Cooperatives and Cuba’s Economy Today

HAVANA TIMES — Since December 2012, the creation of non-agricultural cooperatives has been promoted in Cuba with the objective of decentralizing state management, achieving greater economic efficiency and generating tax revenues, a vital element of the country’s current social project, notes Rachel D. Rojas writing for Progreso Weekly.

In May, Grisel Tristá Arbesú, an official on the Permanent Commission for the Implementation and Development of the Economic Guidelines, told the press that 498 cooperatives had been authorized and that 246 of them were functioning.  Arbesu didn’t specify what happened to the rest, whether they have yet to begin operations or failed in their business efforts.

The sectors allowed under this type of association include commerce, food and other services, construction, transportation, energy and accounting services, etc.

At the June 21 meeting of the Council of Ministers, the ministers evaluated behind closed doors the developments in the economy during the first semester of 2014. Some between-the-lines reading of the published accounts and unofficial information indicate a possible relaxation in the process of approving the cooperatives, notes Rojas.

According to the text published in the official Granma newspaper, the policy approved by the Council specifies that “the establishments that provide food (restaurant), personal and technical services, as a rule, will be managed in non-state forms.” That, the report said, was a statement by Marino Murillo Jorge, chief of the Permanent Commission for the Implementation and Development of the Economic Guidelines.

But there is also another type of non-agricultural cooperatives, not derived from the existing state-run establishments. They are referred to by the government as “non-induced cooperatives” or “self-effort cooperatives.”

According to the legislation that regulates this type of association, the authorities must answer an application for acceptance of a cooperative within six months. Nevertheless, three cooperative creators contacted by Progreso Weekly say that they’ve been waiting for longer than that for an official response.

Statements by government officials suggest that the State intends to retain control of the management of telecommunications. It is known that the Ministry of Information and Communication, as the governing agency, has not approved any cooperative organized on its own. And that’s not for lack of applications.

Nor does the Ministry of Culture consider cooperative management, because, according to Deputy Minister Fernando Rojas, the ministry’s entrepreneurial model — cultural institutions raising their own revenue — “has shown to be successful.” Applying the logic of the cooperative “would create an unnecessary competition to something that has worked well,” he said.

The topic lends itself to speculation because, among other reasons, little information is available. The accounts by the media of the Council of Ministers’ session have been woefully insufficient, and the figures quoted cannot be compared or confirmed in any way. President Raul Castro’s full comments on issues that are vital for the future of the nation were not published.

According to economist Armando Nova, the National Office of Statistics and Information (ONEI) has not issued any data for the first semester of this year, the period on which the ministers’ analyses focused.

Besides, some of the figures reported are not encouraging. GNP growth is a weak 0.6 percent and the expectations for this variable were revised to 1.4 percent, whereas in 2013 the minister of the Economy and Planning, Adel Yzquierdo Rodríguez, had projected a growth of 2.2 percent, based on constant prices. And these are only the published data.

The causes cited by the minister of the Economy include “failure to obtain the foreign revenue planned for, the existence of adverse climate conditions, and the domestic insufficiencies that continue to affect our economy,” as well as a hostile international context and the economic blockade maintained by the United States against Cuba.

Over the last several years up through May 2014, Cuban authorities claim to have licensed more than 467,000 self-employed tax-paying persons, among them individuals grouped in cooperatives. However the government has never released figures on how many of these self-employed, including small businesses owners, have closed operations and returned their licenses. In most countries over half those starting micro and small business fail in the first couple years.

Analysts consulted by HT say the failure to specify the fate of those attempting to make a go in the private sector makes the figures on Cuba’s opening to small business almost irrelevant, making impossible any type of real analysis on their impact on the economy.

A question of interest is what happens to the self-employed who give up their licensees? How do they survive? How many of the self-employed are actually working for private businesses is another important question to understand the changes in the Cuban economy.

Economy and Finances minister Lina Pedraza told Granma newspaper that during the first year of application of the latest Tax Law, tax revenue from the private sector “represents 37 percent of the GDP and derives from the application of taxes, rates and fees.” On March 27, 2012, Marino Murillo said at a press conference that, by 2015, 40 to 45 percent of the GDP would come from the non-state sector.

Any verification of these figures is impossible do to the fact that revenues entering the state coffers are not made public, likewise the budgets of the government, institutions and state businesses. Bits and pieces of information are disclosed on occasion but not enough to grasp the bigger picture.