Incentive for agriculture: Cuba stops with maximum food price

Removing the maximum prices for food products in Cuba will be beneficial for the growth of the Cuban agricultural sector. The price ceilings imposed by the State have so far discouraged many farmers on the agricultural cooperatives from producing more food.

By now allowing supply-and-demand pricing, the authorities are giving up their efforts to curb inflation. The Cuban economy has been hit hard in the past year, mainly due to the collapse of tourism, which normally accounts for a third of national revenue. In addition, many workers lost their jobs due to illness.

After highly unusual demonstrations and demonstrations by disgruntled Cubans, economic "modernizations" were announced last month. Partly in response to the protests, Cuban authorities have now accelerated the pace of economic reforms.

One of the most anticipated reforms is that private small and medium-sized businesses will now also be officially allowed, ending their long-standing legal uncertainty over their raison d'être.

The fine print of those reforms has not yet been published, so the exact impact on the agricultural sector remains to be seen. The same applies to reforms announced earlier this year, such as the establishment of an agricultural bank and more opportunities for setting up (small) private companies.

An important stumbling block remains that Cuban farmers are still not allowed to import and export independently without the intervention of the bureaucratic state companies. Also, many foreign banks are still reluctant to finance business activities in Cuba, because of the still existing US boycott against Cuba.

Yet many see the economic reforms as yet another step towards a more market-oriented economy. According to agricultural experts at the Dutch embassy in Havana, these reforms in the longer term also create new business opportunities for Dutch agri-food companies.