Cuba’s Reforms: State-run Companies and the Private Sector

By Fernando Ravsberg

Raul Castro and his First Vice President Miguel Diaz Canel.

HAVANA TIMES — “Mistakes are mistakes, and they are our own mistakes, and if we are going to measure them against the hierarchy among us, these mistakes are first and foremost mine,” President Raul Castro told Parliament, referring to illegal activities picked up on in the private sector of the economy.

However, he warned the ultraconservatives not to try and use these problems “as a pretext to criticize a decision which is fair,” adding that “we haven’t given up on developing self-employment, nor are we stopping our experiment with cooperatives.”

He made a call to private business owners, hoping for “the support of the majority of citizens who honestly operate within this sector,” but he warned them “that the pace and extent of these changes” will be conditioned by the government’s capacity to do things the right way.”

The problem with independent laborers, cooperatives and small private businesses is that a part of their supplies come from the state-led sector. This phenomenon is called “the detour of resources” but it isn’t anything more than theft within State-owned companies themselves.

State theft dates back before the reforms process; in 2005 Fidel Castro had to use social workers to replace every gas vendor in the country, who were stealing millions. Photo: Raquel Perez Diaz

Those who are against the economic reforms blame private businesses from causing this drain but they seem to forget that stealing from the State is a practice that dates way back before the national economy opened itself up to private property, services and production.

The problem is really very old; in 2005, Fidel Castro carried out a spectacular nationwide campaign when he discovered that a large part of fuel supplies were being diverted to the black market.

If we took the private sector to court, they wouldn’t even be able to accuse them of theft because the thieves work within public companies. Nevertheless, self-employed people commit the crime of receiving these stolen goods, buying them on the black market.

A recent example is that of employees at a state-run store in Trinidad who stole almost $5 million USD in cement. Over 50,000 sacks of cement disappeared; they created a fake shortage and forced everyone to buy it from resellers.

To stop this hemorrhage of resources, a bit of order needs to be established within public companies, if the level of stealing is reduced, the black market can’t exist. However, breakthroughs are fleeting in this field, sometimes because the corrupt and incompetent are “recycled”.

Another much-needed step is to ensure that the private sector, in all fields, has access to the supplies it needs. It’s the Cuban authorities themselves who promote crime when they allow carpenters or body shops to exist when they don’t sell wood or sheetmetal.

It’s true that the self-employed buy stolen goods but these always come from company warehouses owned by the State. Photo: Raquel Perez Diaz

Not all private companies are angels; there are bar owners who make 20,000 USD in profits per month and buy alcoholic beverages which are stolen from the State companies. Likewise, there are those who own several private taxis and make a lot while buying their diesel off the black market.

The subject of the “botero” (collective taxi drivers) is a good example of poor government administration. Chaos was inevitable if they didn’t allocate routes to them; if they don’t demand operation frequency; if buying fuel legally isn’t made compulsory, or if they don’t make spare parts available to them.

Money laundering also could be better controlled so that investigations don’t start when illicit money has already been used to found three restaurants and to buy several homes. Whoever wants to invest should have to show the origin of their financial resources a priori.

The State can seem like it’s an abstract entity but it is much more than this, it’s the apparatus that uses society to self-regulate itself, to establish laws of cohabitation and to force us to respect them, to redistribute wealth and invest money for the common good.

It isn’t about taking the State out of the social equation like “worshipers” of the free market propose so that later, when the crisis comes, they can demand the government of the hour to use everyone’s money to rescue their banks and large companies.

Allowing carpenters to work and then not selling them wood is pushing the self-employed to commit crimes. Photo: Raquel Perez Diaz

It’s about the State playing the function it’s supposed to play: establishing the rules of the game, efficiently managing modes of production which are under its control, drawing up tax policies, simplifying paperwork, establishing sanitary regulations, applying the labor code, controlling where money comes from and ensuring safety for its citizens.

Today, however, some officials spend their time arguing about the exact size a private business billboard can be, while public companies put everyone in danger when they refuse to give fire sprinklers to private businesses.

The President’s self-criticism was correct, the State hasn’t been up to the economic changes, bureaucracy weighs down on it, their prejudices against the private sector, the centralization of their decisions and the old mentality that it has to control everything down to the last detail instead of focusing on what’s important.

5 thoughts on “Cuba’s Reforms: State-run Companies and the Private Sector

  • “The problem with independent laborers, cooperatives and small private businesses is that a part of their supplies come from the state-led sector. This phenomenon is called “the detour of resources” but it isn’t anything more than theft within State-owned companies themselves.”

    Any theft by the State owned companies from the State doesn’t matter as the profits go back to the State. It’s the State. If the private businesses steal things from the State then that’s unfair as the private businesses will be making profit for themselves.

    It’s the same old Capitalism vs Socialism argument.

  • It’s refreshing to hear a govt admit mistakes and a desire to improve. We in the US NEVER hear politicians admit any of their many grievous errors, they ALWAYS just double down or blame others. And the graft and deception, while found in all societies, rich or poor, to some extent, in the corporate capitalist system, and in the US specifically, it is magnitudes greater than others, and it is completely accepted by insiders. So for the politicians to maintain the levels of graft they’ve come to expect, while cutting tax cuts for their corporate benefactors, means less money in the budget for social services.

  • The systems of the world could take lessons from the Cuban liberation as history repeats itself here where I am. As an example : The trade unions here are terrible , my story goes back to a workplace injury which was actually an attempt on my life. The bastards were caught deliberately damaging most important safety equipment prior to new installation in a highly explosive enviroment and its purpose was the final fail safe to ultimate catostrophic plant failure in the oilsands. My partner and I had been in charge of the pre-equipment inspections and maintenance in an storage facility and had been doing our due diligence over half a year and had caught and reported the worst kind of criminals I nick name the union assholesintheocean .
    My assailant approached me from behind and was a young man but a prize fighter , they arranged to have convienient witnesses and worked the system like pigs and should be served the same as pigs.after the cowardly attack. The superintendent used the witnesses to defame me and denied me any medical treatment , which I greatly needed as any fighter knows 15 heavy blows to the back of my head and kneck causes severe concussion and bleeding of the brain , even if the medic would have put a light to my pupil this injury would have been recognized and aprotocal could have been administered. Further to that the administration used all the phony worker statements and did not give me any statement for the investigators who did after months and no actual investigating did take place because this district is over run with a reigion of a secret society who act like nazis even administering sex change on children before puberty , I congradulate Donald Trump for vetoing that idea in his country , straightness is greatness.
    Anyway , following that injury eventually thanks to GOD I was given an interview with some authorities who were of that religeon who built stone fortresses and killed popes in evil days of the world. They acted as the always do here poorly and deliberately to derail my claim . A threat to my life was even made by the lawyer because they did not want to be found out . for the next 14 years I have been in a running battle with the ua to complete there mission to silence the last witness. My partner is deceased long ago . Many attempts have been made and documented by me but the unions always cover up with there religious friends at the highest seat of power.
    That said yesterday I finally got the file reopened despite the most recent threat which was carried out on me , an explosive device that I documented after it was defused . The unions covered that up to and are in control of the government led by a she devil.
    What is a good one to do , my capaneros are aware, the health providers agree I am suffering from brain anthropy and kneck seizures along with wiplash wich was noticable 2 days after the attack.. The brain injury has made me sad sometimes , angry most of the time and I may panic easily . Further to this I finally gave my account to my doctor after getting counselling because my wife of over 30 years loved me enough and I never broke my vow to God so we have a holy union under God and he is with me to this second.
    The point is stay the course , defeat the criminal bastards , the Great president Donald Trump is wishing his country was as safe for the walking the streets as it is in Cuba. By the way they really should pay war reperations it is the best solution , if you want I could help negotiate with him , the british should also pay reperations to Canada and the indigeounos people including Russian could be freed at last from their apartied, that would keep the monetary balance too you know. Meanwhile I will continue to hold the high legal ground and stay out of the heavy truck jam sandwich they are serving me here.
    Thank you God I love you

  • Just for the record, let us record the “illegal activities” to which Raul Castro is referring. He personally listed them on July 7th, 2013, but now apparently is accepting that they are a consequence of his own (and no doubt BIG BROTHER Fidel’s) mistakes. He said:

    “Thus part of society has come to see theft from the state as normal. There has been propagation of illegal constructions with relative impunity moreover in inappropriate sites, non-authorized occupation of housing, illicit marketing of goods and services, non-fulfillment of working hours, illegal cattle rustling and slaughter, capture of marine species in danger of extinction and utilization of the art of fishing, felling of forestry resources including in Havana’s magnificent Botanical Gardens, the hoarding of products in short supply and of bribes and their resale at higher prices, participation in games outside the law, price violations, the acceptance of bribes and privileges, preying on tourism and infraction of established regulations related to informatics security.”

    Such a litany of social misbehaviour in a long established communist society!

    Previously, Raul (and BIG BROTHER) held the citizens responsible for the consequences of their own policies, so it is refreshing to hear of Raul accepting responsibility. BIG BROTHER Fidel never achieved such humility which his arrogance forebade, he blamed the citizens whom he variously described as:
    “Criminals, lumpens, anti-social elements, loafers and parasites”.
    and more simply as:

  • A lot less theft would take place in a rational system. The state has an opportunity to whole sale goods and regulate the retail trade way more efficiently than trying to do it all.

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