All unprofitable state companies to undergo special audit

Photo by Remy Gieling 

21st March 2022

Cuba’s leadership has launched a process that will analyse on a company-by-company basis why state enterprises projecting losses for this year have done so, and see measures introduced to reverse the situation. 

Announcing this to a meeting involving company representatives, President Díaz Canel said that it would be necessary for each loss-making enterprise to prepare for the audit and have ready their best talent to respond on how they intend to move forward.  

According to Deputy Prime Minister, Alejandro Gil, the Head of Economy and Planning, the process will begin rapidly, starting with state companies projecting losses for 2022, and then move on to those not forecasting such an outcome but which are expected to be loss making. The process, he said, will conclude before the end of May and result in the presentation of a final report that will detail the outcome, the measures to be taken, and the deadlines for their execution. 

To this end, Gil said, temporary multidisciplinary working groups will be formed that will include representatives of the Superior Business Management Organisation (OSDE), the University of Havana, the National Office of Statistics and Information (ONEI), and the National Association of Economists and Accountants of Cuba (ANEC). Others to be included are representatives of state business and the unions in the form of the CTC. Similar working groups are to be established in Cuba’s 15 provinces and the special municipality of Isla de la Juventud. 

The announcement of the extraordinary audit follows a presentation by Gil indicating that while many state companies were exceeding projections in relation to profits and sales and are close to expected levels of exports, more than 400 state companies planned to operate at a loss this year. According to Cubadebate, Gil told the meeting that financial statements captured in January by ONEI had shown that of the 1,232 entities that had reported (273 had not done so), 1,178 were from the state system, and of the 457 companies ending the month with losses, 446 belonged to the state business system. 

Observing that “446 is an astronomical figure” and that just 16 enterprises accounted for 50% of the losses, Gil said that 93% of the loss-making  state companies were concentrated in agriculture, the sugar industry, the food industry, construction, transportation, and local subordinate companies. He indicated that the losses involved amounted to more than CUP12.6bn (US$525mn). 

Planning for losses, he was quoted as saying, “is a strategy that cannot continue” because the design established for the state business system required it to be efficient and to operate “with reasonable, fair profits”. Unprofitability, he added, stood in opposition to the measures government had adopted, requiring the state business  sector to be productive, efficient, and autonomous.  “This has to be a year of transformation of the state company”, he said. 

In his reported remarks, Gil made clear that solutions will have to be found through cost savings and will avoid problem solving involving transferring losses and costs to prices. Explaining that any such an approach would have an inflationary impact, he said that increasing prices would not guarantee that state companies remained the countries principal economic actors. All socialist state companies must now provide favourable results to the economy, he said.

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