Business

Cuba dips toe in market economy with legalization of small businesses

HAVANA, Aug 13 (Reuters) – 1000’s of small and medium-sized Cuban companies shall be allowed to include within the coming months, in some of the essential financial reforms taken by the island’s Communist authorities because it nationalized all enterprises within the Sixties.

The reform, particulars of which got here to gentle this week, will allow small and medium-sized companies for the primary time since 1968, placing an finish to the authorized limbo through which many have existed for years within the Soviet-style financial system.

The regulation may even apply to small and medium-sized state corporations, paving the way in which for an essential decentralization of some actions and forcing sponsored operations to grow to be worthwhile or fold, in line with Cuban economists.

Within the meals service sector, 1000’s of government-subsidized eateries will both shut, grow to be cooperatives or flip into small companies, in line with a mid-level supervisor concerned within the course of who spoke on situation of anonymity. These it retains will grow to be small- and medium-sized state-owned companies competing with them.

Whereas there have at all times been personal farms and agricultural cooperatives in Cuba, many of the financial system was in state arms till the Nineties when closely regulated small companies had been allowed in a number of areas beneath the rubric of self-employment, limiting their legitimacy and authorized standing.

The brand new measures are a key a part of the financial reforms undertaken by new Cuban chief Miguel Diaz-Canel over the past 12 months, because the coronavirus pandemic and more durable U.S. sanctions pushed the shaky financial system right into a tailspin and shortages of meals, medication and different fundamental items reached alarming proportions.

Economic system Minister Alejandro Gil mentioned in a televised presentation Wednesday night the measures would put state and personal enterprise on an equal footing to compete, work collectively and create joint corporations, a lot as in capitalist nations.

“It’s a place to begin for a brand new stage within the diversification of the financial system and its improvement, to be able to take advantage of its potential,” Gil mentioned, including that the reform would increase employment and permit the financial system to rebound extra strongly because the pandemic eased.

MIXED ECONOMIC MODEL

Creation of micro, small and medium-sized (MSME) companies was fast-tracked upon approval in Could by Cuba’s Council of Ministers.

The brand new MSMEs will have the ability to entry the state wholesale system, import and export, set costs and appeal to overseas funding, however solely inside a state-dominated enterprise setting the place such actions will stay closely regulated, in line with numerous ministers who appeared with Gil.

Corporations are restricted to not more than 100 workers and people can solely personal a single firm, in line with a decree regulation revealed by the Council of State this month.

Nonetheless, it’s a welcome step for a lot of entrepreneurs and most economists who’ve lengthy referred to as for the reform.

“Cuba is shifting in direction of a combined financial mannequin, at the very least when it comes to employment,” mentioned Pavel Vidal, a former Cuban central financial institution economist who teaches at Colombia’s Pontificia Universidad Javeriana in Cali.

“With this opening, in a number of years the non-state sector will signify greater than 50% of complete employment within the financial system,” Vidal mentioned, including that “nonetheless rather more must be performed.”

Cuba’s financial system, which has stagnated for years, contracted by 10.9% in 2020 and declined one other 2% within the six months by June, in contrast with the primary six months of final 12 months. The financial system stays closely reliant on tourism and imports.

1000’s of individuals in cities throughout the Caribbean island took to the streets on July 11 to protest dwelling situations in what had been the largest anti-government demonstrations because the 1959 revolution. Diaz-Canel has blamed the unrest on the USA, saying protesters had been manipulated by U.S.-orchestrated social media campaigns.

The personal sector in Cuba has progressively expanded because the Nineties to embody greater than 600,000 self-employed license holders in lots of sectors and contains enterprise house owners and their workers, tradespeople and taxi drivers.

The so referred to as non-state sector, together with agriculture, gives work for a 3rd of the 4.9 million formally employed Cubans within the labor drive, with the rest working for the state.

Reporting by Marc Frank
Modifying by Daniel Flynn and Paul Simao

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