{"id":330606,"date":"2025-11-03T14:16:06","date_gmt":"2025-11-03T19:16:06","guid":{"rendered":"https:\/\/oncubanews.com\/en\/?p=330606"},"modified":"2025-11-03T14:16:06","modified_gmt":"2025-11-03T19:16:06","slug":"how-much-can-the-private-sector-grow-in-cuba","status":"publish","type":"post","link":"https:\/\/oncubanews.com\/en\/cuba\/economy\/how-much-can-the-private-sector-grow-in-cuba\/","title":{"rendered":"How much can the private sector grow in Cuba?"},"content":{"rendered":"

In Cuba, there\u00a0remains\u00a0a certain conceptual resistance to the adoption of private property within the socialist model. Although this concept is contemplated in the Constitution and in the governing documents of national development, the theoretical consensus has been broken when faced with practical implementation. To a certain extent, a fear\/rejection\/reproach toward the private sector has been cultivated, which offers no solutions. Instead, it divides us.<\/span>\u00a0<\/span><\/p>\n

Why\u00a0this\u00a0stigma? And, more importantly, can the private sector in Cuba grow to the point that justifies it?<\/span>\u00a0<\/span><\/p>\n

Historically, the 1959 Revolution was founded on a\u00a0criticism\u00a0of production relations based on exploitation and a heavy dependence on foreign capital, especially U.S.\u00a0capital, characteristics that\u00a0marked\u00a0the Cuban economy in the first half of the last century. In 1968, the so-called Revolutionary Offensive\u00a0almost completely\u00a0eliminated\u00a0private businesses,\u00a0consolidating\u00a0a dominant state-owned model that, with the fall of the Soviet socialist bloc, became\u00a0evident.<\/span>\u00a0<\/span><\/p>\n

In contrast, other socialist countries such as China and Vietnam, beginning in the 1970s and 1980s, undertook profound reforms aimed at integrating private enterprise and the market. Thus, China has become the world\u2019s second largest power and a central player in the global geopolitical reconfiguration, while Vietnam aspires to become one of the\u00a0world\u2019s\u00a0<\/span>top 30 economies<\/span><\/a>\u00a0within five years.<\/span>\u00a0<\/span><\/p>\n

Cuba has not even undertaken half of the economic reforms of China and Vietnam. Current laws keep Cuba\u2019s private sector\u00a0small by definition. Its expansion has clear boundaries. Their growth reaches a limit.\u00a0It seems there\u00a0are too many MSMEs because the starting point\u00a0was zero, but the fear that they will control the economy, privatize everything and sell out the country, besides being exaggerated and malicious, is unfounded. Let me explain:<\/span>\u00a0<\/span><\/p>\n

Private entrepreneurs in Cuba complain about the lack of regulation to promote MSMEs, self-employed workers,\u00a0cooperatives\u00a0and other businesses. But one thing is perfectly regulated: its limits.\u00a0This is much less talked about.\u00a0Let\u2019s\u00a0demystify the idea that the Cuban private sector can\u00a0displace\u00a0state-owned enterprises and\u00a0\u201ctake over\u201d\u00a0the country:<\/span>\u00a0<\/span><\/p>\n

Regulatory\u00a0limits<\/span><\/b>\u00a0<\/span><\/h3>\n

Size<\/span><\/b>\u00a0<\/span><\/h3>\n

This is fundamental. Private enterprise, which is the type of business with the greatest growth potential, is micro, small or\u00a0medium-sized by definition. An MSME can only have 100 employees. This limit curbs investment once they reach the maximum size. It will be impossible to find a\u00a0\u201csmall or medium-sized\u201d\u00a0private business\u00a0in Cuba with 500, 1,000 or 5,000 employees and hundreds of commercial outlets throughout the country.<\/span>\u00a0<\/span><\/p>\n

For self-employed workers, the\u00a0largest\u00a0form of business, the restriction is greater: they can only hire up to three people, whether they are family members or not.<\/span>\u00a0<\/span><\/p>\n

In the case of cooperatives, under the principle that in these organizational forms all members\u00a0contribute\u00a0their labor, they can only employ 10% of the number of members. In other words, a cooperative with ten members could only hire one employee.<\/span>\u00a0<\/span><\/p>\n

One member, one MSME<\/span><\/b>\u00a0<\/span><\/h3>\n

The\u00a0\u201cone member, one MSME\u201d\u00a0principle\u00a0establishes\u00a0that one person can only be a member (owner) in an MSME. No one can own more than one business, under the maxim of avoiding\u00a0\u201cconcentration of ownership,\u201d\u00a0as provided for in the Constitution.<\/span>\u00a0<\/span><\/p>\n

Anyone acting as\u00a0a front man\u00a0commits one of the most serious violations, according to\u00a0<\/span>Decree-Law\u00a091\/2024<\/span><\/a>, which implies\u00a0\u201cthe confiscation of assets and the definitive cancellation for the self-employed worker and forced dissolution for micro, small and medium-sized enterprises, and non-agricultural cooperatives.\u2026\u201d<\/span>\u00a0<\/span><\/p>\n

Strategic\u00a0sectors<\/span><\/b>\u00a0<\/span><\/h3>\n

No non-state-owned business can invest in sectors declared strategic by the State, such as mineral extraction, oil production, biopharmaceutical manufacturing, the sugar industry, education, healthcare,\u00a0aeronautics\u00a0and rail transportation, etc.<\/span>\u00a0<\/span><\/p>\n

All of these are captive markets for state-owned enterprises. In\u00a0some, foreign investors are allowed to\u00a0participate, even though there is no opportunity for national private investors. Examples include the nickel and tobacco industries, and the manufacturing and export of pharmaceuticals.<\/span>\u00a0<\/span><\/p>\n

In other sectors, such as tourism, the ban is not total, but it does present significant barriers. Private individuals can offer accommodation services (such as private homes), but they cannot create a private hotel chain or\u00a0operate\u00a0as travel agencies. The hotel tourism market is different from that of private accommodation. This is an example where, rather than competing, the state and private sectors complement the demand of different market segments.<\/span>\u00a0<\/span><\/p>\n

Other\u00a0prohibited activities<\/span><\/b>\u00a0<\/span><\/h3>\n

There is another broad set of economic activities that, while not strategic, are prohibited for private individuals under current legislation.\u00a0<\/span>Decree\u00a0107\/2024<\/span><\/a>\u00a0includes vehicle sales, television and radio broadcasting and financial intermediation in its list. The manufacturing of medical equipment, electricity generation (except for that produced from renewable sources) and solid waste collection, among many others, are also prohibited. Various goods are not marketable by private individuals: medicines, weapons, timber and so on. In other words, only the State\u00a0participates\u00a0in this range of activities where, as in strategic sectors, private individuals are\u00a0vetoed.<\/span>\u00a0<\/span><\/p>\n

Professional activities such as consulting, engineering, architecture, advertising\u00a0agencies\u00a0and legal services deserve special mention. The market for these services has grown; the state-run offer does\u00a0not cover them and\u00a0are\u00a0not specialized in small businesses. Faced with the impossibility of practicing legally, some entrepreneurs have opted for informality. The worst part: those who choose not to take the risk decide to emigrate, and many find professional fulfillment where they can\u00a0establish\u00a0or join businesses of this type.<\/span>\u00a0<\/span><\/p>\n

Access to real estate and land<\/span><\/b>\u00a0<\/span><\/h3>\n

The transfer of property ownership is tightly controlled in Cuba. An\u00a0individual\u00a0can only own a maximum of two homes. One must be the home where they permanently\u00a0reside. The other can only be a vacation or holiday home, according to the General Housing Law.<\/span>\u00a0<\/span><\/p>\n

Ownership in private legal entities (MSMEs and non-agricultural cooperatives) is not regulated. In practice, MSME partners cannot transfer ownership of their homes to their\u00a0enterprise\u2019s\u00a0assets, even free of charge. The treatment of housing in Cuba as an\u00a0unseizable\u00a0asset means that owners cannot offer them as collateral or\u00a0security.<\/span>\u00a0<\/span><\/p>\n

So how do they do it? Most private businesses that require an establishment to carry out their activities do so in two ways: 1) within the owner\u2019s home, 2) leased in a state-owned building or other private residence.<\/span>\u00a0<\/span><\/p>\n

The situation with land is similar. The laws in force prior to the MSMEs\u2019\u00a0existence do not prohibit it, but they also do not regulate the procedure for granting land to these legal entities, whether in ownership or usufruct. However, the\u00a0<\/span>draft\u00a0Law on\u00a0Land<\/span><\/a>, which must be approved in the coming months, makes it clear: Cuban legal entities will not be able to own or lease land.<\/span>\u00a0<\/span><\/p>\n

Barriers to\u00a0access to\u00a0land and real estate are significant constraints on the growth of the private\u00a0sector as a whole. They inherently hinder its physical and,\u00a0consequently, its economic expansion. At the same time, they limit the potential of private MSMEs to enter, for example, the deteriorating agricultural sector.<\/span>\u00a0<\/span><\/p>\n

The\u00a0famous foreign trade monopoly<\/span><\/b>\u00a0<\/span><\/h3>\n

All goods imported by private individuals pass through state entities. Raw materials, machinery,\u00a0food\u00a0and beverages.\u2026\u00a0No private economic actor\u00a0\u2014\u00a0as far as is\u00a0publicly known\u00a0\u2014\u00a0can import goods directly. In the case of direct exports, although implementing them would be a regulatory incentive, they are also not\u00a0permitted.<\/span>\u00a0<\/span><\/p>\n

These intermediaries, while their function is to\u00a0facilitate\u00a0trade management, often\u00a0operate\u00a0bureaucratically and add\u00a0additional\u00a0costs without adding value. Given the increase in private sector foreign trade operations, the number of state entities authorized to act as intermediaries grew to more than 70. However,\u00a0in an attempt to\u00a0maximize control, the government cut the\u00a0number to\u00a048 last year.<\/span>\u00a0<\/span><\/p>\n

The government holds the\u00a0\u201ckey\u201d\u00a0to private individuals\u2019\u00a0foreign trade.<\/span>\u00a0<\/span><\/p>\n

Foreign\u00a0investment<\/span><\/b>\u00a0<\/span><\/h3>\n

Foreign investment transactions (wholly foreign\u00a0companies, joint\u00a0ventures\u00a0and international economic association contracts) are centrally reviewed and approved by the Council of Ministers.<\/span>\u00a0<\/span><\/p>\n

In July 2022, the then Minister of Foreign Trade and\u00a0Foreign\u00a0Investment (MINCEX)\u00a0<\/span>announced<\/span><\/a>\u202fbefore parliament that\u00a0\u201csome seven foreign investment projects linked to non-state management\u201d\u00a0were being studied. That same year, the national press mentioned one that would receive external financing to\u00a0<\/span>produce pork<\/span><\/a>, but ultimately that case did not come to fruition. To date, no (formal) foreign investment in MSMEs has been reported to have\u00a0materialized.<\/span>\u00a0<\/span><\/p>\n

Other\u00a0limits<\/span><\/b>\u00a0<\/span><\/h3>\n

Beyond regulatory barriers, Cuban\u00a0ventures\u00a0face the economic and financial constraints of the context: shortage of foreign currency, inconvertibility of the peso, lack of wholesale markets, inflation, low productivity, energy deficit.\u2026<\/span>\u00a0<\/span><\/p>\n

As if that\u00a0weren\u2019t\u00a0enough, in addition to all the design and contextual constraints, there are discretionary limitations, such as the halting of\u00a0the\u00a0creation\u00a0of\u00a0MSMEs. In the ten months from September 2024 to July 2025, only 231\u00a0\u201cnew\u201d\u00a0economic actors\u00a0<\/span>were approved<\/span><\/a>.<\/span>\u00a0<\/span><\/p>\n

So\u00a0what happened?\u00a0<\/span><\/b>\u00a0<\/span><\/h3>\n

The state\u2019s retreat from activities where it predominated five years ago is\u00a0evident. The most palpable example is retail trade: Cuban families do\u00a0<\/span>55%\u00a0of\u00a0their\u00a0shopping<\/span><\/a>\u00a0in private stores, according to the ONEI (National Institute of Statistics and\u00a0Information).<\/span>\u00a0<\/span><\/p>\n

Is this because MSMEs have\u00a0\u201ctaken\u201d\u00a0market share from state-owned companies that sold food in the CUP (Cuban pesos)? No, what has happened is that the state has practically withdrawn from that market. Private\u00a0enterprises\u00a0are\u00a0barely\u00a0trying to fill the gaps.<\/span>\u00a0<\/span><\/p>\n

But this\u00a0doesn\u2019t\u00a0mean that the private sector is\u00a0\u201cdisplacing\u201d\u00a0the state sector. Even in its most difficult times, the state sector controls large industries and factories, dominates exports and imports, is the only national\u00a0actor\u00a0in foreign investment in Cuba, has no competitors in various branches of the economy, its\u00a0enterprises\u00a0are repeatedly saved from bankruptcy, and it employs more than two million Cubans.<\/span>\u00a0<\/span><\/p>\n

The clarity of the legal limits\u00a0established\u00a0for the private sector in Cuba is unquestionable.<\/span>\u00a0<\/span><\/p>\n

Does the country need to focus on\u00a0\u201ccornering\u201d\u00a0(more) MSMEs? Or do state-owned enterprises need\u00a0the profound\u00a0reforms that have been pending for years?<\/span>\u00a0<\/span><\/p>\n

The\u00a0Law on\u00a0Enterprises\u00a0has been announced\u00a0<\/span>since\u00a02015<\/span><\/a>. Ten years and several postponements have\u00a0gone by. We are wasting time arguing about whether MSMEs are\u00a0\u201cgood\u201d\u00a0or\u00a0\u201cbad,\u201d\u00a0even whether they are a\u00a0\u201cnecessary evil.\u201d<\/span>\u00a0<\/span><\/p>\n

Let\u2019s\u00a0discuss how to transform Cuban state-owned enterprises to make them more efficient,\u00a0competitive\u00a0and autonomous. But\u00a0let\u2019s\u00a0discuss\u00a0this\u00a0seriously, without falling into the\u00a0voluntaristic\u00a0debate that each director or employee in the state sector should fulfill their individual duty to solve all the problems. The solution\u00a0essentially lies\u00a0in political will expressed in economic policy decisions.<\/span>\u00a0<\/span><\/p>\n

\n
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Private entrepreneurs in Cuba complain about the lack of regulation to promote MSMEs, self-employed workers, cooperatives and other businesses. But one thing is perfectly regulated: its limits. <\/p>\n","protected":false},"author":3134,"featured_media":330612,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[13904,13903],"tags":[14816,14819,19256],"ppma_author":[33546],"class_list":["post-330606","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cuban-economy","category-economy","tag-cuban-economy","tag-economy","tag-featured"],"acf":[],"yoast_head":"\nHow much can the private sector grow in Cuba? | OnCubaNews English<\/title>\n<meta name=\"description\" content=\"In Cuba, there remains a certain conceptual resistance to the adoption of private property within the socialist model.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/oncubanews.com\/en\/cuba\/economy\/how-much-can-the-private-sector-grow-in-cuba\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How much can the private sector grow in Cuba? 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