Work In Progress: Cuban Government Poised to Permit Small Business

On May 24 the Communist Party of Cuba published the conclusions of the Party Congress held in April 2016, the most important of which is that the Party envisions a role for micro, small and medium size businesses in the Cuban economy. This reference is a significant acknowledgment that non-state owned companies could contribute to Cuba’s development.

This change follows initiatives in recent years authorizing self-employment in specifically designated blue collar occupations such as carpenters, tailors and barbers. These cuentapropistas, the term in Cuba for people who are self-employed, joined artists and musicians who were permitted to sell their works or services to private citizens, including foreigners. Private restaurants and the rental of rooms in private homes were also authorized. Later the Party authorized private cooperatives, mostly formerly state-owned enterprises.

Many Cubans, sensing a more permissive environment, also began to create small “companies” for home remodeling, apparel design, computer and cell phone repair, and even software and web development. While generally tolerated, these businesses were subject to erratic enforcement actions and the inability to open bank accounts or legally hire employees.

The recent development followed a cryptic reference by President Raul Castro in his speech to the Party Congress last month in which he noted that thousands of micro, small and medium businesses had formed without permission. At the time, many interpreted as a signal that these businesses would be tolerated, but continue to operate without an official status. It will probably be many months before the legal status of these businesses becomes clear. For example, there is speculation that for the first time these businesses may be permitted to legally export their products and to import equipment and materials, both in short supply in Cuba.

The Party document emphasizes that the private sector will only have a supplementary role to play in an economy that will continue to be primarily run by the state, but these new private enterprises could become the most dynamic part of the Cuban economy if they are permitted to thrive. These changes in official policy occur as Cuba faces deep cuts in favorable terms of trade with Venezuela, Brazil and other Latin American countries that are experiencing their own economic challenges. It is unclear how or when these changes will take place, but it certainly seems that Cuba is moving forward.

Read more from John Caulfield on his website.

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