Details of Cuba’s plan to enable small private businesses for the first time since 1968

Thousands of Cuban small and medium enterprises, private and public, will be formed in the coming months to one of the most important reforms of the national economy Soviet style after having been closed since the late 1960s.

The reform, details of which were unveiled this week, will allow small and medium-sized enterprises to exist for the first time since 1968, ending a legal vacuum in which they have existed for years in the Soviet-style economy.

The law will allow public enterprises to operate as small and medium-sized enterprises, which means a significant decentralization of certain activities which will oblige them to make profitable operations subsidized or doomed to closure, according to Cuban economists.

In the gastronomic services sector, thousands of subsidized restaurants will have to close, become cooperatives or small businesses, according to a middle manager involved in the process who requested anonymity. If they are maintained, they will become small and medium-sized public enterprises which will compete with each other.

The new measures are a key element of the economic reforms undertaken by Cuban dictator Miguel Díaz-Canel, who enacted the law in 2020, when the pandemic and US sanctions brought down the already unstable local economy, amid shortages of food, medicine and other basic commodities that have reached alarming proportions.

“It is the starting point of a new stage in the diversification of the economy and its development., in order to make the most of its potential, ”Economy Minister Alejandro Gil said on Wednesday.

The Caribbean nation heavily dependent on tourism and imports. Gil said the measure was aimed at increasing employment and the use of local inputs in times of crisis, but especially recovery.

The Minister of Economy spoke on television about the new regulations to create micro, small and medium enterprises (MIPYMES) for the first time since the Revolution of 1959 and also on the promotion of cooperatives.

The measure puts all companies, public and private, on an equal footing to compete, work together and create joint companiesGil said, as in capitalist countries, although they are limited to no more than 100 employees and owners of a single company.

Mixed economic model

The creation of MIPYMES gained momentum after approval in May by the Cuban Council of Ministers. Among the new rules, companies can access the state’s wholesale system, import and export, set prices and attract foreign investment, but only in the still state-dominated business environment, where these activities remain strongly regulated.

Yet many businessmen and most economists have long called for reform. “Cuba is moving towards a mixed economic model, at least in terms of employment”said Pavel Vidal, a former Central Bank of Cuba economist who teaches at the Pontificia Universidad Javeriana Cali in Colombia.

“I have no doubt that with this opening in a few years the non-state sector will represent more than 50% of total employment in the economy,” said Vidal. And added that “There is still a lot to do”.

The Cuban economy, which has been stagnant for years, contracted in 2020 to 10.9% and fell another 2% in the six months leading up to June., compared to the first six months of last year. The economy remains heavily dependent on tourism and imports.

Thousands of people in Caribbean island towns took to the streets on July 11 to protest against the living conditions in the biggest demonstrations after the 1959 revolution. Dictator Díaz-Canel blamed the United States for the events, noting that the protesters were manipulated by social media campaigns orchestrated by the United States.

Although there have always been private farms and agricultural cooperatives in Cuba, the rest of the economy was in state hands until the 1990s, when they allowed small, heavily regulated businesses in some areas under the rubric of self-employed workers, limiting their legitimacy and legal status.

The private sector has grown steadily since to encompass more than 600,000 freelancers. licensed in many industries and includes entrepreneurs and their employees, traders and taxi drivers.

The so-called non-state sector, including agriculture, provides work for a third of the 4.9 million officially employed workers, and the rest work for the state.

(With information from Reuters)

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