Cuban Government Drastically Increases Tractor Prices for Tobacco Farmers in Pinar del Río

Friday, June 14, 2024 by Isabella Sanchez

Cuban Government Drastically Increases Tractor Prices for Tobacco Farmers in Pinar del Río
Chinese Tractor Yto-X904 - Image from ©

The Cuban regime has "facilitated" the purchase of 13 Chinese Yto-X904 tractors for tobacco farmers in Pinar del Río. However, the selling price for each unit is nearly three times what these vehicles cost on the international market.

During a meeting with Marino Alberto Murillo Jorge, president of Tabacuba, the farmers were informed about the "facilities" for acquiring the tractors. One farmer spoke to the independent media outlet 14ymedio and confirmed that the selling price for each unit is $26,000.

"The only condition is to have the money in MLC (freely convertible currency) and to have earned it through tobacco sales," the source explained to the media. "We are here to produce and sell tobacco," said the architect of the failed Tarea Ordenamiento, emphasizing a "market logic" that doesn’t match the price of the tractors "facilitated" to the farmers.

The urgency of the leadership to boost tobacco production at an accelerated pace—hence the authorization to sell tractors to Cuban farmers—should be an incentive to sell them at a price closer to international market rates, without the current high profit margins.

According to data obtained from e-commerce websites, these tractors can be acquired on the international market for approximately $9,000. The markup imposed by the Cuban government has sparked controversy among the producers, who must pay in MLC and prove they earned the currency through tobacco sales.

"The tractors being sold to tobacco farmers for $26,000 with conditions can be bought retail for about $9,000. The wholesale price with quantity discounts (and for a friendly regime, it should be much lower). The real price is a secret, like everything in Cuba, the country of workers," said a user on X who compared the Cuban regime’s selling price to that of other international suppliers.

A search on the e-commerce site Alibaba reveals that the price of the Yto 90hp X904 tractor varies depending on the quantity purchased. For orders of 1-2 units, the price is around $10,000. For orders of three or more units, the price drops to $3,990 each.

Assuming the Cuban government bought them at the unit price ($10,000), selling them for $26,000 would mean nearly triple the initial cost. Given that 13 tractors will be sold to the farmers (the third sale of this kind, according to the media), it is almost certain that the Chinese manufacturer sold them at a unit price of $3,990, making the sale price six times higher than what Tabacuba paid.

Without concrete data, it is easy to imagine that the payments made by Tabacuba to the farmers for their production are not three or six times higher than those of tobacco farmers in other producing countries. According to 14ymedio, Tabacuba pays them in MLC at 3.6% of the first-quality tobacco—from the localities of San Juan y Martínez, San Luis, Pinar del Río, and Consolación—that they sell in foreign currency.

Murillo Jorge’s Statements and Economic Impact

During the meeting, Murillo Jorge highlighted that Tabacuba has also ensured the supply of fuels and lubricants necessary for tobacco harvesting. He also mentioned that for the next harvest, the rules for second-quality tobacco and sol en palo will be modified, and these will also be remunerated in MLC.

The government’s strategy of selling machinery at inflated prices, according to Murillo Jorge, "aims to incentivize tobacco production." While some perceive this as an "improvement," the reality is that the "facilities" provided by Tabacuba bring significant benefits to the state enterprise’s coffers.

The Yto 90hp X904 tractors have a power output of 90 HP, a 12+12 gearbox, and are used on farms and gardens. They come with a 1-year warranty and have a closed cabin with the option to install air conditioning (which may increase the final price).

The official press has presented the sale of these tractors as a government achievement, while producers express concern over the high cost and restrictive conditions imposed to access the machinery.

In May 2023, the official media Cubadebate reported that the Cuban regime would sell 270 tractors in MLC to tobacco producers that year. Producers could access these machines through a financing scheme where the government would deduct a percentage of their MLC payments for their harvests.

Regarding this, Murillo Jorge assured that the state entity he leads would not earn a single cent during the acquisition of these means and their subsequent sale to the farmers. His statements were made during the ceremony for the delivery of the first batch of 45 such machines in Pinar del Río.

Renowned economist Pedro Monreal stated that this sales scheme reinforces "the medieval segmentation of agriculture in Cuba, or how the 'business' trickle-down approach is imposed over the notion of integrated development."

In a Twitter thread, Monreal was highly critical of such sales, which he described as "quarter schemes" to manage one of the scarcest resources of the Cuban economy: foreign currency.

Although Monreal acknowledged the importance of tobacco producers who earn foreign currency having access to tractors, he also highlighted the importance of tractors for farmers and ranchers who sell food in pesos that are consumed daily.

"Contrary to what appears to be the logic of the promoters of the 'dollarized quarters' in the Cuban economy, there is no economic rationale to justify the segregation of producers who earn in pesos. It is a 'seigneurial' rationale, politically imposed," he criticized.

Decline in Tobacco Production and Worker Discontent

In 2022, tobacco farmers in Pinar del Río planted around 13,921 hectares, according to the Agriculture sub-delegate Ortelio Rodríguez Perugorría, representing the lowest planting plan in a long time in the country.

According to the official, the reduction in plantations in the province also responded to disincentive measures adopted by the state-owned Grupo Empresarial de Tabaco de Cuba (Tabacuba), which reduced the freely convertible currency (MLC) that tobacco farmers could access as a "stimulus" for the produced tobacco considered "exportable" from 5% to 3%.

Since then (December 2021), farmers in the area have expressed their discontent with the measures adopted by Tabacuba to sector officials. A series of fires in tobacco fields, sorting houses, warehouses, factories, and tobacco shipments were interpreted on social networks as allegedly intentional incidents carried out as a form of protest.

Given this scenario, the former queen of the best tobacco in the world was dethroned in August 2023 by the Dominican Republic, where expert tasters found the best fields and qualities of the mythical leaf.

The neighboring Caribbean island has emerged as a formidable competitor in the luxury cigar industry, surpassing Cuba and earning the title of the new cradle of Premium cigars, a path achieved over decades of effort, research, and investment.

Key Questions About the Cuban Tractor Price Controversy

Here are some frequently asked questions and answers that provide further clarity on the pricing and distribution of tractors to tobacco farmers in Cuba.

Why are the tractors being sold at such high prices?

The Cuban government is selling the tractors at nearly three times the international market price to generate significant profits for the state enterprise, despite presenting it as a measure to incentivize tobacco production.

What conditions must farmers meet to purchase the tractors?

Farmers must have the money in freely convertible currency (MLC) and prove that they have earned it through tobacco sales to be eligible to purchase the tractors.

How does the price of these tractors compare to international prices?

The tractors being sold to Cuban farmers for $26,000 can be purchased on the international market for around $9,000, with wholesale prices dropping to as low as $3,990 per unit for larger orders.

What are the implications of this pricing strategy for Cuban agriculture?

This pricing strategy reinforces economic segmentation and fails to support an integrated development of agriculture, instead creating disparities among different types of producers based on their earnings in foreign currency or pesos.

© CubaHeadlines 2024

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