• Submitted by: manso
• Business and Economy
• 02 / 10 / 2011

---

Entrepreneurs may be buying up flour on the black market, causing bread shortages.HAVANA, Cuba — Like air and water, or free health care and education, state-subsidized bread is regarded as a natural right in socialist Cuba.

Every Cuban is entitled to at least one bun-sized piece per day as part of the island’s ration system, and bread is such a staple of the Cuban diet that long lines form outside government outlets for those wanting to buy more.

But with tens of thousands of new Cuban entrepreneurs opening up private snack bars, cafeterias and pizza stands as part of President Raul Castro’s economic reforms, the island’s state-run bakeries have been coming up short lately. Suspicions have fallen on the new small businesses, which may be buying up more and more flour on the black market.

At several locations around the capital, Cubans grumbled about diminished bread availability at state stores, though workers said they were still meeting the minimum output required for the ration system.

“We’re making about 60 percent as much as we used to,” said one employee at a government bakery in Havana’s Playa neighborhood, where customers who queued up on a recent morning were turned away. “We don’t have the flour,” he said.

The shortage at the state shops points to an emerging problem with the Castro government’s plan to shed hundreds of thousands of government employees and create a new class of private entrepreneurs. In the absence of a formal wholesale market to supply the upstart businesses, pilfering employees with access to state supplies and stockrooms become the island’s de facto wholesalers.

While global wheat prices have risen sharply lately, workers at several bakeries said they were receiving the same amount of flour, and denied that supplies were being stolen. Instead, they said that the new entrepreneurs were simply buying up more bread, for use in making sandwiches.

“It’s all these new snack bars,” said a clerk at a bakery in the city’s Vedado neighborhood, who, like other state employees asked about the shortages, did not give her name. Attempts to reach the Ministry of Food Production, which oversees the state bakeries, were unsuccessful, as the phones at its main offices went unanswered.

Government planners have said they will set up a supply system for the new small businesses, with $130 million set aside toward the effort this year, including $36 million for foodstuffs. But they caution it could take years to implement. Since most of the wholesale supplies will have to be imported, it is not clear if the government will sell items at or around cost, as most other goods shipped from abroad and sold in hard currency stores at a hefty markup.

With the government pledging to lay off or reassign 500,000 state workers in the coming months, and possibly hundreds of thousands more after that, it is looking to cut costs by shrinking the size of the state and allowing more private sector and non-state activity. Since October, officials have issued some 80,000 new self-employment licenses, of which roughly 30 percent are for food or food-service related activities.

While the new licenses have created a sense of optimism among some enterprising Cubans at a time when other government subsidies are being cut back, the licenses are limited to a list of 178 occupations. The government has yet to authorize others, citing the lack of a wholesale market for raw materials, such as auto-body repairman, upholsterer and welder — jobs that are now widely performed on the black market anyway.

Late last year, as the reforms were being announced, the communist party newspaper Granma urged patience with the creation of the wholesale system, explaining that officials couldn’t set up such a network overnight. “To think that the State is allowing new small businesses without creating a market for their supplies would be irresponsible, especially since solid planning has been one of the basic principles of these updates to our economic model,” the article said.

“But we can’t rest on our laurels, nor expect the materials to appear from one day to the next,” it continued. “The new economic landscape requires us to increase our levels of production, direct our efforts to the most urgent tasks, and better allocate our resources. These small business can’t subtract from what is available for the people — they must do the opposite.”

But until such a wholesale supply system exists, the island’s budding entrepreneurs — food vendors, mechanics, plumbers — will likely do just that, relying on black-market suppliers for their businesses, even though inspectors can confiscate items that aren’t matched to a receipt. And while some government stores sell imported baking flour and other materials in hard currency, under-the-table providers at state bakeries can offer a more reliable and cheaper supply.

Wheat does not grow in Cuba’s tropical climate, so the country’s entire supply is imported, along with about 70 percent of the rest of the Cuba’s food, a cost of more than $2 billion a year.

The Cuban government wants to reduce that heavy dependence on imports, granting no-cost leases of state-owned land to Cubans who want to farm. But so far the effort has brought only modest productivity increases.

Source: www.globalpost.com/dispatch/cuba/110208/bread-rations-flour-prices-food