Upcoming Cuba Restrictions on Free Enterprise?  

As has been discussed in previous posts, in recent years Cuba has seen a growing private sector of its economy. For example, the number of Cubans working with self-employment licenses rose to 567,982 people in mid-2017, compared with 157,731 in 2010. In response to this growth the Cuban government over the last year has imposed various restrictions on this sector. [1]

Although President Raúl Castro at the 2016 Congress of the Communist Party of Cuba criticized the lethargy of many of the state-owned enterprises and praised the innovations of the growing private sector, Cuba has been struggling with the challenges of creating and managing a mixed economy. The biggest challenge for the regime has been the increasing wealth of those in the private sector and thus the rising economic inequality on the island. [2]

New Draft Economic Regulations [3]

Now Reuters reports that a “draft of new Cuban economic regulations proposes increasing state control over the private sector and curtailing private enterprise.”

The 166-page document “would allow homes only one license to operate a restaurant, cafeteria or bar. That would limit the number of seats per establishment to 50. Many of Havana’s most successful private restaurants currently hold several licenses enabling them to have a seating capacity of 100 or more.”

This draft, which is dated Aug. 3, 2017, and signed by Marcia Fernández Andreu, deputy chief of the secretariat of Cuba’s Council of Ministers, states that it ”strengthens control at a municipal, provincial and national level.” In addition, it provides that enforcement against infractions will be more “rigorous.”

The draft apparently was recently sent to provincial and national organs of administration for consultation. Its leak is suspected to gauge public opinion and could lead to revisions.

Reactions

Even before this new draft was released, the Miami-based Havana Consulting Group had warned that the recent Cuban restrictions on the private sector would generate an annual “flight of local capital abroad” of between 280 and 350 million dollars. Those restrictions also probably would be a negative factor for new foreign investment on the island. [4]

In addition, the new proposed regulations probably would prompt some younger Cubans to lose hope of change in their country and prompt their desire to emigrate, thereby exacerbating Cuba’s problems associated with an aging and declining population.

Finally for the very reasons that Raúl Castro advanced at the recent Party Congress, the proposed regulations could adversely affect Cuba’s employment opportunities and gross national product.

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[1] See posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA. 

[2] Raúl Castro Discusses Socio-Economic Issues in Report to Seventh Congress of the Communist Party of Cuba, dwkcommentaries.com (April 19, 2016). 

[3] Reuters, Exclusive—Cuba Draft Rules Propose Curtailing Fledgling Private Sector, N.Y. Times (Feb. 22, 2018).   

[4] Study: The obstacles of the regime to the private sector generate a flight of millions abroad, Diario de Cuba (Feb. 20, 2018).