After the Revolutionary Offensive in 1968, self-employment and private businesses in Cuba were barely existent points in the midst of a sea of nationalizations. Decades later, they began to emerge in the national reality from the process of crisis and change that occurred after the dissolution of socialism in Eastern Europe and the Soviet Union, with official regulations and resolutions that modulate and control them.
Since then, the range of documents generated by the State has been studied by jurists and economists, both inside and outside the island, who have pointed out the problems of a trajectory not free of zigzags, contradictions and setbacks.
We interviewed one of these scholars, Dr. Omar Everleny, on the subject. We thank him for his time amidst personal commitments derived from research and academia.
How would you define the relations of the Cuban State with the national private enterprise?
It is a very ambiguous relationship. The State expresses in almost all the forums that are held nationally that it has no will to pressure or close down private enterprise. But in practice it does put pressure on them, since it tends to suffocate them with countless controls, supervisions, price caps.… Many businesspeople ― and they are not the ones who under-report or do not declare their taxes ― raise doubts about whether they should continue or close their business. They feel very pressured.
The state discourse has been changing since 2021, when the first private enterprises known as MSMEs were approved. Its initial expressions stressed that the Cuban enterprise was one, regardless of the form of ownership. Even saying today that it is complementary. But it also argues that it must be subordinated to the local plans on which they are based and that they will have to be in line with the priorities of the municipalities.
If we look at the statistics published by the National Office of Statistics and Information (ONEI), the opposite is shown. For example, in 2023, it published household consumption by source of supply. The state sector only offered 40% of that supply. The rest were private.
There would be no reason to try to suffocate private enterprise when the Cuban economy is going through the worst crisis in its history, which includes severe problems with the historic ration book, since monthly deliveries of the few products that were previously guaranteed, such as rice, coffee, sugar, eggs, chicken and oil, among others, are not guaranteed.
Antonio Romero: “In Cuba, dogmas prevail over economic rationality”
What would be the main obstacles to the development of non-state forms of production on the island?
To begin with, the biggest obstacle is the counter-marches that are carried out from time to time. The MSMEs have not matured and suddenly the legislation that they had as a guide for the development of their activity is changed.
I can say that entrepreneurs feel that there is no legal stability in Cuba because the legislation is constantly changing.
Another obstacle to the development of non-state forms is not having the possibility of acquiring foreign currency in some official exchange market; hard currency that is necessary for their supply cycle. They need to buy raw materials abroad because they are not produced locally. Therefore, it is an inconsistency of the policy makers not to ensure the legality of these transactions.
There is another issue that haunts private entrepreneurs: the imaginary limits that are imposed on them. When it is said in the Constitution that the concentration of income or property will not be permitted, it is not known for sure what is meant by that. What is that limit? Who sets it? And this imagery always leads to suspicions among the auditors when a business is growing and begins to prosper and advance to the top of a group, as if it were a marathon race.
In Vietnam or China, these advances are welcomed because they lead to increasing the wealth of the nation. But in Cuba, accumulating a certain amount of wealth is a disgrace. It is understood as the return of the ghost of capitalism.
How should tax policies for private enterprises be, in your opinion?
As fair as possible, in line with national reality and, above all, not discouraging private entrepreneurs. They should reflect the current crisis.
The intention has been to promote the economy’s bancarization in order to have more control over the financial movements of enterprises. So far, this is correct. What happens, however, is that the banking system suffers from weaknesses and bad policies that are not supported by society, but rather irritate it.
Long lines to enter banks, few staff, terrible premises…then they don’t let you withdraw what you have deposited and you need it to pay individuals who do not use modern payment methods ― in agricultural markets, street vendors, among others.
In conclusion, not everything possible is deposited. The State does not know the real tax base of private enterprises.
What problems do you find in the legislation on Cuban private enterprise, from an economic point of view?
Recent legal provisions lack a realistic approach and a promotion of private enterprise. Rather, they have focused on control. This is not unreasonable, but it should not be the main focus at this time.
The necessary efforts are not being made to attract international microcredit institutions that have offered to work in Cuba. It would not be logical to create a specialized bank just to attract funds or lend to private entrepreneurs, but one that respects the funds deposited for the promotion of private enterprise.
There is also no real interest in recognizing that in certain sectors, private forms of production are much more efficient than the State. As an example, we can mention food production, gastronomy, clothing, the manufacture of household equipment, repairs and construction, among others.
It is not understood why there are a number of prohibited activities. They are almost absurd, as in the cases of architecture, civil engineering, language teaching.… I would have liked to know the argument that was used to establish these prohibitions.
That is why the approved legislation is insufficient to return to a positive path of economic development. It lacks articles. Others should be eliminated.
What are the limitations of the socialist state enterprise to fulfill the role that is officially assigned to it?
To begin with, those who direct the socialist state enterprise function as simple administrators of the resources that the State grants them. They do not have the room for maneuver that the managers of private enterprises have. In other words, they do not have the necessary autonomy to succeed in getting their enterprises out of undercapitalization and in some cases out of paralysis.
They are subject to pressure from higher levels to comply with the assigned plans. But their finances can be intervened when the hierarchical levels are required for a purchase by the country.
It may be paying for a shipment of products necessary for the almost nonexistent ration book. Or to pay for a ship of fuel, sometimes crazy decisions, but also necessary. What happens is that the enterprise is left unprotected to fulfill the role assigned to it.
On the other hand, the so-called Law on Enterprises, which should at least have clarified many duties and rights of entrepreneurs, has apparently been sabotaged by entities that would not benefit from its application.
However, apart from the adverse scenario in which private forms have had to develop in the Cuban economy after September 2021, and despite the government wanting to control them excessively, at the end of May 2024 there were about 11,046 private enterprises: 4,548 of which were reconverted and 6,498 new ones. Of these, 26% are medium-sized enterprises, that is, with more than 36 workers.
Its progress is also demonstrated by the fact that in 2023 the private sector imported just over a billion dollars. In the first half of 2024 alone, MSMEs had managed to import 622 million dollars, in contrast to the state import plan for that first half, which was achieved by less than 50%.
Don’t clip their wings, let them fly. Despite criticism of their prices, they supply goods that the State cannot supply.
Author
Alfredo Prieto
