An Insider’s Perspective to Cuba’s Private Sector

By Osmel Ramirez Alvarez

HAVANA TIMES – It’s a fact that a private sector already exists in Cuba, which is becoming more and more apparent. Self-employment was the beginning and MSMEs (micro, small and medium-sized enterprises) are an evolution of this. There are no doubts that the Government will soon be “forced” to accept larger enterprises, because of our reality.

I’m sure that in another five years, over 50% of goods and services in Cuba will be produced by the private sector. The ineffective and dysfunctional state planned economy has been taking a step back to give this emerging sector more and more ground to operate given the fact the economy has come to an almost complete standstill, and it will continue to decline despite the repetitive discourse they continue to hold onto at the National Assembly and in Council of Ministers’ meetings.

The streets in my town are full of self-employed selling something and private businesses right now, with lots of products that help Cuban families find essentials, which they are unable to obtain in state-run stores selling in pesos, or even in MLC (magnetic dollar) stores. That’s because MLC stores also belong to the state planned economy and that’s why they haven’t been so efficient at providing supply.

The reality is products are very expensive compared to the wages and pensions the vast majority of Cubans receive. It’s criminal for a pensioner to receive 1500 pesos a month and with that just about enough to buy two liters of cooking oil or two kilograms of detergent with it, for example. A Cuban worker’s monthly wage is the same price as a box of beer or malt (two dozen).

But it’s prices in dollars, the currency of purchases, and not salleries that are taken into consideration when it’s time to fix prices and make a profit. Every business seeks a profit. If wages aren’t enough to cover basic needs, the people fixing prices and paying these wages are the ones responsible. The private sector pays its employees better because it takes living costs into consideration, so wages are an incentive for workers, and not doing things illegally.

While the exact opposite happens in the state-led sector, where people “hustle” to make up the rest of their wages and leave those who have nothing to steal vulnerable. Therefore, we need to be complaining to the State, as an employer, about the low purchasing power of wages, not the private workers and businesses.

We regularly see lots of people blaming the private sector for prices that are unaffordable on a Cuban wage, while their employees have better purchasing power, Therefore, it is Cubans’ main employer, the State, that has created two economies: the real one based on the dollar; and the virtual one, based on wages in pesos.

Products sold by private vendors and can also be considered expensive compared to prices in other countries within the region. In part because dollars are used to buy them both outside and in Cuba, which are forced to come through a state-run importing company stuck in the middle, who charges a high fee, thus raising the cost. Let’s also add to this the fact that the fuel crisis has gone as far as quintupling the price of transporting these goods.

Not too long ago, a person walking down the street with a crate of beer or more than a liter of cooking oil could be arrested by the police as a criminal, fined, the goods seized and they would spend all day down at the police station. If it happened again, a year under home arrest was the minimum penalty waiting for you. Transporting any merchandise was extremely dangerous. Today though, it’s normal, you can be carrying 20 cases of beer on a tricycle or a crate or cooking oil or a bag full of packets of detergent, and the police will walk straight by you, they wouldn’t even look at you. That’s a big difference.

A lot still needs to be done, but we’re on the right track. I’m sure there are MSMEs that have corrupt managers or people from the ruling elite involved, as it is claimed and there is even proof, but to say they are all like this is a whole lot of nonsense.

It’s understandable for a Communist pensioner with 1500 pesos in their pocket, who has been forgotten and sad because young people on their block or the sales assistant at the MLC store don’t value their medals and diplomas for “taking the heat” for the Revolution their entire lives. When they see the price of cooking oil at an MSME, they go red in the face. Without the courage to protest because bodega ration stores are empty, they blame the private sector and not the Government. But it doesn’t make sense that there are people who are a lot smarter and still think this.

The private sector and dollar-equivalent prices are the future in Cuba, there’s no other choice, and it’s inevitable that many people will suffer along the way. Wages and the rest of the State’s fictitious and virtual economy will have to gradually adjust.

Bread will be better quality when private bakers make all the bread and buy all the flour, importing it themselves, as well as baking ovens; just like prices will drop once they become competitive. Potholes will also be filled when there is a road company; and so on.

Gradually going back to a free market, without the Government feeling like they need to make democratic changes. Democracy and human rights today aren’t what’s pressuring them and forcing them to change, it’s the economy. That’s where they are being forced to retreat.

Things are slowly collapsing under their own weight and in the mid-term, with greater economic freedom, the landscape will have to move towards other changes that are just as necessary. The important thing is that the ball is rolling and is, luckily, unstoppable.

Read more from diary of Osmel Ramirez here.