CUBAN LAND REFORM?

C O N F I D E N T I A L SECTION 01 OF 02 HAVANA 000078

SIPDIS

STATE FOR WHA/CCA

E.O. 12958: DECL: 02/04/2019
TAGS: ECON EFIN PREL PGOV CU
SUBJECT: CUBAN LAND REFORM?

REF: A. 08 HAVANA 790

B. 08 HAVANA 593

HAVANA 00000078 001.2 OF 002


Classified By: CHARGE: James L. Williams: For reasons 1.4 (b) and (d)

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SUMMARY
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1. (SBU) Cuba's Agriculture Ministry has reportedly approved
45,518 applications to lease idle land to private farmers,
cooperatives, and state farms. The announcement, reported on
February 2 by the official Communist Party newspaper Granma,
is the most significant step to date in what some
international press are calling the largest land
redistribution since the 1960s. The leasing of idle land is
the centerpiece of Raul Castro's emphasis on increasing
domestic agriculture production to reduce Cuba's heavy
reliance on food imports. However, providing land alone is
unlikely to create more than subsistence farming without a
realignment of incentives and better access to supplies. End
Summary.

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A DECENT START
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2. (U) Speaking to a gathering of provincial government
leaders, Deputy Agriculture Minister Alcides Lopez Labrada
said that as of January 22 his ministry had received 96,419
applications for 657,896 hectares (1.6 million acres) of
land. This represents about 50 percent of the land the
Government of Cuba (GOC) considers idle and 18 percent of the
total non-productive arable land (idle land plus empty
natural pastures). Official statistics show that Cuba
currently uses only 45 percent of its 16.35 million acres of
arable land. Of the productive land, 23 percent is
controlled by state farms, 50 percent by cooperatives, and 27
percent by private farmers and local farm associations.


3. (SBU) According to Lopez, more than 30,000 of the
applications were "redirected" for requesting land the
Ministry of Agriculture did not classify as idle. From the
remaining 66,000 applications, 45,518 were approved, 88
percent of which have already turned into agreements with the
Cuban Government to start production. The relevant laws,
Decrees 259 and 282 (Refs A and B) published in July and
August of 2008, respectively, permit leases of up to 10 years
for private farmers and up to 25 years for the less
productive but more easily controlled cooperatives and state
farms. Both may be extended at the end of the lease. New
farmers may receive up to 33 acres, although many applied for
much less. Farmers who already work land may increase their
holdings up to 100 acres.


4. (SBU) Granma did not report how much of the requested 1.6
million acres was approved. Nor did they report on the
distribution of land to private farmers, cooperatives, and
state farms. By law, beneficiaries could lose the land at
any time if they fail to fulfill a number of requirements,
including government production quotas, the payment of newly
created taxes, and retaining the favor of representatives
from the national agriculture union and local supplies
cooperative.

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BUT A LOT MORE WORK TO DO
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5. (SBU) Agriculture production (including fishing but
excluding sugar) has leveled off in real terms and declined
as a percentage of GDP over the past decade. In 1996 and
1997, Agriculture production represented 7.2 percent of real
GDP. In 2008, it represented only 4.2 percent. Sugar
production, once more than half the Cuban economy, now
represents a mere 0.5 percent of GDP. Despite three
devastating hurricanes, the GOC reported a 1.5 percent
increase in agriculture production and 1.6 percent increase
in sugar (including sugar products) in 2008. In the selected
statistics released thus far, the GOC saw increases in the

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production of root vegetables and milk. Additional figures
rightly represent what we saw in local farmer's markets
showing a 25 percent fall in the production of citrus fruit,
25 percent reduction in bananas, 10 percent decrease in
tomatoes, and 10 percent decrease in corn.


6. (SBU) Cuba reportedly spent nearly one billion dollars
more on food in 2008 than 2007 due largely to higher
international prices, but also partly to additional imports
required to replace fruits and other goods lost in the
hurricanes. Cuba imports up to 84 percent of the food it
consumes, including some products produced in Cuba. For
example, high quality coffee is produced in Cuba for export
to generate foreign currency, while low quality coffee is
imported and sold to the Cuban population at highly
subsidized prices through the ration system. Farmers,
however, see little of the foreign currency earned from the
export of their products.


7. (SBU) Since assuming the presidency one year ago this
month, Raul Castro has sought to implement measures to
increase food production. Early in 2008, he moved some
administrative functions from Havana to the provinces. He
increased state payments to farmers for milk and some other
key products. He also created credit mechanisms to provide
better access to farming supplies and equipment. However, it
is unclear if these reforms have been effective or even fully
implemented as we continue to hear reports of farms with
antiquated or insufficient resources necessary to meet their
government quotas, let alone sell in the farmer's markets
where any real profit is found. The Cuban state maintains a
monopoly on all the means of production (supplies, etc.) and
the commercialization of all but a tiny percentage of the
fruits of production.

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COMMENTS
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8. (C) To the extent that leases are approved for private
farmers rather than the much less efficient cooperatives or
state farms, agricultural production will undoubtedly
increase in the next two years. However, much of the land to
be leased was idle for a reason. Most is overrun with marabu
(an extremely strong and stubborn weed/root) and some
includes very poor soil. As the government dictates what
each farmer should plant, there is no room for
experimentation or trial and error. In addition, the
agricultural sector is currently woefully undersupplied. We
have no reason to believe that the GOC, as the lone supplier,
will be able to meet the needs of 45,000 additional farms
covering some 1 million more acres. Finally, even with
fertile land and ample supplies, Cuban farms will continue to
under-perform without the promise of a profitable market
(domestic or foreign). Price controls at the only domestic
outlet, the supply and demand farmer's markets, remain in
effect since the end of hurricane season as a reminder that
the GOC does not intend to give up their monopolies any time
soon.
WILLIAMS