Cuba’s Urban Cooperatives: Hard to Receive Approval, Difficult to Grow

By Gisselle Morales Rodríguez  (Progreso Weekly)

The La Esperanza cooperative in Fomento, Sancti Spiritus.

HAVANA TIMES — Last February, when 83-year-old veteran military leader Ramiro Valdés Menéndez visited the urban cooperative La Esperanza [The Hope] in the city of Fomento, the 11 partners had great expectations.

The vice president of the Councils of State and Ministers was interested in the manufacturing of plastic tubing and took a tour of the factory.

He watched the workers at their stations, rummaged through the raw materials, talked with Julio Ramón Cermeño, the man who invented each one of the machines in use, assessed the quality of the hoses just made, and was dazzled by the so-called “plastic wood,” a secondary product of the small factory.

Two months later, another vice president of the Council of State, Salvador Valdés Mesa, made the same tour of the tubing factory, a gesture that its workers interpreted as a show of governmental support to the incipient cooperative. Today, however, they’re not so sure.

“Ever since Commader Ramiro’s visit, we’ve been asking for permission to expand the factory, because — obviously — we’re running out of space here,” said Yoel Torres Hernández, president of La Esperanza, while guiding this reporter past the boxes of raw materials, the rumbling machines and the rolls of hosing ready for shipment.

He’s trying to prove a point: the place is overcrowded. “And after all this time, they’ve still not given us an answer,” he adds.

Torres explains the inconsistency with a thought that he has mulled after innumerable consultations with fellow entrepreneurs in other parts of the country.

“Urban cooperatives are trapped in a dual discourse. On the one hand, we are told that the process of development of our kind of enterprise is irreversible, and on the other hand we’re tripped every day with arguments like ‘this won’t work,’ or ‘what do you need this for?’”

Torres’ experience is repeated — with slight variations — in the almost 500 cooperatives that were legally operating in Cuba by late May, 500 small businesses that have embarked on their own to sail through the so-called “experimental phase” of cooperative labor.

Neither state-run nor private

“We haven’t invented a thing. It’s all here,” Torres explains, waving a copy of the Guidelines of Economic and Social Policy of the Communist Party and the Revolution, approved in April 2011.

Ramiro Valdés Menéndez visits the cooperative.
Ramiro Valdés Menéndez visits the cooperative.

From the start, the document states that “this model of management recognizes and promotes — in addition to the socialist state enterprise, which is the main form in the national economy — the modalities of foreign investment permitted by the law […] the cooperatives, the small farmers, the owners in usufruct, the leasers, the self-employed workers and other forms of employment that, as a whole, should contribute to elevate efficiency.”

Nevertheless, one year and seven months went by before, in November 2012, the Council of State issued the governing documents: Law/Decree #305, cornerstone for the operation of urban cooperatives and Law/Decree #306, which deals with the special Social Security coverage granted to cooperative members.

It took just as long for the Council of Ministers to approve Decree #309, a sort of manual for first-level cooperatives.

Those are the guidelines for the more than 2,300 co-op members who, according to the National Office of Statistics and Information, have opted for this form of employment, a kind of hybrid between the private sector and the state enterprise.

Perhaps because this new labor modality is still in development, the nation’s leaders have been watching with a magnifying glass every aspect of the process.

At its most recent session, the Council of Ministers officially acknowledged the flaws that many cooperative workers had already pointed out: the difficulty in accessing supplies by legal means, and the trend toward a constant increase in the prices of services and products, especially in farmers’ markets and the restaurant sector.

Without approving the much-requested wholesale markets that would guarantee stable supplies for the non-state sector at competitive prices, thus preventing inflation in the cost of merchandises and services, the Council of Ministers decided “not to massively expand the creation of cooperatives. The priority will be to consolidate the existing ones and move ahead gradually, because otherwise we’d be generalizing the problems that come up.”

A full-sail experiment?

“It’s like stepping simultaneously on the accelerator and the brake.” That’s the description given by a member at La Esperanza of the crossed fire in which he believes his company now finds itself. La Esperanza is the only urban cooperative in Cuba devoted to the manufacture of garden hoses, tubes for electrical and sewage use, and a long etcetera of plastic devices.

Judging from the indicators, everything shows that the business is going well. Last year, the members received an average wage of 5,000 pesos a month ($189), between advance payments and final profits (around nine times the average wage in the country.) By the end of April this year, they had also paid the equivalent of US $20,566 in taxes.

The factory maintains an adequate tax discipline and meets its debt payments to the bank, according to a report made by the provincial government to which the press had access.

In addition to the performance of the seven urban cooperatives now in operation in Sancti Spíritus, that document lists more than 10 applications from similar groups sent to the ministries of Construction, Communications, Industry and Transportation for approval.

“In general, we consider that the cooperatives have contributed to elevate the quality of productions and services,” says Roberto Fajardo Veloso, vice president of the Council of Provincial Administration, which oversees the program of economic and social development.

cooperative5jpgFajardo cites figures to buttress his belief. During 2014, the non-state sector contributed 63 million pesos (US $2,377,358) to the national budget, “and this year it will be more,” he adds.

Among the problems identified by the local government is the fear of many state-run businesses to enter into contracts with these associations. Then there’s the urgent need for a wholesale market.

And a new concern has arisen: the possibility of tax evasion. Provincial government authorities now devote 30 percent of their supervisory activities to a rigorous examination of non-state enterprises.

The insistence on close control may have been caused by three radical events:

A refusal of the Ministry of Transportation to recognize an association engaged in the rental of bicycle-taxis, inasmuch as that activity falls under the designation of self-employed entrepreneurship.

The rejection of an application from a cooperative engaged in the manufacture and installation of electric motors that didn’t submit guarantees of its supplies of raw material.

The suspension of the Lapinet Construction Company, the first cooperative of its type to operate in Sancti Spiritus, which according to government sources, committed “legal irregularities.”

Little willingness to negotiate

Out of 300 state-run companies and 20-some cooperatives that participated in the “Second Fair of Conciliation and Fidelity to the 2016 Plan”, La Esperanza stole the show with its display of plastic wood.

“We detected a 20-million-peso demand for that unique product, a demand we cannot fill and are renouncing,” says co-op president Yoel Torres with pain in his voice.

“To deal with that production volume we need machinery, which could come from other industries that are not using it. But the State businessmen are shutting us out. They say that they can’t lease it or sell it to us. They say that they have to wait for approval ‘from above.’ We can’t move ahead that way.

“To increase the production of plastic wood we could turn to foreign investment. The law takes cooperatives into account and gives them their space. However, we applied for a partnership with a Mexican company and the response from the [Cuban] Ministry of Industry was that the procedures for implementation are not yet ready.”

“How do you appraise the development of this form of business?” I asked Torres.

“It’s however anyone wants to view it. I see the processes as slow. They say it’s necessary to speed up production but we’re hog tied. Every time I go to a meeting of cooperatives, I hear the same thing. In Sancti Spiritus — and in the rest of the country, I believe — there is a lack of willingness to negotiate, to agree,” he answers.

The Council of Ministers seems to agree with that opinion, because it amended Law/Decree #305 and Decree #309 so as to adjust the rules to the current circumstances, although suspicious minds may have interpreted the official statements as a sign of retreat.

Just in case, Torres pinned to the door of his office a kind of prescription that his associates are calling The Ten Commandments. The last item reads: “You cannot help men permanently by doing for them what they could and should do for themselves.”

“Abraham Lincoln said that,” he says proudly, without realizing that it was actually the Rev. William J. H. Boetcker who published the so-called Decalogue of Prosperity in the early 20th Century, and that there is no way — no matter how hard plastics manufacturers may try — to adjust that precept to the very peculiar economic model that Cuba is trying out today.

34 thoughts on “Cuba’s Urban Cooperatives: Hard to Receive Approval, Difficult to Grow

  • June 22, 2015 at 7:42 am

    And this is where our conversation comes to an end. It is apparent that you live in your own private eco chamber with very little understanding of economics or military (I mean my God man….even China asserts they don’t have a blue water navy!). Simply repeating your statements over and over without any proof doesn’t make them true, it just makes it a “proof by assertion” fallacy.

    So let’s bring this conversation around back to the beginning ….When biology has it inevitable way with the Castro’s, Cuba will go one of two ways, either a Scandinavian style Capitalist / Socialist model or an authoritarian Capitalist model similar to China’s. Let us hope it is the former.

    I leave you in the twilight of your Castro fever dream

  • June 21, 2015 at 8:57 pm

    Finally, a some-what adequate response…Now that you have finally deemed appropriate to answer some concrete points, let me first point out that China owns or has controlling interest over a large chunk of the USA Economy, buying shares in USA Stock Exchanges (and in EU Stock Markets also) and buying non-strategic companies and real state all over the country. Wikipedia figures do not account for many of these investments because they go as part of the USA (or EU) Economy; you wrote off the BBC on your own authority to prove your point and Bloomberg figures are tainted by provenance because they emanate from a right-wing source. Also, notice I said Economy not GDP (Gross Domestic Product); but let’s not split hairs, China is today at least as powerful economically and militarily as any of the other 3 superpowers: the EU, USA and Russia. They have grown this Economy on a Free Market basis under the control of the Communist Party. This is precisely what has to happen in Cuba before the Economy can take off. I fully support more privately owned small business and medium sized business co-ops all over Cuba to begin with, with more development as trade with the USA increases and the Blockade comes down.
    Thank you for saving a significant portion of our culinary cultural heritage in Miami, as soon as Cubans in the Island can afford such delicacies, after the Blockade comes down, they will be asking their relatives for recipes. I also hope Cuban-Americans invest millions on business’ in the Island through their relatives and actually return to run them with all the knowledge you all picked up in Yuma. And this is precisely why I want the CCP in charge of making biz work for Cuba, for the benefit of our people on the Island, not just for a relatively small upper class and/or foreign economic interests.
    What can be wrong with taking back the $ Uncle Sam stole from us Cubans, Canadians, Latin Americans and the people of the Caribbean in whatever way, and why should that be a problem for me or of any consequence to the discussion? I don’t dispute your immigration figures at all, people go where the $ is (USA, EU, Australia) and not away from it; and alongside there is the Hollywood Dream Machine fomenting both the legal and illegal brain and human resource drain that you mentioned. There is an old saying in the Southern USA that “Chickens come home to roost”, the USA has laid eggs of misery, poverty, exploitation, abuse, war and murder all over the world, these have hatched and the chickens are coming home in record numbers. I am also glad to see you are using the automatic spelling option or am I talking to # 3? See, I taught you something…(joke).

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