Cuba: MSMEs, challenges and possibilities
During the last year, along with the effects of COVID-19, Cuban self-employed workers have had to face circumstances as diverse as the worsening of the U.S. blockade, the elimination of the dual currency system, and the expansion of authorized economic activities for the private sector.
In addition, after 53 years, in 2021, micro, small and medium-sized enterprises (MSMEs) return to the Cuban economic scene, with the approval of a decree law for their creation, which came into force on September 20.
The first 35 MSMEs were recently approved, 32 of them private and 3 state-owned, since in Cuba the approved regulation has the particularity that the state sector can also opt for this form of management.
Thirteen of these MSMEs are focused on food production, 6 on manufacturing, 3 on recycling activities, 3 are incubated in the Scientific and Technological Park of Havana, 5 belong to Local Development Projects, 10 had previously exported, 20 emerge from the self-employed sector, and 15 are newly created enterprises.
Official sources reveal that there are currently around 602,000 self-employment licenses in the country (13 percent of the labor force on the island), and with the implementation of the new provisions, many holders will go from self-employed workers to employees or owners of MSMEs or Non-Agricultural Cooperatives.
Antonio Romero, an economist and professor at the University of Havana, considers that this decree law is a milestone in the process of economic transformations that the country has undergone in recent years, and further consolidates the process of competition between state and non-state economic agents.
“It is to be expected that this decree law and all the legal norms that accompany it will foster a gradual transformation of some of the self-employed workers, who already managed a micro, small and medium-sized enterprise, towards this new economic figure, with all the degrees of autonomy, legitimacy and possibilities of exploiting all the potentialities that are not exploited today in Cuba, due to the restrictions of the legal environment in which the economy operates.”
There are currently 1.4 million non-state workers on the island, distributed among the private self-employed sector, cooperatives and a small group of joint enterprises (Cuban and foreign-owned), which currently occupy about 30 percent of the country’s sources of employment.
Despite the fact that between 80 and 85 percent of the country’s Gross Domestic Product is produced by state-owned enterprises, the entry into force of the new decree law could generate very positive synergy to stimulate the competitiveness of state-owned enterprises with the growing presence of private actors. This is the opinion of Ileana Díaz, economist and researcher at the Center for the Study of the Cuban Economy and the Entrepreneurship Network of the University of Havana.
“Competition within the regulatory framework of a country like Cuba is beneficial, because to some extend it causes prices to go down. So that is going to be beneficial for the population, for the economy, and it is going to be beneficial for the state enterprise that will have to rise to the challenge and shake off its continued inertia. This inertia is often not because the state enterprise itself wants to maintain things this way, but because the existing economic mechanism unfortunately does not help, does not support, does not favor the state enterprise.”
A scenario which, in her opinion, is also favorable for developing productive linkages between the state and non-state sectors, an important and necessary dynamic in view of the current economic situation.
“It is not going to be simple, it is going to be a complex scenario, because there is also the whole issue of how to close the circle in terms of the supply needs that these new actors are going to have, and the problems related to freely convertible currency, and the exchange rate, which as we know cannot be officially closed, and which moves according to an informal rate and scenario, and which logically impacts on the final prices.”