Cuba launches 2 economic reform plans
By Gerardo Arreola
From the Mexican newspaper La Jornada
HAVANA – Cuba this year launches two of its most ambitious economic reform plans: a kind of market bubble with state-run companies, and the creation of hundreds of urban cooperatives of products and services.
The reform tasks in 2013 and 2014 “will be the most complex, with the greatest importance and impact in the updating of the economic model and in all of society,” said Vice President Marino Murillo in an address to Parliament.
With the new experiences, Cuban reform breaks the boundaries of personal microenterprises and the internal life of businesses to cross a sensible border and create a new set of relations between economic agents without precedence in half a century.
“All this is more difficult than allowing people to sell their cars and houses, which we did in the first stage, or eliminating prohibitions,” said Murillo during the December session of the National Assembly of the People’s Power.
In a pilot experiment, a small group of businesses this year will go into a mercantile system that is different from the others, with the autonomy to fund itself, take advantage of its benefits and raise the wages of its workers without waiting for subsidies from the State.
The new model breaks with the Soviet-style vertical control that the government has exerted over businesses for decades. In addition, it goes beyond “entrepreneurial improvement,” a mechanism that originated in the armed forces. It sought efficiency, but didn’t expand beyond the four walls of the building.
In this manner, the government hopes to boost a new managerial culture and an incipient wholesale market. It also plans to insert its businesses in the circuit of international prices.
The sale of some product according to offer and demand, not according to prices fixed by the State, will reveal “which is the price of a product that the Cuban market recognizes,” Murillo explained.
Cuba does not know what its international competitiveness is today “because we set the prices without always taking into account the market conditions,” the vice president said.
Participating in the experiment will be the Group of Biotechnological and Pharmaceutical Industries (second-highest line of exports, after nickel), the Sugar Group Azcuba (in charge of the entire sugar industry) and the Shrimp-raising Company.
Other companies will participate partially. Initially, the bubble will be small so the changes it provokes may be monitored properly, Murillo said.
“If we don’t create all the conditions necessary to maximize the development of the productive forces, particularly the development of the state-run companies, we won’t move forward in the actualization of the model,” he stressed.
New lines for microenterprises
The vice president also announced that new lines for microenterprises will be opened and that this year will see the start of 230 urban cooperatives for products and services in 47 professions, mostly in the repair and construction of housing. Heretofore, only farm cooperatives existed in Cuba.
The implantation of that entrepreneurial method will be a platform to move employees into private initiative. The units will be autonomous and able to export and import through state agencies. They will not depend on any public authority and may sell their goods or services at market prices.
Any inactive state-owned sites that can be exploited by cooperatives will be auctioned off, a practice never before tried in Cuba.
During the initial stage, there will be cooperatives of professional services in translation, computer use and accounting, which opens a field that had been closed to qualified workers. But despite the stimulus offered to the entrepreneur by the new policy, the creation of cooperatives still faces bureaucratic hurdles: to organize them, applications must rise through four levels of authority, all the way to the Council of Ministers.
Other forms of support
The government is adopting other decisions about economic policy that will contribute to the formation of the new mercantile environment. Such is the case of the gradual withdrawal of subsidies to businesses and a firm halt to the fiscal deficit, which was 3.6 percent of the gross domestic product in 2010 and 3.8 percent in 2011 and 2012. The forecast for 2013 is 3.6 percent.
The old taxes on circulation (imposed on the producer) will be eliminated and replaced by taxes on sales (on the retail businesses). “Now the taxes will be imposed where the economic transaction takes place,” Murillo said.
Other rulings will free the payment of goods and services to microentrepreneurs in the better-valued Cuban currency, i.e., the convertible peso, known as CUC. Companies will be allowed to produce or sell according to the needs of the market.
Murillo gave an example of what could happen under current regulations: a cement factory produces at top volume but the authorized buyer does not pick up the merchandise. The inventory bloats, the factory stops working and loses money, and the product is wasted.
“It makes no sense for the cement factory to shut down because it’s overstocked, while a block away a school has to install a toilet and can’t buy a bag of cement,” he said.
