What Lessons Does 2024 Leave the Private Sector in Cuba?
By Glenda Boza Ibarra (El Toque)
HAVANA TIMES – In December 2023, during his speech to the National Assembly, Prime Minister Manuel Marrero Cruz promised that in 2024, the “mechanisms for supervision and regulation of the governmental control system over the private sector” would improve.
“This will be beneficial for the economy,” he assured the deputies. However, a year later, they were informed that the results of these “mechanisms” had not been satisfactory.
In 2024, Marrero confirmed that the private sector in Cuba is a “necessary evil.” Although the government insists that there is no “witch hunt” against the private sector, the year demonstrated how the State shifts responsibilities to entrepreneurs only to later blame them for the crisis.
The government’s policy of throwing stones and hiding its hand has also influenced public perception. While many goods and services are sustained today thanks to the private sector, some people see entrepreneurs as “the villains”: imposing “abusive” prices, hoarding dollars in the informal market (thereby influencing the exchange rate), and evading electronic payments without assuming social responsibility toward their communities.
This narrative, supported—and even eagerly promoted—by the government, often deflects attention from its own responsibility for scarcity, inflation, and the overall crisis. Criticism of the “new economic actors” conveniently ignores that they emerged in a context of precariousness created by the system itself and have had to fill the gaps left by the State’s insufficient offerings.
A Year of Prohibitions and Restrictions
Rather than greater openness and flexibility for micro, small, and medium-sized enterprises (MSMEs), self-employed workers, and non-agricultural ooperatives —2024 was marked by resolutions and decrees that mostly imposed tighter control over the private sector.
“It’s not persecution, but regulation,” declared Roberto Morales Ojeda, secretary of the Communist Party, during its recent IX Plenum. However, this is not the perception of economists and entrepreneurs, who have seen government policies complicate the private sector’s functioning.
On January 25, 2024, the Ministry of Finance and Prices published Resolution 7/2024, reducing import tariffs by 50% for raw materials and intermediate goods for agricultural and food production.
Although this aimed to reduce costs, the increase in the exchange rate from 1 USD = 24 pesos to 1 USD = 120 pesos drastically raised import costs, effectively nullifying the “benefit.”
Some economists warned that this measure could lead to a general price increase, adversely impacting consumers. Indeed, inflation continued to rise, despite official figures claiming a “slow deceleration” by October.
Nevertheless, the measure succeeded in generating State revenue. According to Prime Minister Marrero’s report, over 3.4 billion pesos were collected by applying the 1 USD = 120 CUP exchange rate for tariff calculations on imports.
The 50% reduction was not the only government measure to stimulate the importation of raw materials instead of finished products. In November 2024, the Cuban government established a tariff exemption for importing essential raw materials such as fertilizers, pesticides, and animal feed, with the aim of boosting agricultural production.
However, these measures were introduced in the context of a prolonged crisis, where farmers face shortages of supplies, high foreign currency costs, and low state farm purchase prices.
Although this exemption is expected to lower production costs and, consequently, food prices, many experts believe that the reforms are insufficient to address the structural problems of Cuba’s agricultural sector.
One of the main criticisms of the private sector in 2024—from both the government and the public—was its resistance to electronic payment systems.
More than 55% of fiscal accounts in the private sector remained at zero, prompting authorities to launch a campaign to identify tax evaders and collect outstanding debts.
Between July and December, debts totaling 6 billion pesos were identified, and travel restrictions were imposed on over 9,000 entrepreneurs with debts exceeding 1.2 billion pesos.
While tax evasion is a common issue worldwide, in Cuba, it is exacerbated by a fiscal and banking system that imposes restrictive conditions and fosters mistrust among both citizens and entrepreneurs.
Price Caps
On June 28, 2024, Deputy Finance Minister Lourdes Rodríguez met with private entrepreneurs to discuss price caps and tariff exemptions on six basic products: sausages, powdered milk, pasta, detergent, chicken, and cooking oil.
The measure, implemented shortly afterward, limited private sector profit margins to 30% and was criticized for failing to account for real import and transportation costs. Six months later, the government had not adjusted the capped prices, as initially promised.
The most visible consequence of the retail price cap was the disappearance of these six products from retail shelves.
Wholesale Trade Restrictions
One of the most controversial measures of 2024 was a decree introduced in August. It imposed restrictions on sectors such as forestry, manufacturing, commerce, and cultural activities, drawing criticism for limiting production and economic diversification.
The decree mandated that MSMEs and cooperatives engage in wholesale trade exclusively through contracts with State entities.
In November, the Ministry of Domestic Trade followed up by canceling all wholesale commercial licenses granted to the self-employed and secondary activities of other private businesses.
Officials argued that State enterprises had the necessary infrastructure and experience, but entrepreneurs criticized the inefficiency of State-managed supply chains, citing frequent delays, disorganization, and financial losses.
Furthermore, there is concern among some businesspeople that the measure will primarily benefit the state and limit the financial operations of the private sector by requiring payments through transfers in contracts.
Despite this, others believe they may find ways to operate without direct state intervention affecting their management.
Widespread discontent and business closings
The restrictions and lack of support have fueled dissatisfaction among entrepreneurs, many of whom are closing their businesses or liquidating assets to emigrate.
Others struggle to adapt to the uncertainty surrounding policies and the energy crisis affecting their operations.
Leaked recordings from various meetings reveal widespread frustration among entrepreneurs, who are increasingly vocal about the worsening economic conditions.
Meanwhile, the government openly uses fiscal policies to reduce its deficit and leverage private businesses to boost the State economy.
Amid foreign currency shortages, the government seeks ways to capture the dollars currently circulating in private sector exports and imports, bypassing State-controlled financial institutions.
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First published in Spanish by El Toque and translated and posted in English by Havana Times.
These government economic half-measures that are intended to regulate positive entrepreneurial behaviors have the opposite effect. For example, trying to force private businesses to effect money transfers electronically only serve to encourage further off-the-books accounting practices. As pointed out in the post, tax evasion is a universal problem. But in Cuba, the half-measure of imposing higher taxes without offering offsetting incentives to private businesses only encourages cheating on the amount of taxes private businesses should pay. It would seem that the Castros approach to regulating the “necessary evil” private businesses is a lot like being almost pregnant. It makes no sense.