Cuba’s first MSMEs approved amid optimism and necessary reforms

A pioneering group of 35 micro, small and medium-sized enterprises (MSMEs) received approval on September 29 to proceed with their incorporation as legal entities in order to carry out their economic activities.

Just nine days earlier, the official channels of the Ministry of Economy and Planning (MEP) announced that “up to 5:30 p.m. today, when the legal norms came into force, the Platform of Economic Actors had received 75 applications for the creation of MSMEs and Non-Agricultural Cooperatives,” and the following day, that number had risen to 109 requests.

According to a MEP press release, this first enterprises to make the move  include 32 private and three state-owned MSMEs, divided among the prioritized activities with “thirteen in food production, six in manufacturing, three related to recycling activities, and three others that started up in the Havana Scientific-Technological Park,” in addition to five local development projects and others dedicated to exports or that have previously carried out operations of this type.

I remember that on my own Twitter profile I recently commented that this economic transformation, among others that we have experienced throughout this 2021, are positive and will benefit the private sector and by extension the rest of society in the medium term. The curious thing was to learn about all the years that have passed since the disappearance of such entities in 1968. Now they are being formally recognized and therefore, this is considered something new for Cuba.

Nor can we forget the hard struggle that many self-employed workers and enterprises endured during the last two decades, until visualizing this option for growth; obstacles such as scarce access to credit, legal prohibitions on access to markets, underdeveloped and poorly supplied wholesale markets, no possibility of importing intermediate goods for their production, two currencies and more than two exchange rates. Even so, they became an important source of employment and supply.

And while we are on the subject of overcoming barriers, private entrepreneurship must now apply a change of mentality itself. An optimistic view of this phenomenon is presented by entrepreneur Oniel Díaz, who stated on his Twitter account that “if before September 20 the possibilities of doing things were tied down by a list of authorized activities, today it is impossible to achieve successful growth without looking beyond procedures, permits and licences.”

According to him, once all these entities have legal status, the changes that will take place “set out different paths that we can follow in strategic matters: licensing; franchising; sessions; contracts; alliances; agencies; agreements and much more. The keys to touching the horizon with our hands lie in commercial law.”

Having regulations that formalize these businesses is positive both for the national economy and for those involved in these activities. However, certain future changes in the rules are necessary, “if MSMEs are to become a strength of the national economy and contribute significantly to territorial development strategies,” according to D.Sc. and economist Juan Triana.

In his analysis, he identifies gaps which greatly influence the future and necessary growth of these companies. The first is that “the desire to collect taxes has prevailed over the intention to promote and develop MSMEs, since a 35% tax, even with the argument that the tax burden has not increased, is far from being a positive incentive.” Moreover, only Cubans who reside in the country can open MSMEs, thus “excluding non-resident Cubans and foreigners, a measure that cuts off possible sources of fresh income,” which Cuba so desperately needs.

Everything indicates that the number of applications for registration is rising at a good pace, and that their geographical distribution will cover the entire national territory, as the 35 already being constituted are located in eleven of the country’s fifteen provinces. Likewise, there is still no trend towards the conversion of previous businesses into MSMEs over a start-up from scratch, since “due to their origin, 20 of these businesses are a conversion from self-employment to the new form of non-state management, while the other 15 are newly created,” the MEP press release points out.

Even so, and following the release of the initial figures on the number of applications for the creation of MSMEs, Cuban economist Pedro Monreal argues that, “it would be interesting when the first month is up to offer two pieces of information: the structure of licences according to categories in the classification of activities and by scale (micro, small and medium). The data on the activities in which the MSMEs will operate would indicate whether there is a reorientation of the private sector towards a greater emphasis on production.”

Everything seems to be going smoothly so far. We must wait for a little more time to pass for more in-depth analysis and to correct mistakes. However, through the Economic Actors Channel, two pieces of good news were offered for those who were already most prepared for the move.

If you sent an application that does not correspond to the economic activities included in the first call (food production, exporters of goods or services, local development projects, technology-based businesses, projects incubated in technology and science parks, circular economy and recycling) do not worry. These were archived and not deleted, but saved on the Platform until the call related to the sector in which your business is inserted is opened.    

In addition, the rest of the applications are being processed and so far none of them have been rejected.