You cannot analyze something systemic in a fragmented way, says head of the Entrepreneurship Network of the University of Havana

During the coronavirus pandemic there have been numerous enterprises and small private businesses that had to close in Cuba, given the impossibility, for financial and other reasons, of reinventing themselves in the midst of the crisis. The line of self-employed workers (TCP) who lost their jobs increased during the months of stricter quarantine in the country. Some businesses are just beginning to come back. But in a scenario with a greater scarcity of goods and where the purchasing power of the majority has deteriorated, many will have to take different paths.

Professor and researcher Ileana Díaz, head of the Entrepreneurship Network of the University of Havana, estimates that there exists a difference between those individuals who have had a good idea and are passionate about it where it becomes a life project to those who perform more primary activities motivated solely by subsistence. Those who survive crises are usually the first. However, she explains, the mortality rate in this area is generally high.

“As a country, we should try to ensure that [primary activities] are minimal, and that most business projects can be more robust, with strong growth and dynamics, at different scales,” she says. All this taking into account that these very primary activities are also necessary and should not be assumed by the state. Although, precisely because of their vulnerability, they should be more protected by the regulations in the face of economic disasters, a failure that has existed during the current pandemic.

According to the professor, one of the main obstacles to differentiate employees from employers, large from small, those who should have different types of tax structures, is precisely that the legal norm that protects them is the same for everybody. Although its implementation has already been announced, the existence of micro, small and medium-sized enterprises (MPYMES) in Cuba has not yet been formally recognized.

Professor Díaz also invokes people immersed in informal work, which, according to official estimates, must be around one million. “In Latin America, there are policies that are directed towards formalizing these people. Some do not do it because they do not have the financing, because it is expensive, because they do not pay taxes, or because there are no higher expectations. So what is sought is to encourage them, either with tax exceptions for certain periods, or by paying lower taxes. Because the idea is that they start family businesses, even if it is a micro company, which generally have other incentives,”she explains.

Informality, Díaz adds, is a more recurrent phenomenon in underdeveloped countries. “There is less of this in European countries, which is where I think we should also look for successful benchmarks on entrepreneurship and small businesses, so as not to make mistakes that others have already made.”

There are many well-educated and capable people in Cuba, she says. “Many have emigrated, but others have opted to stay, for whatever reason, for the moment.” That also counts when setting related policies. As well as the fact of whether Cuban emigrants will be able to invest or not in the near future in these MSMEs, something that is currently being discussed, according to Díaz, and that has also been a repeated topic for years in the meetings and dialogues with the Cuban emigrant community.

Private sector: Complementary or remnant?

The evidence is overwhelming: the pandemic has swept everywhere, in most economic sectors, in any form of management. In the case of Cuba, these effects only add to the crisis that the country was already facing. All this, explains Díaz, makes even more clear the feeling of emergencies.

“It was said in the conceptualization and in the constitution that small and medium-sized companies could be constituted, as we have just finished doing. There is also the strategy of making self-employment more flexible and of recognizing these MSMEs. I think that they are working on that, even if it is a long and slow decision-making process, at various levels, etc.” she insists.

She adds that there is a problem that will be difficult to solve in the short term. “Where should the cooperative and the private sector be? If you are thinking that the state sector has to dominate everything, what space will the other sectors have? You have to start with these definitions, things that are not in the strategy. What place does the socialist state enterprise have to occupy, being the central axis of the country’s economy? It is something that has not been done.”

“For example, ownership of the land or the mines belongs to the state, but does everything have to be exploited by it? (…) Since this has not been done, the participation of the state is still understood as the one that manages and not just the one that owns the property. It is a situation where what is left to the rest of the forms of management have not been defined,” says. Until these issues are resolved, there will not be, for example, a lesser list of activities, as announced last August.

The State sector and autonomy

To analyze the space and role of the private sector, it is necessary to analyze that of the state sector. That’s if a comprehensive analysis of all economic actors in the country is sought. In the case of the state-owned company, several measures have been stipulated or policies have been enunciated, but in a very dispersed way in their implementation and dissemination, which makes it difficult to examine what has really changed within their economic dynamics; what has actually been unlocked and what has not.

“It is impressive, because every other day something changes. For example, the 28 measures that have a legal standard in Resolution 115 of the Ministry of Economy and Planning. Yes, it allows the state company a flow, especially to the one that exports, to which it substitutes imports, to which it is linked with one that exports.” But also in the nineties there was something similar, an emerging sector and a traditional one, according to the professor.

There is another set of 15 rules that, says Díaz, are related to workers. “The problem is that I don’t see why there has to be an entity that tells companies how many average wages it can pay. Or they can decide what amount to pay from the profits, however, they have to define that amount in advance, and it must be approved by another institution. So, what’s the story?

“There is like a morass in the measures as a whole,” she says. “And the worst thing is that they are trying to solve a structural issue through fragmented measures, when those issues correspond to the science of business.”

In general, Professor Díaz describes next year as a hopeful period for the private sector on the Island, since the creation of MSMEs must be recognized and implemented and the list of activities to which they will not be able to dedicate themselves must be completed, leaving a greater number of possibilities for new businesses. “Beyond the political will that may exist, there is also an urgency. Monetary order is going to lead to the obligatory restructuring of the State company,” she says. And in turn, many workers will need alternatives to reintegrate into the labor market, something to which the private sector could contribute when the right conditions have been created.

Professor Ileana Díaz adds: “What I am trying to convey is that there is no systemic view. And here we are talking about the business system of the country: state, private, cooperative or mixed. The look must be based on what you want to achieve: growth, export, innovation. All this implies a comprehensive outlook. You cannot look through watertight compartments and in fragments at something that is systemic.”