Is Cuba’s Private Sector Heading in Reverse?

By Nery Ferreira  (Progreso Semanal)

Photo: Nery Ferreira

HAVANA TIMES — Last December, when the Cuban government advanced the last details of the new regulations (which still need to be approved) for self-employment and non-agricultural cooperatives, I’m sure many Cubans remembered the sad end of the thriving private sector in the late ‘90s. During that time of the so-called “Special Period” crisis, the dynamic boom of entrepreneurs languished between restrictions and the State’s regulatory authorities’ excessive control.

Of course, the landscape is different now. This time, independent labor is even being recognized in official documents for the current economic reforms process, the will of the country’s top leadership is even different this time. “Private modes of production won’t go backwards, nor will they come to a halt,” these have been President Raul Castro’s words on more than occasion.

However, a different intention with outcomes that could be similar to those experienced in the ‘90s, can be noted in the changes announced at the end of 2017 to “tackle illegal activities and violations of the current law in force.”

Marino Murillo, the head of the Permanent Committee on the Implementation and Development of the Communist Party economic guidelines, has announced that only one license will be authorized for each type of activity. According to the regulations in force since 2013, Cubans could work in different professions at the same time, “as long as they meet and abide by the law.”

Marino Murillo the head of the Permanent Committee on the Implementation and Development of the Communist Party economic guidelines.

Even though the former Economy minister didn’t explicitly say it, it seems that the measure is looking to prevent some people from concentrating too much wealth. This would be reasonable and in keeping with the socialist project that is being built in Cuba… if there weren’t mechanisms already in place to regulate incomes, such as taxes.

However, the most worrying thing about the license suspensions is that illegal work might spread again. For example, let’s think about someone who rents out their hallway, but also wants or needs to rent out their ‘50s Chevrolet or open up a cafe or even sell peanuts.

Another reason for this new restriction might be that the future law will group related activities together. Seven related to beauty services, 10 for different kinds of repairers and 12 traditional  crafts jobs from the City Historian’s Office, to name a few, said Marta Elena Feito Cabrera, the First Vice-Minister of Labor and Social Security.

While this “reduces the current dispersion and improves the reach of professions”, which is “a great adjustment”, in Murillo’s words; it also warns of tax changes, which will put those who only want to work in one of the many grouped together variants at a disadvantage.

To give just one example, there is the traditional barber who is present in nearly every neighborhood, explains bookkeeper Darien Garcia. Why does he need to take out a more expensive license if he only wants to cut hair? he asks. Now, the license for this barber also includes hairdresser, manicurist, make-up artists and another two professions which are also related to beauty services.

Logic points out that this will save people red tape in the future if they ever want to expand their business.

Private restaurants known as “paladares” are one of the most successful types of private businesses. New licenses are suspended. Photo: Juan Suarez

In any case, inconsistencies with this confirm what many experts have already been recommending for a while now: the need to create a negative list. That is to say, set out the activities that the State isn’t interested in being carried out by the private sector, without holding back the Cuban people’s inventiveness.

Nevertheless, instead of this list expanding, it is shrinking. As a result of the abovementioned grouping of activities and the suspension of others, there will only be 122 licensed activities, compared to the 201 that exist today.

Part of the good news seems to be that renters can provide rental services to state business entitities. Plus, bars have been made official, which are very popular and in high-demand today but still operating under a restaurant license, “stemming from a misinterpretation in the service that they could provide,” Feito Cabrera admitted.

In the new job category, Murillo says that what constitutes a bar is defined and that the open hours need to be authorized by the Municipal Council. Let’s hope nightlife is a properly understood term and that its interpretation doesn’t stifle some towns’ nightlife.

A bird without wings?

Furthermore, in wanting to “rectify any deviation that is leading us away from the chosen path,” as Raul pointed out, the regulations for non-agricultural cooperatives (CNAs) will also be tweaked.

Attention, only 429 non-agricultural cooperatives remain in the experiment, according to Murrillo. It is expected, then, that Cuba won’t have any more new cooperatives in the near future.

The former Economy minister explained that under the imminent law for such cooperatives “they won’t be able to work outside of the province where they have their legal residence”, as they only exist to drive local development.

Board members of Scenius an accounting cooperative that was closed down by the government. File photo: oncubamagazine.com

In tune with Darien Garcia, who has done the books for many cooperatives, such a measure will imply a serious restriction for many young companies. He cites the case of two companies which have been approved by the Industry Ministry. One of them is dedicated to repairing a specific kind of sewing machine, while the other focusses on scales.

Is there a single province that has enough machines for these cooperatoves to be profitable? The reality is that up until today both these companies are forced to offer their services to different provinces in order to have enough work.

The same thing happens with so many the coops that specialize such as mountain sports, servicing specific air conditioning units, renting and putting up scaffolding and renovation equipment. Many are the only of their kind in the entire country.

And there are more contradictions because the majority of the building sector’s cooperatives are found in Havana.

This disparity is replicated in the geographical distribution of cooperatives too. The National Office of Statistics and Information reported that at the end of 2017, 269 out the 439 that exist were found in Havana, 68 in Artemisa, 19 in Matanzas, while the rest of the provinces barely have 14 each (there are only 2 in Las Tunas).

On the other hand, it was made public that this discussed resolution will set out how many members and laborers an urban cooperative can have, and that the number of members will be limited, while wages between the cooperative member who earns the least and the most can’t be more than three to one.

Murillo explained that the purpose of this is to regulate the distribution of wealth, so that nothing happens like the case where the president earned 37,000 pesos and a member only receives 3,000, which is typical in private companies.

Then, why are false coops popping up? In Garcia’s opinion, cooperative training is still weak, and there’s another just as important factor in play here. “Today, when a Cuban wants to open up a private business they can’t obtain legal status as such, nor do they receive tax breaks, or access to the limited wholesale market.” They are just classified as self employed workers.

That’s why they normally emigrate to cooperative movements, but with the mentality of a small business, he adds. There must be very few non-agricultural cooperatives which truly respect the principles of this mode of production, bearing in mind the fact that these are sometimes used as a pretext due to their tax safeguards, he concludes.

The truth is that opening up the Cuban economy to different modes of production has served to drive the need to work. It’s worth pointing out that nearly 68% of people employed in the private sector have no previous employment ties, and they found a way to satisfy their needs and their family’s needs with this mode of production, thereby fulfilling themselves as individuals and gaining independence.

On the government’s Cubadebate website, an Internet user poses the following to decision-makers: “Talk to entrepreneurs and listen to their concerns; create a debate; don’t impose your opinions, do your math and if necessary, make adjustments. But, don’t continue to hold us back or close the doors to us, at the end of the day, we are all people.”

Meanwhile, another forum user sums it up perfectly: “I strongly believe that socialism should fear poverty more than it fears wealth.”



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