Non-state yet socialist – why not?

By José Alejandro Rodríguez

HAVANA – The most visible and colorful facet of the so-called “updating of the Cuban economic model” (though not the decisive one) continues to expand and create comment.

By May 31, more than 387,000 people were self-employed, according to a report from the Ministry of Labor and Social Security. The figure represents a 7 percent increase – in only five months – in the number of private workers who were recorded by the end of 2011.

In a country where state property and state employment were hegemonic, more citizens are boldly learning the unpredictable rules of the market game, practically without previous skills or training.

The newspaper Granma offered an eloquent detail: While at the end of 2011 the transport industry (freight and passengers) accounted for about 200 trades or activities, by May 2012 the most numerous group – with 16 percent of all licenses – was constituted by self-employed workers who had been hired by other self-employed people.

This shows that, along with individual private work, there is a boom in the so-called microbusinesses, most characteristically the restaurants called paladares, cafeterias, sites for the manufacture and sale of food, and home rentals, among others.

From October 2010, when the private sector was re-launched, the government measures that favor and simplify self-employment – spurred emphatically by President Raúl Castro himself – have broken obsolete barriers in a way that was unthinkable years ago.

Those private workers have been allowed (by law) to sell their goods and services to state institutions. They have been granted access to bank credits and service. They don’t need to be retired citizens or have any work ties to accede to this form of employment and may have several licenses to engage in more than one activity.

They are allowed to rent an entire house or rent rooms by the hour. As to the paladares, the authorized limit of seats rose from 12 to 50 and the ban on certain foods that were controlled by the state was lifted.

Cubans who hold a Permit for Residence Abroad (PRE) can lease their homes and vehicles by appointing a representative.

The government is very interested in promoting and encouraging self-employment because it expects a considerable spillover of workers into that mode from the state sector. There, it has initiated a major restructuring that, once gradually softened, should end with the chronic and inefficient excess of staff workers.

While they consider that the opening to self-employment and microbusinesses is a key element of Cuba’s structural adjustment, Omar Everleny Pérez Villanueva and Pavel Vidal Alejandro, doctors in Economic Sciences and researchers at the University of Havana’s Center for the Study of the Cuban Economy, warn of the limitations that hinder a sustained growth in that sector.

• The list of 181 activities is precarious and reduced, they believe. To begin with, the categories are much too specific, which discourages individual initiative.

• The activities so far permitted are not knowledge-intensive. Mostly, they rely on manual labor and do not take advantage of the country’s high investment in education and its remarkable human capital. It can’t be ruled out that many of the workers dismissed through the “deflation” of payrolls are university graduates.

• The recent approval by the Council of Ministers of cooperative experiments beyond the agricultural industry, in production and urban services, creates hope that these formulas of collective property and activities, which are democratic and flexible, can take advantage of skilled labor to bring to the market goods and services with some technological components and values added.

• Another restriction on the non-state sector, according to Everleny and Vidal, is the absence (so far) of wholesale markets for consumer goods. This means that the private sector must guarantee its materials and raw materials to the retail market, which affects its stability and forces it to raise the prices of its products and services in order to make a profit.

The specialists believe that promoting microcredits with international cooperation in a decentralized environment would mean attracting hard currency into Cuba. This in turn would enable self-employed entrepreneurs and microbusinesses to import necessary goods.

The essential contribution of the non-state sector to the fiscal budget, through tax policies, could offer flexible tax rates to business start-ups, the specialists say.

Likewise, the forthcoming revision of the Cuban Tax Law could lead to differences in the tax rates according to territoriality and seasons of the year. For the purposes of taxation, renting a home in the Vedado district of Havana is not the same as renting a home in Perico, Matanzas province. And the peak tourist season is not the same as the low tourist season to those who rent their homes to foreigners.

Add to this the subjective obstacles that some reluctant bureaucrats raise against anything that becomes decentralized and acquires a life of its own. Despite the calls and ultimatums by the Cuban government to favor the required changes, there remain government structures in the provinces that hinder the work of the non-state sector, using harassment and trickery instead of control and discipline.

Of all the limitations that affect self-employment the worst, Everleny and Vidal describe as the greatest obstacle the low rate of growth of the Cuban economy, which coincides with a contraction in the demand.

This is why this boom in the private sector is intertwined with the great changes undertaken by the central nucleus of the Cuban economy, a qualitative change that will confer power and probity to the socialist state businesses and lift them from the stagnation where they lie.

Growth in the key or strategic sectors of development is one of the linchpins of wealth. We must grow and grow, generate ever greater values that will permit us to deal with the structural adjustments of the Cuban economy and strengthen it. We must grow to guarantee development, investment, consumption and well-being in the leading-edge sectors, like a great umbrella that also guarantees, with expanded reproduction, the development of cooperative or private microbusinesses. We need to display the initiative of our citizens – the socialist initiative, without any taboos.

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