An Insider’s Perspective to Cuba’s Private Sector

Photo: EFE

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.

Osmel Ramirez

I'm from Mayari, a little village in Holguín. I was born on the same day that the Vietnam War ended on April 30, 1975. A good omen, since I identify myself as a pacifist. I am a biologist but I am passionate about politics, history and political philosophy. Writing about these topics, I got to journalism, precisely here on Havana Times. I consider myself a democratic socialist and my main motivation is to try to be useful to the positive change that Cuba needs.

7 thoughts on “An Insider’s Perspective to Cuba’s Private Sector

  • brew,
    Yes Canada!! Wonderful place. Lived there myself for a while.
    A perfect example of a Capitalist country who’s economic policies tend to roll more with Keynes than with Friedman.
    Thank you for illustrating my point so succinctly with this example.

    Hey, if only all Capitalist countries were like Canada huh?
    Then we wouldn’t have the tragic exodus of people from the bottom of the heap risking their lives fleeing all those failing Capitalist countries in the southern hemisphere.

    brew – perhaps you actually do think all Capitalist countries in the world are just like Canada??

    If so, then you may wish to stand in front of the mirror for a while and practice some Arnie impressions???

  • Sooke, Amen!

    The growth of Capitalism in Cuba will do some good and it will do some harm.
    The harm? One only needs to look at capitalist societies all over the world to see harm, if there is any.
    The good? Well, its nice living in Canada, safe, wealthy, clean, prosperous, etc. etc. How’s life in Cuba? the same as Canada?
    As Arnold says, “duh”

  • Until Capitalism in Cuba is openly legal, the Castro dictatorship will always hold a Sword of Damocles over the heads of entrepreneurs thus limiting the growth of their businesses.

  • The stifling of entrepreneurial-ism has long been one of the most harmful elements of post revolution Cuban reality. It is good to see the gradual and apparently begrudged changes that have occurred. There have previously been instances of the Cuban Government simply flicking the switch if things are progressing in a way which is too far beyond their control.
    It would be wonderful if Capitalism were some magic wand which brings love, peace and happiness to one and all. However, historical fact teaches us that this is far from the case.
    Sooke quotes the elfin, free-market fundamentalist, Friedman. This economist’s extreme ideologically-based recommendations have been proven to produce repeated catastrophe. How a USA based economic theorist had the bare-assed gall to come up with such BS in light of the 1926 crash and the depression of the 30’s was quite astonishing. But I guess he made plenty of money from his work and lived a very comfortable life. Far more comfortable than the gazillions who suffer at the bottom of the Capitalist pyramid.
    The biggest problem that Capitalism has faced is the onset of democracy. Ever since the advent of bottom-up democracy, the Capitalists have sought to out outmaneuver it. They have sought ways in which to circumnavigate democratic obstacles. The likes of Friedman rarely acknowledge such glaring facts.
    History will continue to show the overwhelming triumph of Keynes over Friedman. Keynes was far more in tune with the reality of how the world is rather than getting lost in fundamentalist dreams of how the world should be.
    Capitalism will inevitably grow in Cuba.
    Quite what form it takes is yet to be seen. It could follow a similar pattern to China and Vietnam. It could be oligarchical such as we see in places such as Russia or Ukraine.
    Or the whole thing could simply be swallowed up by US-based corporate giants like whales swallowing up plankton.
    Either way, I foresee Cuban Entrepreneurs having increased opportunity.

    The growth of Capitalism in Cuba will do some good and it will do some harm.

  • “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.”

    This is so true. For the sake of the Cuban people, lets hope it occurs sooner rather than later.

  • More efficient ways of production of goods and services are emerging in Cuba. Unfortunately, polarized ideological debate still persists: capitalism vs socialism; individual freedom vs common good. There is a need to get out of ideological boxes and to pursue the public good.
    There are ample examples of what works and what doesn’t. You can benefit from free markets if excesses are limited through progressive income taxes and inheritance limitations. The benefits of an improved economy will protect the benefits that Cubans have fought for – universal health care, education and other social services. Time for blinkered ideologies to end.

  • History suggests that capitalism is a necessary condition for political freedom.

    – Milton Friedman

    Capitalism is just another word for things we do together without being told to.

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