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Cuba has approved as legal entities the first privately owned micro, small and medium-sized enterprises (MSMEs). The decision will initially see 32 private and three state entities begin operations in food production, manufacturing, recycling, and establish IT related businesses in the Science and Technology Park of Havana.
The decision marks the start of a controlled move to a more mixed economy and the further decentralisation of Cuba’s planned economy.
The Ministry of Economy and Planning said that its objective in creating new forms of private management and decision making is intended to unleash their potential and contribute to the socioeconomic development of the country. The new measures are also intended to address the deterioration in levels of production and
widespread shortages of goods and food, concerns reflected in recent unprecedented street protests.
The measure effectively creates a new category of Cuban economic actor in eleven of Cuba’s fifteen provinces, with the majority so far being in Havana. Cuban media reports indicate that the companies have various origins, ten having previously carried out export operations, twenty being pre-existing enterprises converting to the new form of non-state management, while 15 are wholly new. State media stressed that other requests are being processed, noting that ‘so far none have been denied’.
In a related decision, Cuba’s Central Bank (BCC) gazetted a resolution that allows financial institutions to grant credits in foreign currency to non-agricultural cooperatives and MSMEs with prior BCC approval. Up to now, both SMEs and non-agricultural cooperatives could only access bank loans in Cuban Pesos (CUP). The measure will enable the new entities to overcome previous constraints that saw them having to pre-finance overseas inputs requiring hard to obtain foreign currency.
As Cuba Briefing has previously reported (7 June and 30 August 2021) eight decree-laws approved earlier this year have the effect of placing private and state entities on a similar footing legally, and recognising and expanding the role of MSMEs, non-agricultural cooperatives, and self-employed individuals in the Cuban economy.
Taken together they mark a sea change in government thinking about the future structure of the Cuban economy, establishing for the first time in more than 50 years a place for private enterprise to play a larger legal if limited role in the development of the Cuban economy.
The reforms are now expected eventually to see thousands of small businesses legally incorporated for the first time under what is widely regarded as one of the more significant economic reforms undertaken by the Díaz-Canel government.
The new regulations allow for enterprises to be state-owned, private, or mixed, and classified either as micro enterprises (employing 1 to 10 persons), a small company (11 to 35 employees), or a medium sized company (36 to 100). The new laws exclude sectors regarded as strategic such as telecommunications, health care, defence, and the media, as well as certain professional and other activities. They also make clear that there are limits to the expansion of permitted economic activity.
Speaking in late August on the television programme Mesa Redonda, the Minister of the Economy, Alejandro Gil, said that the measures would place state and private business on an equal footing, able to compete, create joint companies, and develop projects together. Earlier this year the Prime Minister, Manuel Marrero, made clear however that the process will not lead to privatisations.
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