Overspending on the Cuban Market

The Chicago Cubs have long been connected to Cuban defector Yoenis Cespedes this winter, but last week, they came to terms with another Cuban free agent, 19-year-old left-hander Gerardo Concepcion.

Concepcion flew under the radar for the majority of the offseason. The focus has been on the higher ceiling Cubans, which left much of the baseball community slackjawed at the $7M price tag the Cubs had to pony up to land the southpaw. Teams simply do not spend that much money on a prospect that is largely considered to be nothing more than a back-end starter … tops.

That is, unless one factors in the fact that international spending will now be capped, starting this upcoming July. Rick Hahn, Assistant General Manager of the Chicago White Sox, predicted a week ago that teams would be “extraordinarily aggressive on Cespedes, Soler and Concepcion” due to the upcoming limitations. He turned out to be right on the money.

Kevin Goldstein of Baseball Prospectus told me over the weekend that his “mildly educated guess” regarding Concepcion’s price prior to the new Collective Bargaining Agreement would have hovered around the 1.5 to 2 million dollar mark. The Cuban lefty got almost four times that much from the Northsiders.

To put this in perspective, only five players in the 2011 MLB Draft received signing bonuses above the amount Concepcion received last week: LHP Danny Hultzen ($8.5M), RHP Gerrit Cole ($8M), OF Josh Bell ($8M), OF Bubba Starling ($7.5M), and 3B Anthony Rendon ($7.2M). Granted, teams were not bidding against each other to land these elite prospects, but the fact that 19-year-old Gerardo Concepcion — a potential #4 or #5 starter — received more money than 19-year-old right-hander Dylan Bundy — a potential legit #1 — highlights the inflated market due to the upcoming limitations on international talent.

In some ways, teams have to either buy the young Cuban defectors now while the market can be exploited, or wait until the following offseason and compete on the same level as the rest of the budget-strapped teams in the league. Beginning July 2, 2012, every team in the league will receive $2.9M for international signings; the Cubs just spent more than two times their upcoming international budget on the third-best Cuban defector on the market.

The lofty price tag does not mean the Chicago Cubs made a poor signing, though. Concepcion may not have a high ceiling, but he is an extremely polished young pitcher and is considered a safe bet to reach the big leagues in some capacity. Any big league talent that will be under team control for at least six seasons provides substantial value for a rebuilding club, like the Cubs, and if the organization has money to burn and overpay for a probable back-end starter, more power to them. It will ultimately help.

This signing does indicate that the number needed to acquire Jorge Soler just jumped dramatically. The 19-year-old outfielder is a potential five-tool player — though his baseball skills remain quite raw — and could eventually become an above-average corner outfielder at the big league level. Granted, his ultimate floor is much lower than that of Concepcion, but if a potential back-end starter is worth $7M on the international market, imagine what a potential impact corner outfielder could net this month.

Surprisingly, the Gerardo Concepcion contract may not affect the Yoenis Cespedes market very much. One would suspect that it would, but two separate people — one inside an organization and one well-connected on the outside — opined that Cespedes would not sign for significantly more now that Concepcion has set the Cuban market. One person said Cespedes was “too unique” to be affected by the young lefty’s $7M bonus.

The new CBA will take effect this upcoming July, and it will assuredly decrease the amount of money dished out to unproven teenagers in Latin America. The new CBA is doing the exact opposite this winter, though. Organizations are overcompensating and overpaying for the likes of Gerardo Concepcion and Jorge Soler while the market can still be flooded and manipulated with tons of cash. The Chicago Cubs are the first team to do it this month, but they certainly won’t be the last.



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J.P. Breen is a graduate student at the University of Chicago. For analysis on the Brewers and fantasy baseball, you can follow him on Twitter (@JP_Breen).


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Steve
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Steve
4 years 3 months ago

I thought the bigger news was not the pricetag, but the fact they gave him a major league contract.

Someanalyst
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Someanalyst
4 years 3 months ago

Agreed. That is wild… 19 yrs old & a pitcher… but now he has only 3 years to make the majors before going through waivers and uses a 40-man roster spot the whole time… the Cubs clearly think he can be more than a 4-5 starter.

Jason
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Jason
4 years 3 months ago

There is no evidence to support the conclusion of the article. I think this is a great case study in how much the draft suppresses the compensation of players who earn way more money on the free market.

Ronin
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Ronin
4 years 3 months ago

I think you are correct in a way since the supply is so limited on high ceiling international players every year. I wonder if North American players were free agents in the same manner whether signing bonuses would actually go down. After all a team only gets the chance to sign 1 or 2 top talents a year. If you had the option of negotiating with any of the top 20-40 players you can always move on to another player if your top choice wont come to terms. I think teams feel a lot of pressure to pay out the big dollars bc their draft is a failure if they dont sign their one pick.

Jason
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Jason
4 years 3 months ago

If so you can bet that MLB would be trying to do away with the draft rather than expanding it internationally.

Kampfer
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Kampfer
4 years 3 months ago

The draft is actually a way to give the poor team a chance to acquire impact talent. Imagine if all youngsters are FA, the Yanks and RedSox will not sign the normal FA but just flex their financial muscle to acquire all the Stephen Strasburg and Dylan Buddy and Bryce Harper.

Jason
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Jason
4 years 3 months ago

I’m not sure if you are attempting to support my comment or not… but your hypothetical obviously illustrates how the draft suppresses earnings for players. Since players can only negotiate with one team and there is no bidding war among teams with greater resources, overall expense is reduced.

Preston
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Preston
4 years 3 months ago

I think teams are and should be motivated to spend excess cash this off-season before the new CBA goes into affect. But that doesn’t mean Jorge Soler will get significantly more than 7 million because most teams just don’t have that kind of money laying around and if they do (Yankees) will another team force them to spend that much.

Ronin
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Ronin
4 years 3 months ago

If Concepcion is really only a 4-5 starter I dont think giving him a mlb contract and 7 mil up front is really “exploiting the market.” Also if that is his upside, 6 years of player control doesnt seem all that great since I would think most back end starters are probably close to if not over the threshold of being overpaid when it comes to their 2nd and 3rd years of Arb.

ferrets_bueller
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ferrets_bueller
4 years 3 months ago

I think you’re underrating his potential a bit- he at least has the potential to be a number three- only 19, has a 92-ish MPH fastaball, and potentially two plus breaking balls. Not exactly automatically limited to a 4-5…

Kyle Mayhugh
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Kyle Mayhugh
4 years 3 months ago

You lost me the moment you compared a drafted player’s contract with an IFA.

They are completely incomparable, for reasons you acknowledged in the article. IFAs and draft picks “cost” teams about the same in total value, but only if you consider the value of the draft pick itself as spent value. Spending $7 million on a kid is roughly the same as spending $1 million and a second-round pick on him.

Anyway, once I read the attempted faulty comparison, I mentally checked out, skipped the rest of the article, and came down to the comments section.

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