Cuban Regime Forced to Tolerate Private Enterprise
amid the country’s economic collapse
Interview with Ricardo Torres Perez, adjunct professor at American University in Washington DC, and author of the study: “Cuba’s Private Sector: Safety valve or engine of development?”
HAVANA TIMES – Private enterprise is a “necessary evil” according to the Cuban government. The regime has shown a steady lack of commitment to private business, even though the sector has been gaining ground on the State economy. That’s the conclusion of Ricardo Torres Perez, author of a study released August 9, entitled: Sector privado en Cuba: ¿Válvula de escape o motor de desarrollo? [“Cuba’s private sector: safety valve or engine of development?”]
The analysis, commissioned by the Cuba Study Group, made up of Cuban-American business leaders and young professionals in the US, reveals that the private sector already holds significant weight in Cuba, with over 10,000 cottage, small and medium businesses – known as “mipymes” in Cuba – registered in the past two years. This sector is already responsible for around 30% of employment on the island.
Nonetheless, private enterprise’s capacity for growth continues to be limited by a “glass ceiling,” imposed by the government’s lack of commitment to business owners, Torres asserted.
“Cuba is going through a profound economic crisis,” noted Torres, an adjunct professor at American University’s Center for Latin American and Latino Studies in Washington DC. He underlined the fact that the situation on the island provides few opportunities for these businesses to grow.
Income inequality among the population also reduces demand. “A good part of the citizenry, of the consumers, tend to concentrate their spending on essential products, with not much left over for buying other things,” he explained.
“Right now, there’s great uncertainty in the private sector, because the economy is drowning. Everything depends on the regulations of a government that isn’t committed to free enterprise,” he continued.
“There is no commitment, because the ideology that still prevails in the government views the private sector as a threat,” explained the author of the report, which was drawn from over a decade of data.
Torres described a panorama in which the government acts unpredictably, using raids, inspections, regulatory changes, price caps, and tax adjustments as tools for control.
The study emphasizes that although the private sector has filled gaps left by the state, especially in retail, transportation, and home services, it continues to be treated as a safety valve rather than an engine of development, because “growing the economy is not a priority,” Torres affirmed.
The author stressed that the relationship between the private sector and the government doesn’t depend on personal connections or favors, but on the ability of entrepreneurs to resist.
“I don’t see convincing evidence anywhere that the majority of the private sector are people who used to be in the government or who have formed a company through their connections with the government. It’s not that way,” he assured.
“The reality of most of the private sector is that, in the end, the Cuban government doesn’t want them, because it knows that the day [the private sector] is given free rein, the State economy will practically disappear,” he added.
In addition, Torres warned about the influence of external factors, mainly US policies, which also impact the private sector’s ability to grow. Financial restrictions and the lack of normal banking relations with the US make financing and international payments difficult, he said.
Added to this are recent changes in visa policies, which limit the ability of Cuban entrepreneurs to travel to the United States to seek business opportunities: “If they could manage to export at a given moment, they would double or triple their sales.”
The report documents how the elimination of tax benefits, price caps, and limits on the profitability of contracts with state-owned companies have further restricted the operating space for private entrepreneurs.
Torres noted that if the Cuban government could count on decisive support from powerful allies such as China, and to a lesser extent Russia, “it would adopt much stronger measures to limit the development of the private sector.”
Despite this scenario, the study also reveals the sector’s resilience, even though that doesn’t manage to translate into sustained prosperity. Although the sector generates employment and covers gaps in the market, its contribution to the GNP remains greatly below its potential, due to the internal and external restrictions.
The combination of the economic crisis, limitations imposed by the State, and the US financial embargo all serve to keep the Cuban business sector in a vulnerable position, Torres concluded regretfully.
First published in Spanish by 14ymedio and translated and posted in English by Havana Times.