Cuba Food Industry Cooperatives Feel Betrayed

Vicente Morin Aguado

HAVANA TIMES — Why the feeling of having been betrayed? Today, I have a chat with Jaime Olano (aka “Lefty”), a company manager that does not quite fit our preconceived notions about such positions: he is a tall, slender, soft-spoken man with greying hair. Jaime was once a high school principal, a job he quit back in the tough nineties because it wasn’t putting food on his table (education is all about chalk and notebooks of scant market value, and he wasn’t willing to sell exam answers to students).

Jaime Olano: I’ve been working in the food sector for 20 years. Now, I’m not sure I want to continue here. I’m afraid I’ll end up in jail, accused of tax evasion. This whole business of running a cooperative is like living under the sword of Damocles. The decisions are made at the top. Then they hold a meeting with us, simply to say to us: “take it or leave it.”

HT: The idea that this is something done of one’s own free will has always been upheld. Are we acting like Stalinists, applying a kind of forced collectivization?

JO: The difference is that, here, they save face by holding a meeting that is supposedly democratic. If you decide not to accept their conditions, they won’t sanction you – you’re simply placed at the mercy of the Ministry of Labor, waiting for a position outside your sector. Can you imagine that? What option does a cook, a barman or a waitress have, when they’ve been doing those jobs for more years than I have mine?

HT: The government has unleashed a crusade against superfluous jobs. This socialist model had created the dream of total employment, now it is looking to find jobs for a million people. The expression of Lefty’s face is rather eloquent. I continue with my questions, bearing in mind he’s told me he could end up in the nick.

JO: The pressure is real. I say this because there are many tax obligations.

HT: It would be good if you could tell us what they are.

JO: Every month, you have to pay the rent for your locale – we’ll never be the owners of the place. You also have to rent some equipment (the best units, incidentally), and to buy others with years of use practically at store prices.

HT: They do not apply a depreciation rate?

JO: They apply it by mixing Cuban socialism with a kind of “loan shark” capitalism. They apply a depreciation rate from 5 to 10 percent to an industrial toaster with 15 years of use, a unit that was perhaps repaired by the employees themselves during the tough times of the Special Period. They charge you 12 Cuban pesos for every square meter of the locale, counting warehouses and offices, every centimeter of the place, that is. This is an average cafeteria for Havana. It was built well before the revolution. The right thing to do would be to loan it for commercial purposes free of charge.

HT: Are there other taxes?

JO: The list is endless. You should write this all down, because I may not remember them all, even though I have a good memory.

HT: Right, I’ll copy it from your notebook:
– Locale and equipment rental.
– Electricity, water and sewage, fuel.
“One thing,” he says to me, “We pay rates similar to the regular ones applied to the general population.” Good to know, I think, and continue jotting down the information.
– Transportation of goods.
– Cleaning products and utensils.
– 10 percent of monthly sales.
– Quarterly social security payments for each member of the cooperative, equivalent to 262 Cuban pesos.
– Monthly salary as an advance on profits, calculated on the statistical average calculated for the province. In Havana, it is around 450 pesos.
– At year’s end, a per capita income tax calculated on the basis of the controversial percentage scale.
Of course, I ask him to explain this last item.

JO: They apply a cumulative scale to calculate year-end payments. It starts out at 10 percent, applicable to the first 10,000 pesos of income for each partner and goes up to 45 % if the income for each partner exceeds 50,000. As you can see, it doesn’t really help if you’re trying to promote competition as a means of increasing profits. The ideal thing for everyone (and I include us, because we are part of the population), is for prices to go down, to be able to sell more, without having to cut into anyone’s benefits.

HT: I end up agreeing with Jaime’s “suggestion” about the real possibility of evading taxes. I would never, of course, incite anyone to break the law, not even one as controversial as the law that applies to cooperatives in the food industry. Now, can’t you negotiate with State companies?

JO: Negotiate? (He laughs sarcastically). That’s the other half of the story. The company serves you the food, as is established, and you have to eat it. For instance, wholesale supplies are now sold at market prices, with a discount averaging only 10 percent. If rice is sold at the market at 5 pesos the pound, they sell it to us at 4 pesos. Is that a real advantage? It’s a fixed rate that can’t be negotiated.

HT: The main issue is making profits. How do you tackle this problem?

JO: I think you’ve gotten to the crux of the problem. Our units, which make up the “base” network, sell light snacks: sandwiches, soft drinks, ice cream, milkshakes and pizzas, all at relatively low prices. All other incomes are made from the sale of cigarettes, cigars and alcoholic beverages.

HT: What is the income ratio?

JO: The most important thing here is this second source of income. Cigarettes and alcohol represent more than 85 percent of our incomes. However, the prices of these products are considered strategic by the State, they cannot be altered. We get ludicrous percentages from their sale: 2 percent for cigarettes, 5 percent for rum and 14 % for beer. If you do the math, we get very little out of selling food, what with so many taxes and restrictions. What’s more, wholesale supplies are always unstable and not enough.

HT: What does this lead to, assuming one doesn’t decide to evade taxes?

JO: Where? The answer is in plain sight. Go and see what happened to some of the establishments that became cooperatives. The prices go up. Perhaps services will improve because of it.

HT: Even though you’re the manager, you’re working at the bottom, next to your employees. What atmosphere exists in the workplace?

JO: We set our hopes on the cooperatives, but we’ve been let down. There’s just too much meddling by the State. I feel like they’re handing us a corpse to see if we can bring it back to life. Now, we in the food industry are expected to solve the problems they couldn’t fix in over 50 years, when they nationalized these small businesses. They should show us some respect, we’ve already taken a beating during the hardest years, keeping socialism standing.

If it’s a question of being optimistic, I would like to quote Decree Law 305, which states: “To establish, on an experimental basis, the norms that shall regulate the creation, operation and liquidation of cooperatives in sectors outside the country’s agricultural and livestock industries.”
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Vicente Morin Aguado: [email protected]