In the picture
Street vending in a Cuban town [GregMontani].
The year 2021 has been the year in which Cuba's economic reforms have taken off, forced by the island's difficult situation status , which has been aggravated by the pandemic. Although timid, the reforms have opened up a space for private business with employees, beyond the individual 'cuentapropismo' (self-employment) allowed until now, although the economic levers are still tightly controlled by the communist state. Moreover, the effectiveness of the new measures to improve the country's status is called into question by the tight control that the government exercises over society.
In the midst of the economic crisis, Cuba is accumulating economic reforms aimed at boosting a nascent private initiative as a way to overcome the new special period in which the island finds itself. The lack of tourism, the high public expense due to the health emergency resulting from the pandemic and the US sanctions make for a complicated situation that has finally pushed Miguel Díaz-Canel's government to undertake reforms long postponed due to ideological imperatives.
Initiatives to open up the economy have been taking place since 1 January 2021, when Cuba put an end to its dual currency system with an ambitious currency reform. In February, an opening to private initiative of more than 2,000 additional items was announced. Since then, the government has taken successive steps in its strategy to boost Economics, consisting of the easing of regulations for the importation of food, toiletries and medicines; the implementation of new banking regulations; and the approval of a regulatory package that legalises the first micro, small and medium-sized enterprises (MSMEs), allowing them to obtain credit in foreign currency. These measures are part of the path opened up by Havana for a slight change in Cuba's economic model , in which the state-owned business is the main subject of the national Economics .
While economic measures make modest progress, the old habits characteristic of centralised government remain. The absence of a change in the political framework reduces the impact of real reform. Authorisations to set up companies and grant them credit remain in the hands of a state that prioritises stifling any hint of political dissent.
For the time being, the sharp economic downturn is preventing the small improvements that the new measures could bring about from being noticed. The crisis is also fuelling social discontent in Cuba, which already triggered a mass protest movement in July and then justified the call for a new demonstration workshop on 15 November, which could not take place because the government used all its means to prevent it.
The great novelty of 2021 in the Cuban economic system came in August with the publication of the regulations on the 'improvement' of the economic actors of Cuba's Economics , by means of which MSMEs, non-agricultural cooperatives and self-employed workers are called upon to promote, from their own sphere, the national economic development . The regulatory package, in force since 20 September, grants legal personality to these forms of business which, for years, have been operating on Economics under the label of self-employed workers (known as cuentapropismo), while at the same time establishing changes in the functioning of non-agricultural cooperatives and self-employed workers.
MSMEs are a new player on the Cuban economic scene. They may be state-owned, private or mixed, which will make it possible to decentralise certain economic activities that until now have been under the exclusive tutelage of the state. Through the creation of a private sector that is supposed to play by the rules of the free market, Cuba aims to attract resources to the island that are currently unavailable to it.
According to the new rules and regulations, MSMEs, non-agricultural cooperatives and self-employed workers will be able to undertake projects in all activities except 112 that form part of the essential core of the Economics and affect the health, telecommunications, banking and defence sectors, among others. From agreement with the issue of employed persons, including both partners and employees, MSMEs are categorised as: micro-enterprises (from one to 10 persons); small business (from 11 to 35 persons), and medium business (from 36 to 100 persons).
Although MSMEs will in principle be able to access the state wholesale system, import and export, set prices and attract foreign investment, they are still heavily regulated by the state. Companies are allowed to export and import, but only indirectly, i.e. through state entities. In addition, companies are limited to 100 employees and individuals can only be members of one business at a time. So far 520 new economic actors have been approved to participate in the Cuban Economics . Of the approved MSMEs, 497 are private companies and 11 are state-owned.
To date, 12 non-agricultural cooperatives have also been registered at C . This is an economic actor that has been operating in Cuba on an experimental basis since 2013. The regulatory text eliminates the experimental nature of this subject and introduces regulations concerning its constitution, operation and extinction as an actor in the national Economics .
With regard to the exercise of self-employment, the new rules and regulations updates the general provisions for its development, regulates the procedure to process authorisations through the Office of Procedures created for this purpose, and adapts its system of organisation and control. It also "perfects" the responsibilities of the local administrations of the People's Power, the bodies, agencies of the Central State Administration and national entities in relation to this modality of employment.
Foreign currency transactions and tariffs
Among the economic developments, a resolution published in September to authorise the Central Bank of Cuba (BCC) to authorise financial institutions to grant foreign currency loans to non-agricultural cooperatives and MSMEs also stands out. To this end, the BCC announced in November the creation of a new institution called Financiera de Créditos SA.
Until now, these economic actors could only access bank loans in Cuban pesos. Foreign currency is understood to be the freely convertible currencies accepted by the BCC, including the US dollar, the Canadian dollar, the euro and the new Mexican peso. The measure is beneficial for the owners of non-agricultural enterprises and cooperatives who are forced to import the necessary inputs in foreign currency or buy them in the existing wholesale markets on the island that operate in foreign currency.
Similarly, the BCC authorised more flexible use of bank accounts in freely convertible currency for the purchase and sale of goods and the provision of services, and extended their opening to natural persons, forms of non-state management , MSMEs, foreign legal persons, among others.
On the other hand, in July, the import Schools for the non-state sector was extended. Among the measures is the exemption until 31 December 2021 of entities that provide the service of importing inputs and raw materials for non-state forms of management from paying customs tax. This is another measure to stimulate the production of goods and provision of services in the private sector.
It also authorised the extension until December of the free import of medicines, food and toiletries for natural persons, which had been authorised by C in 2020 as an exceptional measure to alleviate the serious crisis resulting from the pandemic. The decision on the extension was taken just after the social protests that took place on 11 July, which put pressure on the government to continue easing restrictions in order to alleviate the lack of supplies on the island and the inability to acquire them on the international market.