Since the beginning of summer, with the economy declining even further due to the impact of the pandemic and the U.S. blockade, there has been a greater impetus on the part of the Cuban government to take measures to boost production and consumption, favoring above all the private sector, farmers and individuals.
In the first work of this sequence, I will try to summarize the main measures announced in this context. I will leave for the second an analysis of these measures, as well as the institutional and structural obstacles that still limit their effectiveness and expansion in the country.
All the actors of the Cuban economy on stage
In June, the Council of Ministers approved the “improvement” of the actors in the Cuban economy, which includes the socialist state enterprise; non-agricultural cooperatives; micro, small and medium-sized enterprises (MSMEs); and self-employment. We will talk about MSMEs later.
Cooperatives again
On June 20, “an innovation proposal for the strengthening and consolidation of agricultural cooperatives” was presented, which includes the creation of a Cooperative Development and Promotion Institute, the consolidation of current entities and the promotion of the birth of new entities, as well as “strengthening the necessary cooperative-related legislative support.” In addition, there was talk of the “promotion and development, in an experimental way, of second-degree cooperatives, which in this case would be the union of several primary cooperatives in a higher organization.”
In August it was learned that the Council of State issued the Decree-Law “On Non-Agricultural Cooperatives,” which regulates the constitution, operation and extinction of this national economy subject. To date, it has not been published in the Gaceta Oficial and its content is, therefore, unknown.
Also in relation to the exercise of self-employment, the Council of State adopted the Decree-Law “On the exercise of self-employment,” which updates the general provisions for its development, regulates the procedure for processing authorizations through the Office of Procedures created for this purpose, adapts its organization and control system, as well as perfects the responsibilities of the People’s Power local administrations, organs, Central State Administration agencies and national entities in relation to this type of employment. In this case, its publication in the Gaceta Oficial is also pending. Recall that in February 2021 the list of possible activities for self-employment was expanded (from 128 to more than 2,000), which includes all those that appear in the National Classifier of Economic Activities except those expressly banned for this sector, which appear in the list of “Activities where self-employment is not allowed.”1
New import facilities, retail sales and transportation rental
Regarding the expansion of import facilities for the non-state sector, on July 31 it was announced that the state foreign trade entities (COMEX) that provide the import service of inputs and raw materials for non-state forms of management would be temporarily exempted from paying customs tax. The express objective of the Resolution is to reduce costs and boost the production of goods and the provision of services, mainly by self-employed persons and cooperatives. Those who import through these enterprises will only have to pay, in addition to the price of the merchandise, logistics and transportation expenses, using their bank accounts in freely convertible currency.
Subsequently, the decision was announced to “exceptionally and temporarily authorize the import via passenger with accompanying luggage, food, toiletries and medicines”…but insisting that it must be non-commercial. Travelers arriving in the country will be able to import these products without paying taxes, only limited by the costs and amounts imposed by the airlines. The dubious premise that those who import suitcases full of deodorants, toothpaste, soaps and medicines will do so only for their personal and family consumption, and not to sell in the many points of sale that have sprung up in recent years on the island, is maintained. Nor does it speak of the impediment to taking full advantage of this measure as a result of the reduced number of international flights, a measure that is lasting longer than expected due to the worsening of the pandemic.
Similarly, on July 28 it was announced that Cuba will authorize for individuals the import of photovoltaic systems for non-commercial purposes: “Individuals are exempt of paying Customs taxes for the import for non-commercial purposes of equipment that use renewable sources of energy and energy efficiency, their fundamental parts and pieces.”2 This import may be carried out by accompanied or unaccompanied baggage and through the established COMEX enterprises authorized to do so, in freely convertible currency. The document itself explains that “the individual is responsible for the installation of the photovoltaic system and its sustainability, as well as for the recontracting of the electricity service to the Electricity Conglomerate and that the latter certifies compliance with the requirements for installation and guarantees the meter for measuring the energy generated by the photovoltaic system.” It is not clear if “the recontracting of the electricity service to the Electricity Conglomerate” implies that the latter is going to pay people for the electricity they contribute to the grid, or if the purchase rate will be higher than the sale rate to encourage private generation of electricity, a measure that has been successfully adopted in places like Ontario, Canada.
An attempt is also being made to make the forms of retail sale more flexible. Recently, the Ministry of Domestic Trade approved garage sales as a modality of eventual retail marketing, and established the regulations for its realization. The people who carry out this activity will not require a commercial or self-employment license, and the items to be sold must be for domestic and personal use, recycled, pre-new and new.
Also on July 31, Cuba authorized the leasing of underutilized vehicles from state entities to legal entities that carry out passenger and cargo transportation, and individuals who present a project of social or local interest in the territory. This could help transport agricultural produce and other cargo to markets and, through competition, lower the costs of private transportation, which until now was the only option for many.
Market opening and incentives for agricultural producers
The most daring of the measures taken in recent days is, without a doubt, the new marketing policy for agricultural products. It is supported by a package of legal norms that include a Decree of the Council of Ministers,3 and a Resolution of the Ministry of Finance and Prices (MFP).4 It is “a very practical, flexible policy that was built together with many producers,” said the minister of agriculture.
All state and non-state marketers, enterprises, agricultural and non-agricultural cooperatives, and agricultural producers (farmers) may participate in the commercialization of agricultural products. They can lease trucks, spaces, refrigeration, warehouses, weights and any other input that supports the commercialization. The director of marketing of the Ministry of Agriculture (MINAG) explained in this regard:
“Before, there were bottlenecks with regard to supplies from the self-employed. Today all those wholesalers can supply non-agricultural non-state forms of management (such as restaurants). All variants are made more flexible to encourage production. It is a stimulus for the producer who can manage his market or point of sale,” said the minister at the time, and commented that a month and a half after the policy was approved, “enterprises like this have already been born, well-received by the population.”
“The producer can even rent a space in a market for a day to sell production that has no outlet.… Likewise, he can sell to tourism, other sectors…. Or take production to industry. There is flexibility so that products are not lost,” added the director of marketing of MINAG. In this way, it is expected that the unfortunate images of quintals of mangoes rotting in the fields or tomatoes unharvested due to lack of packaging, transport or collection management will disappear.
Taking into account the increase in real cost, and seeking to stimulate the producer, the centralized maximum prices are also eliminated. They will be established by agreement between institutions and producers. The MFP annulled the limit on the growth of retail prices (price caps) of agricultural products, in force since February 2021.5 The effect was immediately seen in an increase in the selection and in prices in the supply and demand markets of the country’s capital. On the other hand, this measure also annulled the maximum prices for collection agencies and wholesalers of agricultural products destined for social consumption.
Will these measures produce the significant increases in food production and marketing that are needed for a real food sovereignty? Will the generation of renewable energy be promoted by individuals with the corresponding savings in electricity and fossil fuel by the State? Will the availability of food, medicines and toiletries increase — thanks to free imports by travelers — despite the shortage of flights and the risks of traveling due to the pandemic? Will the new import facilities for the non-state sector help lower costs and increase production? Will the leasing of underutilized vehicles from state entities to legal entities and individuals take place despite the bureaucracy? Will it boost and lower the cost of freight and passenger transportation that is so badly needed?
Finally, MSMEs are approved
After a long wait and great expectation, on August 6 it was reported that the Council of State issued eight Decree-Laws “within the framework of the expansion, recognition and strengthening of the work of the different economic actors, and of other programs of national interest,” for the “improvement of three important actors in the Cuban economy”: micro, small and medium-sized enterprises (MSMEs), non-agricultural cooperatives and self-employed persons. The first is the Decree-Law “On micro, small and medium-sized enterprises,” pending publication, which we will comment on below.
Cuban MSMEs will be state, private and mixed ownership and will be classified according to the number of employed persons (workers and partners) that comprise them:
- Micro: from 1 to 10;
- Small: from 11 to 35;
- Medium-sized: from 36 to 100.
They will have legal status and will adopt the Limited Liability Company as a management model and organizational legal form. It is “a trading company, whose capital is divided into social shares and is made up of the contributions of all partners.”
Among their autonomous powers, MSMEs will be able to export and import, manage and administer their goods, define the products and services to be marketed, as well as their suppliers, clients, destinations and insertion in markets, have access to any legal source of financing — including funds established for them — and set the prices of their services and goods, except those that are centrally approved. All this, according to current legislation, of course, and this is where the “small print” will have to be reviewed.
For example, the social target of MSMEs will be “the authorized legal economic activities to which they will be engaged” (Art. 15). It was advanced that, in the case of private enterprises, activities already excluded for self-employment and other professional activities, including those that self-employed persons can perform. We will talk about this in the second part of this work.
Individuals permanently residing in Cuba, over 18 years of age, whether they are Cuban citizens or not, can be members of privately-owned MSMEs. State or government cadres or officials or those who hold professional positions in a state body cannot be partners, which seeks to avoid that evil so common in Latin America that is the corruption of public officials, who are themselves capitalists.
Regarding this, Cuban Prime Minister Manuel Marrero Cruz clarified: “the expansion of activities of non-state forms of management does not lead to a process of privatization, as there are limits that cannot be exceeded.” It seems that one of them is that one cannot be a partner in more than one MSME (Art. 50), this despite the fact that a self-employed person may have more than one license.
Already Art. 15.2. provides that “MSMEs carry out the economic activity constituting their social target with social responsibility,” but what that social responsibility consists of is not defined.
Among the special provisions is that a non-agricultural cooperative may be reconverted into a MSME, provided that its partners agree.
Lastly, the Decree-Law establishes the creation of the National Council of Economic Actors as the “inter-institutional governing body of policies and regulations concerning MSMEs in charge of promoting and fostering their development” (Art. 10), a task that the Council of Ministers will undertake in the future.
Conclusions and questions
Will the legalization that allows creating MSMEs, long-awaited after a decade of delay, increase investment, employment, production, productivity, and development opportunities for Cubans eager to start their own businesses? Will it cause a flight of competent professionals and technicians from the state sector, or will it be an incentive to create state and mixed MSMEs with the same benefits for its partners and workers? Will the other legislation in force, state agencies and enterprises, local governments constitute obstacles or incentives for the full deployment of MSMEs? Will this audacious measure accompany the structural changes still pending in Cuba?
The train is on the move, this time in a hurry after a long pause, and hopefully now nothing and no one will stop it. Much more can be done — and we will talk about that in the second part of this article — but in these months of so many tribulations the government seems to be moving forward, and the country and its citizens will have to respond to the new possibilities that are opening up.
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Notes:
1 Ministry of Labor and Social Security, “Activities where self-employment is not allowed, according to the National Classifier of Economic Activities,” February 2021
2 Resolution 322 of the MFP published in the Gaceta Oficial No. 69 Extraordinaria, of July 30, 2021. “Among the equipment that benefit from this measure are solar heaters, photovoltaic pumps, small wind turbines, geomembrane biodigesters, biogas motor pumps, solar lighting and solar air conditioning systems, as well as the fundamental parts and pieces of this equipment.”
3 Decree 35/2021, On the Marketing of Agricultural Products (GOC-2021-437-049)
4 Resolution 320/2021 of the Ministry of Finance and Prices (GOC-2021-727-EX68)
5 MFP Resolution 320, published in the Gaceta Oficial No. 68 Extraordinaria, of July 30, 2021
Author
Rafael Betancourt
The logical response from the US administration would be to assist this process of development by ending the embargo. https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=27373&LangID=E&fbclid=IwAR0TdRaYmpKBWiSqq2-nWQn_PvS1C8zsGlcM3DAIpokuNCbQ88e4M2Gf99E