Cuba Imposes New Restrictions on the Private Sector

On August 30, Cuba announced, effective November 1, new regulations on non-agricultural cooperatives (CNAs), which the government still regards as “experimental” seven years after their first authorization. A Cuban economist, Oscar Fernández, says it cannot be an experimental if, as here, there are no stated objectives and indicators to measure compliance.[1]

According to official data, there are more than 400 CNAs functioning across the island with over 17,000 members, mostly in the sectors of gastronomy (151), trade (81), construction (59) and industry (34). This total compares with the initial 126 in 2012. However, approval rates have declined since 2015, and only two new ones were authorized in 2018.

The changes freeze the creation of new CNAs, the government says, in order to concentrate on consolidation of existing ones. In addition, although the government states that, going forward, prices charged by CNAs will be determined by the market (supply and demand), the government is given control mechanisms over the prices that such  cooperatives can charge for some goods and services and pay their directors, and it establishes limits to the number of partners they can have.

The new regulations also limit construction cooperatives to the provincial level but allow other types of service to be offered nationally, such as the repairing and restoration of machines for textile production, technology equipment, weighing equipment, equipment for refrigeration and climate control, and aluminum carpentry equipment.

The new regulations are intended to cutdown on “irregularities,” such as hiring excess employees and conducting activities outside a cooperative’s mandate. Some economists suggest that through these changes indicates the government’s intent to assert more control over the island’s growing private sector. Other economists criticized the government for ignoring the context in which these cooperatives have developed — with limited legal frameworks and an unsteady economy — that has caused some of the “irregularities” cited by the new regulations. Others suggest  this could be an experiment to establish alternatives to small and mid-size enterprises in Cuba, which are not yet legal in Cuba.

According to Professor Ricardo Torres, the full development of CNAs will happen only “when the great imbalances of the Cuban model are noticeably reduced, there is a transparent legal framework, the playing field is leveled for all productive actors and the absurd restrictions are eliminated.”

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[1] Reuters, Cuba Unveils Tighter Rules on Cooperatives in Clampdown on Non-State Sector, N.Y. Times (Aug. 30, 2019); The Government suspends the creation of new non-agricultural cooperatives, Diario de Cuba (Aug. 31, 2019); Control over non-agricultural cooperatives increases, Diario de Cuba (Sept. 2, 2019); Rojas, Economies designed for control do not produce development, Progreso Semanal (Sept. 5, 2019); Castro Morales, Legislation governing non-agricultural cooperatives updated, Granma (Sept. 10, 2019).