15 September 2025
Recently published official figures indicate that Cuba’s non-state MSMEs have begun to make a major economic contribution in consumer related sectors and services despite severe bureaucratic and regulatory impediments. However, according to a recent report by the US-based Cuban academic, Ricardo Torres, the sector continues to be seen by Cuba’s political leadership as “a necessary evil.”
Preliminary information published in late July by Cuba’s Office of National Statistics (ONEI) makes clear that, possibly for the first time since the Cuban revolution in 1959, Cuba’s private sector now accounts for more retail sales by value, meeting in 2024, according to ONEI, demand for some 55% of retail goods and services, a figure up from 44% in 2023.
The change is observable in the wide variety of products now on sale in informal markets – often at high US Dollar or Euro related prices – compared to state retail outlets that increasingly are only able to offer a limited variety of goods because of government’s lack of foreign exchange to import such products.
Provincial reporting and government statements additionally indicate that Cuba’s embryonic private sector is now playing an increasing role in turning around the fortunes of some productive and export-oriented state enterprises that have been able to identify and receive approval for entering into cooperative public-private ventures.
Emphasis now on localised state control
In a recent address to the Economic Affairs Commission of the National Assembly, Mercedes López, the President of the state-run National Institute of Non-State Economic Actors, made clear the growing fiscal importance of Cuba’s private sector.
Contributions from non-state management entities to the state budget, she was reported to have said, reached CUP6.8bn at the end of May, “confirming their growing fiscal impact and their importance as financial support for the country.” She also noted that non-state MSMEs “had a significant impact on the national economy, had created new jobs, promoted initiatives in the productive and service sectors, and increased revenue for the state budget.”
However, the official also laid emphasis on the need for control and for Municipal Administration Councils empowered to directly approve new MSMEs and non-agricultural cooperatives (CNA) to act to build on the territorial momentum and institutional strengthening they have been given responsibility for.
Stressing the importance of accelerating the decentralised power they now have to approve new state and non-state economic actors, she made clear that the objective now is for provincial and municipal authorities to foster “opportunities for identifying productive and commercial linkages,” and to allow non-state MSMEs “to more effectively integrate into the national economy” with a focus on potentially exportable products and territorial development.
No clarity on how far private sector will be allowed to grow
Despite this, it is far from certain how much further Cuba’s private sector will be allowed to grow. There are signs that the process of approval of new MSMEs’ slowed after central government handed responsibility for the approval of new non-state MSMEs to regional entities in September 2024, introducing a new layer of bureaucracy.
The news agency IPS reported in July that the approval of new MSMEs in Cuba is practically now at a standstill, and at mid-2025, growth in the non-state sector of the Cuban economy is showing signs of slowing due to the bureaucratic processes involved in their approval and ability to operate relatively freely.
It quoted Oniel Díaz, the General Manager of Auge, a private company providing corporate services, as saying: “The approval process for MSMEs is practically at a standstill, because in the first two or three years (since 2021), 100 MSMEs were approved weekly, and from May 2024 until today, only a handful have been approved.” According to Díaz, whose business has supported the growth of more than 400 private Cuban enterprises, this has resulted in “visible discontent” as applicants are having to wait for a response “for seven or eight months, or more than a year, and haven’t received one.”
The situation, he said, “does nothing to resolve any of the distortions in the economy, but rather, on the contrary, reinforces them.”
IPS noted that the 2024 decision to grant approval for MSMEs to municipal governing councils and remove it from the Ministry of Economy and Planning (MEP) should have been completed in March this year, but relatively few existing municipalities have been incorporated into the new system. It also observed that the older slow-moving process requiring lengthy inputs from local governments remains in place in most of Cuba.
For his part, President Diaz-Canel asserts that Cuba’s position on encouraging non-state MSMES and cooperatives must remain “strategic” and should be seen as an integral and complimentary part of the country’s socialist economy, while insisting state companies remain the dominant force in the economy but must become more efficient.
In July, Cuba’s pragmatic Minister of the Economy and Planning, Joaquin Alonso, told Cuba’s National Assembly that the development of Cuba’s private sector remains important to the economy. Although some ministers continue to stress the need for greater control, Alonso told delegates that the role of non-state economic actors is advancing, and that government’s intention is not to want to confront it “but rather to properly guide it.” Imports by private businesses, he said, had topped US$1bn, a 34% increase over the same period in 2024.
’Cultural problems’ affecting state, non-state business relationships In recent months, government’s stress has increasingly been on creating approved cooperative arrangements between state and non-state entities where the latter are able to provide services or have the financing available to facilitate imports to enable the restoration of state production.
Despite this, recent exchanges on Cuban television’s flagship programme Mesa Redonda, make clear that achieving this requires overcoming what were euphemistically described as “cultural problems.”
Speaking on the programme on 19 June the Directors of state and non-state enterprises made clear they face similar problems in developing public-private collaboration in the “complex landscape of the Cuban economy” where “cultural and bureaucratic barriers converge.” Or as one participant succinctly put it: “Some directors still view the non-state sector as competition rather than an ally. It has been very difficult to establish that relationship simply because of the culture of Cuban business.”
In a report on the discussion, the official publication Cubadebate concluded: “The Cuban economy can no longer afford to maintain silos. In a country with limited resources, cooperation among all economic actors is not an option, but the only way to build resilience. Practice demonstrates this. When applied pragmatically, productive linkages cease to be a theoretical bridge and become a tangible engine of development. It is urgent to institutionalise these good practices, transforming exceptions into the rule.”
Its commentary raises important and so far unanswered questions as to how internal political disagreements within the Communist Party between senior conservatives, reformers, and the military – which controls significant parts of the Cuban economy – about the eventual size of the island’s private sector will be resolved. The issue is of particular significance at a time when much of the economy is in free fall, and the Communist Party and government appears to prefer the more controllable route of offering new more liberal incentives to private and quasi-state investors from China and Russia interested in key sectors such as tourism, sugar, and agriculture.
Expert analysis explores uncertain future of Cuba’s private sector Ricardo Torres, a Cuban economist formerly at the University of Havana but now a Professor at the American University in Washington DC, answers this by saying that private enterprise has become a “necessary evil” for the Cuban government, despite it gaining ground on the state. In a recently published study, ‘Private Sector in Cuba: Escape Valve or Engine of Development?’ he observes that the island’s private sector remains limited because of the state’s lack of commitment to it.
The analysis, published by the Cuba Study Group, a US based entity which brings together Cuban-American business leaders and young professionals, makes clear how much the Cuban private sector’s influence has grown, with more than 10,000 MSMEs having been registered in two years and now accounting for approximately 30% of employment or about 0.6mn jobs.
Speaking recently to the news agency EFE, Torres said: “Right now, there’s a lot of uncertainty in the private sector because the economy is in a stranglehold. It depends on regulations from a government that isn’t committed to free enterprise.” “There is no commitment, because the ideology that still prevails in the government views the private sector as a threat.”
The study confirms that, although the private sector now plays an important economic role in retail, transportation, and household services, it is regarded as “a safety valve rather than an engine of development,” Torres notes.
Drawing on official data, the report seeks to answer complex questions but with unclear answers relating to the point at which the state might halt its advance, and the conditions that would be required to enable the private sector’s potential as a driver of sustainable growth.
It notes that although Cuba’s MSMEs and the self-employed contributed 23% of national tax revenues in 2024, persistent structural obstacles remain. Cuban entrepreneurs, it observes, face multiple challenges including legal uncertainty, limited access to credit, and a tax burden heavier than that applied to foreign investors. Private entities also suffer from state limits on their ability to compete in external markets as official restrictions require the use of state intermediaries to engage in foreign trade.
In the report, Torres points to the lack of uniformity in the interpretation of regulatory provisions and unpredictable actions by government in relation to raids, inspections, legal requirements, price caps, and tax adjustments and their use for control. He argues that US policies by restricting banking and financial arrangements additionally impact the private sector’s ability to grow.
The academic recommends that if Cuba’s private sector is to develop and play a greater role, it requires more than mere tolerance. Eliminating bureaucratic barriers, expanding authorised activities, allowing foreign investment in MSMEs, and reforming the tax code to grant domestic private firms at least the same treatment as foreign investors, should, he believes, be the way forward.
The full 27-page report can be found at https://cubastudygroup.org/white_papers/special-report-on-cubas-private-sector/
According to reports presented to the Economic Commission of Cuba’s National Assembly in July, Cuba has 11,369 private MSMEs, seventy-one non-agricultural cooperatives (CNA), and 305 state MSMEs. In total, Cuba has 19,428 economic entities: 2,843 are state-owned entities, 110 joint ventures and wholly foreign-owned companies, 5,106 are cooperatives, 11,369 are private MSMEs, 305 are state-owned MSMEs, and seventy-one are non-agricultural cooperatives.
The decentralisation process in relation to MSMES began in sixteen selected municipalities. They have so far authorised 231 new economic actors. In June, 28 municipalities were added to this number. ONEI’s figures suggest that over the last five years the state-economy contracted by 11%.
Highlights in this issue:
- China and Cuba close to restructuring public and private debt and using Renminbi for trade
- Complete loss of power again affects whole country for extended period
- Regional and municipal governments told to plan to raise more revenue in 2026
- Sheinbaum says Mexico will continue to receive Cuban doctorsUS Judge overturns jury’s Helms-Burton related decision
15 September 2025, Issue 1293
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