortage in Havana, eggs being a foundational staple of the Cuban diet and typical basket of goods for any given family. What I saw inside the room was the result of a speculator attempting to profit off the new price of eggs by hoarding and eventually selling them at an inflated price that he helped create. From an economist’s perspective, aside from the lack of refrigeration, this egg hoarding was extremely rational, albeit exploitative. Resources are tight in Havana and opportunities for profit tend to be slim in a state-dominated economy that is rampant with side hustles such as this one. Indeed, when I arrived at my Airbnb, one of the first things my host told me was that breakfast could no longer be offered because she simply did not have eggs, and there were no realistic substitutes to make breakfast. I would later read that egg shortages, along with other main diet staples, are a common trend in Cuba. However, changes in the economy are transpiring that could allow for more legal private sector action that are intended to prevent shortages of essential goods like these in the future.
University of Havana Main Campus (photo by Hannah Factor)
Contextualizing Cuba’s economic development: Expert perspectives on constitutional reform
Despite the egg shortage, now seemed like the perfect time for an economics student to visit Havana. The state had just passed a new constitution introducing a number of private sector reforms, including the first recognition of private property since the 1959 Revolution. According to Dr. Ricardo Torres, professor of economics at the University of Havana, the new constitution still affirms a socialist economic system and socialist planning. Cuba’s constitution now mentions private markets, and allows markets to operate, yet still under socialist planning as the main coordinator for the economy. Even more, it recognizes private ownership over the means of production, which incidentally may include the egg and poultry industry in the coming years. Interestingly, Torres was quick to point out how private ownership implicitly recognizes the exploitation of labor for the sake of production, a critique levied by many who opposed this constitutional referendum, and certainly a view that places him on the left of the American political spectrum (even more so when you just look at American economists). Torres did remark that the new constitution promotes workers participating in leadership decisions in their companies, as well as affirms the need for regulating wealth accumulation. Still, according to the new constitution, the main means of production must be state-owned, but as Torres quickly highlighted, that could mean many things, and leaves the fate of something like the egg and poultry industry largely uncertain, and up to the politics of Cuban lawmakers.
Streets of Vedado, Havana (photo by Hannah Factor)
Trade’s impact on domestic economic development
Torres believes that Cuba should want to trade with anyone willing to trade with them. “If you’re trying to diversify your economy, anyone is welcome.” When I asked if Cuba would reconsider certain trading partners in light of Trump’s tightened sanctions, Torres gave the following perspective: “If you’re tightening sanctions, it’s not rational to expect that Cuba will pay attention to any of your concerns. So if countries like China, North Korea, Turkey are willing to forge even closer ties with Cuba, Cuba will welcome that move.”
In 2017, Venezuela was Cuba’s highest trading partner in goods, primarily coming from Venezuela’s oil exports to Cuba. Yet with the increasing political crisis and threat of regime change unfolding in Venezuela, this economic partnership is expected to be tested, with Torres speculating that oil shipments have decreased. Because the 2018 trade numbers have not been released, it is difficult to know what will need to happen next. But many economists are forecasting something in the vein of the “Special Period” of economic crisis that characterized Cuba in the 10 years following the fall of the Soviet Union in 1989, their main trading partner and political supporter at the time. While Venezuela’s decline may not be so hard-hitting as a decades-long recession, this further contextualizes Cuba’s need for private sector reforms in forging its own economic independence, rather than relying on trade with increasingly volatile nations.
Assuming no change in the US embargo, Cuba’s tension is clear: Become less dependent on volatile nations while maintaining their socialist values. When asked whether the private sector would increase as a share of the Cuban economy, which currently composes 28%, Dr. Torres shared his uncertainty “we cannot predict that, we’ve only had a change of the model, a change of the framework for which the government will help set up the implementation steps to make it all possible. The how of all this has yet to be determined.”
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Hannah Factor is a senior economics and public policy major currently taking Economic Development Policy (PLAN 770), and is interested in economic development planning and upward mobility. She loves making memes and loosely planned backpacking trips. Her trip to Cuba was made possible thanks to the UNC Economics Adventure Fund and Innovate Carolina’s Dreamers-Who-Do Program.