There was a time when in Cuba we identified Foreign Direct Investment (FDI) from capitalist countries as a mechanism of extortion by rich countries over poor countries — which is true to a large extent — and in our specific case, FDI was seen as an enemy of the Revolution and socialism. We protected ourselves from this THREAT to prevent it from taking advantage of our country and the work of all Cubans.
Then came another time when — because there was no other choice, after the disappearance of the socialist camp and Soviet socialism — this approach/perception/ideological judgment was changed and then FDI began to be assumed as a NECESSARY EVIL.
To protect ourselves from this evil, to protect our sovereignty and to avoid ideological contamination, decree laws were invented, then laws, regulations and organizations — for example, personnel hiring agencies — many of which still exist, and others persist in the “very comfortable heads” of many.
Then it was discovered and considered that FDI was a STRATEGIC NEED for the development of the country. However, far from creating regulations consistent with this new approach/perception/judgment, the regulations and procedures — the rules of the game in this case — continue to be far from our real needs and have led us to be able to compare ourselves with Haiti in terms of foreign investment flows. Many of these rules of the game have ended up scaring away many possible and good businesses, which would have helped the productive reconstruction of our country.
It is true that the U.S. blockade has contributed significantly to frustrating these possibilities, but it would not be a waste of time to establish, with data that unfortunately are not public, how many other very good businesses have been ruined by these rules and, in doing so, have helped — perhaps unintentionally, but not out of ignorance — the U.S. government’s policy that seeks to suffocate our people.
There was also a time when “the non-state” was considered by default as an enemy of the Revolution and of socialism, as unworthy and immoral, unpatriotic and also ideologically perverse, and was excommunicated from our society. Then it was included among the necessary evils. Well into this new century, which has surprised us with such old things, it has been elevated to the category of COMPLEMENT.
But, after the recent package of regulations, it would seem that, rather than a complement, it is considered and treated as an expendable APPENDIX.
I will advance some considerations on this new regulatory package that has raised so many opinions so far and that will produce so many more in the future, as new decrees and regulations are added to the one already published.
An inconvenient complement?
The first thing that draws attention is that, being the non-state sector a “complement” — it barely represents 15% of the GDP and much less of exports — so much time, legislative and media effort has been devoted to the complement.
Meanwhile, the heart of the reform, the engine of the economy, the state business system, is kept waiting for a law that, although it will not be the magic wand, should help that system lead the productive reconstruction of the country. And we have already been waiting for several years.
Because if our economy is doing badly it is not because two years ago the MSMEs were “allowed,” nor because small and large grocery stores, hardware stores and stalls flourish, protected by that self-employment figure; nor because cousins ”abroad” are passing money so that those inside can reap their “wheat.”
Nor is it because these MSMEs are setting exorbitant prices, due, among other factors, to the fact that they must work with an exchange rate that is not the “official” one, because our monetary authorities have not known how/been able to resolve this problem inherited from a poorly conceived and worse executed monetary order. But MSMEs have come in handy to share these blames, just as hurricanes or droughts have sometimes done.
If our economy is doing badly — including the blockade and the slanderous list of sponsors of terrorism — it is because our state and socialist business system, responsible for 90% of all sales in the country, for more than 80% of exports and recipient of all investments, whether from internal or foreign sources, has been subject to archaic regulations — including planning —, tied up by their respective ministries, whose bureaucracies are unable to adapt to these times.
After several years of repeated announcements, the long-awaited business law is still waiting for consensus and depending on those who do not want the state enterprise to be what it should be.
The Cuban economy is doing badly because it does not attain sufficient income from exports. And yes, it is true, the new actors almost all do not yet have an export vocation. However, of the more than 2,000 state enterprises, only 20 of them, that is, less than 1% of the total, account for 80% of the income from exports.
If the main engine of the reform, the state enterprise, which has the advantage of accessing resources and investments, which integrates official delegations to promote exports, which has advantageous access to foreign enterprises interested in establishing business in Cuba, does not achieve an export dynamic, then how can we ask the “complement/appendix” to become an “exporting power.”
But despite the evidence, regulators have emphasized that one of the reasons why our state-owned enterprises do not obtain the results they should is because they are at a disadvantage compared to MSMEs, for which a decree law has been legislated that attempts to put MSMEs as close as possible to the conditions under which state-owned enterprises operate. So much for institutional innovation!
The fiscal deficit that overwhelms us
MSMEs, and non-state actors in general, have shown how much this sector can contribute to reducing the scourge that is and has been the fiscal deficit. They have contributed 30 billion pesos (9% of gross revenue collected and 15% of tax revenue) to fiscal revenue and another 40 billion have been lost due to tax evasion.
Without a doubt, increasing fiscal discipline is decisive, no one in their right mind can deny it. Acting to reduce this evasion is very important. But if there were no MSMEs and self-employed workers, those 30 billion would not exist today, and neither would the potential that remains to be recovered.
That is why it is striking that, instead of promoting the creation of more non-state actors, implementing more expeditious mechanisms for their creation, reducing bureaucratic obstacles, the balance of what is legislated in this last package is more difficult. For example: presentation of a project; restricted corporate purpose; maintenance of prohibited activities; subordination of approval to the development strategy of the municipality in which it is proposed — a strategy, by the way, that the citizens of these municipalities themselves have a hard time knowing; obligation to limit the activity to the territory of the municipality where the actor has his tax residence, etc.
Far from facilitating the birth and growth of new actors, it reduces and discourages their creation. Therefore, this objective of making the business network larger, something that our reality has evidenced, does not seem to be easily achieved.
But along with the increase in fiscal discipline of non-state actors, expenses and transfers from the budget to the state business system should be significantly reduced and the destination of income should be made more transparent, especially in municipalities.
This other part of the equation should also be put in order, because the state of our infrastructure, our hospitals, our schools, basic services such as garbage collection and treatment, today leave much to be desired and lead citizens, whether or not they are new actors, to question the use of their money.
The more than 160 pages of the new decree contain enough content to contrast the purposes and realities of our economy.
For many, the appendix — that insignificant organ with which we are born — is at most an oversight of evolution or of the Creator, and was only there to bother and complicate our existence, because in the end it can be amputated without consequences for human health. Its function is to produce and protect the good bacteria in our body, but it is not indispensable.
So, we remember the appendix when it becomes inflamed and causes appendicitis or when we do not treat it in time and then it can lead to peritonitis.
It would seem that our MSMEs, all of them, as well as the self-employed and all those who make up the so-called non-state sector, after this decree, are closer to the appendix than to the complement.
Author
Dr.C Juan Triana Cordoví
