Two years after the creation of small and medium-sized companies in Cuba: what is the progress?

The regulations that gave rise to the creation of private micro, small and medium enterprises (MSMEs) in Cuba He turns two years old this Saturday amid a myriad of criticisms, a deep economic and political crisis that limit his management.

These new firms entered the scene of the traditionally centralized Cuban economy just one month after the massive anti-government protests of July 11, 2021.

According to the official press, close to 50% of the companies are not state-owned: more than 8,000 have been registered in two years.

He sector employs more than 15% of the country’s workers and contributes just under 14% of GDPaccording to official figures.

However, the journey they have gone through in this short time has not been easy nor has it been without controversy.

Their detractors point to them as the alleged cause of uncontrolled inflation in the country due to their high prices -a carton of milk, for example, can cost up to half of an average salary- and, in the opposition, they are accused of being close to the Party Communist (PCC, only legal) and simulate a false opening of the market.

This barrage of criticism was underlined by the president himself, Miguel Díaz-Canel, at the closing of Parliament sessions last July.

”(…) They attack us by sowing matrices of ungovernability (…) Some from the most extreme positions contribute to this purpose: from the right calling for privatizing everything, and for system change, and also from a supposed left demonizing any space to the market,” said the president.

IMPORTS IN DOLLARS

For Ricardo Herrero, executive director of the Cuba Study Group, an organization based in USA. that helps to train entrepreneurs on the island, part of the statements conform to a “limited” vision.

Regarding the costs of the products, he assures that Cubans have become accustomed to “highly subsidized prices, far from the dynamics of the market” since the prohibition of the private sector in the 1960s.

“They (the detractors) did not imagine that after two years the private sector would be the only thing that works well in the Cuban economy. With all the distortions it faces, this sector is the only one that is putting food in stores and on people’s plates, ”he highlights in an interview with EFE.

One of those distortions is in the currency market in the country, with three exchange rates.

In the ubiquitous informal market, to which the small and medium businesses to buy the currencies to import your itemsonly in the last year, the green ticket went from costing 135 cup to 250 this Friday.

Camilo Condis, partner of the Lucendi company, specialized in electrical installations and renewable energy, complains about this situation, in an interview with EFE.

“The Government does not allow us to make sales in dollars to maintain a stable price (…) We do not have tax incentives, we do not have bank loans, we do not have any type of government support or financial institutions inside or outside the country that allow us, Let’s say, create a production plant. Therefore, we have no choice but to import ”, he stresses.

REGULATIONS THAT SUFFOCATE

In recent weeks, the Government announced measures to promote the use of the banking system Cubaa country where cash is still king.

Among the rules that will come into force in six months is a ceiling of 5,000 pesos (about 40 dollars at the official exchange rate) in transactions between companies.

For the Cuban economist Omar Everleny, bank access is a good idea that has been badly planned. country where a liter of milk is worth 2,000 pesos,” he adds in an interview with EFE.

David Roque, owner with his partner, Diana Figueroa, of the Jíbaro restaurant in Old Havana, agrees.

He, like others in the hospitality industry, has noticed how MSMEs have made his life easier to obtain products.

But he would like to have more support, as Condis stated. “There is no mechanism for an entrepreneurial Cuban to have access to financing abroad and the banking system (of his country) cannot assume this type of loan,” he comments.

To this tide of difficulties is added the tax burden.

The Government has eliminated the tax exemption in the first year for MSMEs, who must pay 35% on profit and partners 20% on their benefits, explains Condis.

THE ROLE OF THE UNITED STATES

For Ricardo Herrero, the US has lost a golden opportunity to strengthen the incipient private sector in a climate in which the Cuban State is drawing closer positions with Russia and China.

Given the criticism from some dissident circles, that entrepreneurship should not be supported while Cuba not be democratized, Herrero assures that one thing does not cancel the other.

He insists that the private sector can be promoted and “continue pushing for the Cuban government to release political prisoners (after the 9/11 protests) and recognize the political rights of citizens.”

(With information from EFE)