© Reuters. FILE PHOTO: A farmer holds a wad of Cuban money on a vegetable stall at a market in Sagua La Grande, in Villaclara province, in central Cuba, about 240 km (149 miles) to the east de Havana, October 12, 2013. REUTERS / Desmond Boylan
By Marc Frank
HAVANA (Reuters) – Thousands of Cuban small and medium-sized enterprises will be allowed to integrate in the coming months, in one of the most important economic reforms taken by the communist government of the island since it nationalized all companies in the 1960s.
The reform, details of which were unveiled this week, will allow small and medium-sized businesses for the first time since 1968, ending the legal vacuum in which many have existed for years in the Soviet-style economy.
The law will also apply to small and medium-sized state-owned enterprises, paving the way for significant decentralization of certain activities and forcing subsidized operations to become profitable or disappear, according to Cuban economists.
In the restaurant business, thousands of government-subsidized restaurants will close, become co-operatives or turn into small businesses, according to a mid-level manager involved in the process who requested anonymity. Those it keeps will become small and medium-sized state-owned enterprises in competition with them.
Although there have always been private farms and agricultural cooperatives in Cuba, most of the economy was in state hands until the 1990s, when heavily regulated small businesses were allowed in a few. areas under the rubric of self-employment, limiting their legitimacy and legal status.
The new measures are a key part of the economic reforms undertaken by new Cuban leader Miguel Diaz-Canel over the past year, as the coronavirus pandemic and the tightening of US sanctions have pushed the precarious economy into a free fall and shortages of food, medicine and other basic commodities. reached alarming proportions.
Economy Minister Alejandro Gil said on Wednesday evening in a televised presentation that the measures would put public and private companies on an equal footing to compete, work together and create mixed companies, much like in capitalist countries.
“It is a starting point for a new stage in the diversification of the economy and its development, in order to make the most of its potential,” said Gil, adding that the reform would boost employment and enable the economy to rebound more strongly as the pandemic has abated.
MIXED BUSINESS MODEL
The creation of micro, small and medium-sized enterprises (MSMEs) was accelerated after approval in May by the Cuban Council of Ministers.
New MSMEs will be able to access the state’s wholesale system, import and export, set prices and attract foreign investment, but only in a state-dominated business environment where these activities will remain highly regulated, according to various ministers who have appeared with Gil.
Businesses are limited to a maximum of 100 employees and individuals can only own one business, according to a decree-law released by the State Council this month.
Nonetheless, it is a welcome step for many entrepreneurs and most economists who have long called for reform.
“Cuba is moving towards a mixed economic model, at least in terms of employment,” said Pavel Vidal, a former Cuban central bank economist who teaches at the Pontificia Universidad Javeriana in Colombia in Cali.
“With this opening up, in a few years the non-state sector will account for over 50% of total employment in the economy,” Vidal said, adding that “there is still a lot to do.”
The Cuban economy, which has been stagnant for years, contracted 10.9% in 2020 and fell a further 2% in the six months to June, compared to the first six months of last year. The economy remains heavily dependent on tourism and imports.
Thousands of people in Caribbean island towns took to the streets on July 11 to protest the living conditions during the biggest anti-government protests since the 1959 revolution. Diaz-Canel blamed the unrest on the United States. United, claiming that the protesters had been manipulated by social media campaigns orchestrated by the United States.
Cuba’s private sector has grown steadily since the 1990s to encompass more than 600,000 self-employed permit holders in many sectors and includes business owners and their employees, traders and taxi drivers.
The so-called non-state sector, including agriculture, provides work for a third of the 4.9 million Cubans officially employed in the workforce, the rest working for the state.