Self-employment, COVID-19 and economic strategy
The year 2020 will be remembered for many things, almost all related to the lasting effects of the COVID-19 pandemic, particularly on peoples’ lives and the global economy. Cuba already had a stagnant economy, and as we noted in a previous column, although the number of self-employed people continued to grow, it did so very slowly, given the slowdown in production and the restrictions of a regulatory framework too focused on control, rather than economic development.
The blow to this sector as a result of the health crisis and its economic impacts is very serious. In the face of a lack of reliable figures, what has been revealed in both state and alternative media speaks of lasting damage. A substantial part of the “self-employed” sector is linked to the service sector, which has been the hardest hit by the lockdowns. Services are characterized by the need for human contact, as production and consumption are simultaneous. In Cuba, this sector is focused on the production and sale of foodstuffs, accommodation, transport and household services. All of which have been suspended for several months. To this is added the closure of international borders, which has meant a fall in visitors, on which a large number of businesses directly or indirectly depend, especially in the main tourist spots of the island, which unsurprisingly concentrate the largest numbers of self-employed workers. This regrettable reality is particularly notable in the capital, which sets the pace of the country’s economic development.
In this month of October, the authorities have made some decisions that offer hope to businesses. Based on a relative improvement of the epidemiological situation in the capital, it has been decided to suspend most of the restrictions on movement, and the majority of service activities, both state and private, will be reopened. However, the self-employed sector faces other challenges, no less significant. Among them are the advance of dollarization, price increases, the scarcity of supplies, the fall in demand, and inevitable changes to business models. Many enterprises have had to reinvent themselves to survive in the new circumstances, and several analysts predict that the “new normality” implies modifications in behavior and consumption patterns that are here to stay.
For example, the speed at which international tourism will resume is uncertain. It seems obvious that online shopping and delivery services will see a significant expansion in the coming years. Fortunately, the self-employed sector has been at the forefront of this move, and one can only imagine that this is just the beginning. Likewise, there are encouraging signs in the operation of public-private partnerships for the development of new production schemes. However, this behavior is not homogeneous, and many businesses are at risk of disappearing. The sector is still suffering from the unnecessary restrictions of an outdated regulatory framework. It appears an unhappy coincidence that the boost to the sector comes when the economic crisis leaves few alternatives. This is a sure recipe for stagnation and the squander of our own strengths.
On July 16, the Cuban government announced the implementation of an anti-crisis strategy that rescues an important part of the agenda of changes contained in the economic “update” plan. The published document includes provisions that indicate an expansion of the role of the private and cooperative sector. However, some of the most important proposals have not been deployed in a timely manner. For example, there are high expectations regarding changes to the agricultural model, the additional flexibility of self-employment, with the elimination of the current categories and their replacement by a negative list; and the implementation of the legal framework for the constitution of micro, small and medium enterprises (MSMEs).
In the current conditions, and having observed the vast adaptive and survival capacity of the self-employed sector, it appears clear that despite the enormous challenges ahead, the development of this sector and the possibility of it occupying a more prominent role in the national productive scene depend greatly on the adaptation of the norms and regulations to the future development needs of the country. There is a huge community out there waiting for a new opportunity.
Now is the time!