Economic risks and enterprising solutions in Cuba faced with the coronavirus
As soon as the shock wave of the novel coronavirus pandemic spread to the most industrialized countries of Europe and America, the immediate concern, beyond health, was the new way of working imposed on the labor force and the impact that social isolation policies would have on markets, employment and the economy as we know it.
Although a rapid economic recovery could occur due to social factors associated with the age of the least affected by the virus, as some forecasts indicate falls in GDP of no more than one percentage point in several large economies, a global slowdown is the most likely outcome, affecting small and medium-sized companies, coupled with greater suffering in less developed economies.
The global economic losses sparked by the pandemic could reach up to 347 billion dollars, due to the fall in tourism and the negative consequences on the supply of health services, according to a graph produced by Europapress.tv. Added to these two sectors are restaurants and shows, which attract a considerable number of consumers.
Local remedies to avoid greater ills
As soon as the Cuban government became aware of what was coming, it adopted tax, fiscal and financial measures to mitigate the impact on self-employed workers.
According to a tweet by Oniel Díaz, founder of the Auge strategic consultancy firm, the measures “represent important support for the thousands of ventures that right now are completely exposed to the global epidemiological situation.”
Díaz also considered the decisions adopted were correct, while stressing that “seeing the prime minister seeking cooperation from the private sector to ensure that the more than 11,000 tourists who are staying in private rentals can leave Cuba, is not a minor detail.”
Among the regulations which entail private businesses, as published by Auge, are the “exemption from paying taxes for those who suspend their activities at their own request or by government decision; 50% reduction in the payment of monthly contributions in the case of gastronomic activities; authorization for the local governments of tourist hubs and sites attracting high numbers of tourists to reduce monthly tax contributions; and the reduction to a single monthly contribution as a minimum balance in taxable bank accounts.”
Another measure includes “Stopping debt collection on credit granted, which will be restructured,” while among the measures regarding the labor force are: “wage protection for contracted employees who continue working, which cannot be less than the country’s minimum wage; and the extension of the authorization period for designated workers who are substituting in a permanent post for someone who is outside the country and will not be able to return within three months,” according to the summary provided.
Meanwhile, the national newspaper Granma notes that self-employed workers are not obliged to continue working, because “the temporary cessation of service is incorporated as a cause of suspension of the exercise of self-employment, which is granted upon request of the interested party by the authorized agencies.”
In this context, “workers who, as a consequence of the labor measures applied to confront COVID-19, consider the financial situation of their family nucleus insufficient to meet their basic needs, may request help from Social Assistance,” Granma explains.
However, economist Juan Triana, in a recent article entitled Coronavirus: We will survive, but that is not enough, presents a tough national scenario for 2020. “Our already diminished export earnings may decrease even more; the global economic slowdown will have an impact on nickel prices and revenue may fall, probably also on sugar prices.”
The possible fall in prices cannot be compensated by more exports because there simply will not be enough external demand and domestic production is still insufficient. Revenues from exports of beverages and tobacco are equally difficult to predict, since the main markets of both sectors, European countries, are the most affected by the pandemic.
PhD in Economic Sciences, Juan Triana, concludes that, “today it becomes more evident to everyone how much the weakness of our food and agriculture sector exposes us to risk; how necessary it is to rethink the allocation of investment resources among the different sectors of our economy, how much faster we must work to achieve greater diversification of our energy matrix; how necessary it is to dedicate more investment resources to our industrial system; how sensitive a sector as strategic as tourism is.”
Although the outlook is not very encouraging, an opinion piece published in early April by economist, Pedro Monreal, on his blog El Estado como tal, identifies, among others, four actions that, if fully implemented, could help us better overcome the post-coronavirus economic crisis. These are: “establish agriculture as the main source of food for the people; approve the Exchange Reform and establish a business exchange rate with the dollar, at no less than one USD to 25 CUP; establish that in the period until December 31, 2020, Cuban citizens exchange all the CUC they have for CUP at a rate of 1 CUC to 24 CUP; and approve a legal instrument that authorizes the creation of Small and Medium-sized Enterprises (SMEs), mainly in the agri-food business, and that agricultural cooperatives can join if they wish.”
At the end of his thread on Twitter, Oniel Díaz offers a final thought: “cooperation, partnerships and dialogue are the tools we have at hand to face together, in addition to this challenge, all of those that lie ahead in the national economy.”
Business continues from home, what about you?
While people are invited to stay at home as the main measure to slow the spread of COVID-19, Cuban businesses and entrepreneurs are not idly sitting by or waiting for the pandemic to pass to reach out to their communities.
The private sector has rolled out solidarity actions and business techniques, in order to contribute to combating the invisible enemy. The first of these is the Bella Ciao restaurant, whose co-owner, Saverio Grisell, commented that, after inquiring about ways to help, “the president of my Neighborhood Council gave me a list of 29 older people and I decided to give them a free meal every day.”
In addition, the clothing brand and store Dador, “has its sewing machines devoted to a different task than their usual purpose of creating limited edition outfits for the catwalk or the store in Old Havana.” According to one of its founders, Lauren Fajardo, they have “collaborated with a group that provides assistance to the elderly, donating 160 facemasks to those who need them most, such as older people, inhabitants of crowded neighborhoods, or those who do not have the option to stay home because they have to work or buy food.”
Together with Dador, the guys from Ciclo EcoPapel have also donated masks to the Doña Leonor Pérez Maternity Home in Old Havana. Meanwhile, Taller Tostonet announced through its Facebook page that it will reduce its services to the public “and suspend face-to-face services,” maintaining only a minimum of staff in charge of completing already contracted projects, although it will provide services online or at homes, “provided that the basic conditions of social distancing required to avoid the risk of contagion of any of its members or clients can be guaranteed.”
Other businesses, also featured in our issues, that have decided to close their doors to support the fight against the coronavirus are El Gelato and Oasis Nelva, which, imbued with their individual and social responsibility, have adopted this measure to protect the health of all. There are also those who are using their home delivery services to continue to serve their regular customers, such as the Japanese restaurant Fuumiyaki, or Juanky’s Pan, which has developed initiatives including pre-prepared meals that customers can cook at home.
“Come rain or shine, we will always deliver to your home, or at least try,” the Clandestina brand posted, with its characteristic humor, which through its online store aims to offer orders to each municipality in the capital. Finally, and in view of the suspension of vehicular transport implemented by the government, the Bajanda application suspended its activities to maintain the safety of its drivers and clients.
If the past days have been difficult, those that remain until normality reigns again will be even harder. Our discipline, the initiatives of enterprises and the confidence that economic sense will prevail over the rigidity of the system, are some of the steps that will lead us to advance once this sad episode concludes in Cuba.