Cuba’s private sector in a difficult context

Nayvis Diaz (D), manager of the small company “Velocuba” with a member of his team. Velocuba is an SME dedicated to the repair and rental of bicycles, in Havana, Cuba. January 4, 2022. Photo: Jorge Luis Baños / IPS

By Patricia Grogg (IPS)

HAVANA TIMES – The new year has started with more than 1,000 micro, small and medium enterprises (MSMEs), the first to be licensed since September, with their hopeful owners amidst economic tensions and a dangerous upturn in COVID-19.

Until December 22, 2021, there were 1,188 SMEs, of which 1,166 were private and 22 were public, plus 19 non-agricultural cooperatives, the other form of private enterprise after a series of regulations came into force in September, which allows to join the economy of this country with a socialist government.

The Cuban Economy Ministry pointed out that 58% of the total authorized so far were already existing independent companies (with no real legal status as such) that were restructured, and the rest were new companies. The official report adds that these entities, spread across the country of 11.2 million people, will create 18,603 job opportunities.

They range from food production, production of building materials, furniture, textiles, footwear, plastics, as well as cleaning and hygiene products, computer programming activities, material recovery and recycling and technical services, to name a few.

“For small private companies like ours, MSMEs are an opportunity for us to enter the national economy as a recognized and legitimate player,” said Adan Perugorria, Creative Director and co-founder of the Gorria Gallery / Studio, viewed by IPS. .

Workers process mangoes for jam production, in a mini-industry, in the municipality of Baracoa, in the eastern province of Guantanamo, Cuba. June 13, 2018. Photo: Jorge Luis Baños / IPS

This cultural institution in the busy district of San Isidro in Old Havana, is linked to the local development of the region and does not exclude becoming an MSME in the future, which will give it the possibility of having a legal personality, a bank account, and other particularities of this type of economic actor.

“There is no doubt that this is a new reality for doing business in Cuba, which will allow companies to develop in conditions favoring supply chains and greater opportunities to prosper,” said Perugorria.

The official opening of the economy to this new form of MSME has been welcomed and as an economic ‘boost’, although many experts agree that it should have been adopted several years ago. or at least before the reform process, which has been officially called Tarea Ordenamiento and involved the process of monetary unification that began on January 1, 2021.

Despite everything, some entrepreneurs have decided not to join this reorganization of self-employed workers into business owners. “We have a year to analyze all of this and we will wait. Firstly because we have accumulated debts over the past two years, which we are still trying to repay and it has been very difficult to get out of it, ”explained a restaurant owner, who asked to remain anonymous.

“We are worried about these regulations that really get along, especially in tax matters, and in a legal context. We also do not know what advantages we will have right now by becoming an SME. A group of restaurants are already sure, but we are not, ”he told IPS.

Another small company shows its products. Photo: Jorge Luis Baños / IPS

Experts and entrepreneurs both point out how unfair the tax system is, which does not differentiate between different types and establishes the same type of tax and levy for micro, small and medium-sized businesses, which other countries in the region.

In addition, taxes are the same for public enterprises, but are generally higher and protected by the state. “The tax burden is excessive”, David Tavares, co-founder of Digital Marketing Agency JYD Solutions, weighed in speaking to IPS. In this first phase, his company did not obtain a license to become a company.

“Despite existing legislation, we are not allowed to directly transform into MSMEs with our current business model, we are still studying and reviewing this, because when we can become legal persons with all the challenges and issues that we are experiencing. implies, ”he said.

With many years of experience in the self-employment sector, Tavares advises new business owners to be flexible and adapt their business models to market realities. In addition to diversifying the goods and services offered by companies and avoiding thinking in the short term.

“We will have to work very hard and be extremely efficient, in order to run our businesses in an economy in crisis, so short-term thinking can be more of a problem than a solution,” he said.

Entrepreneurs fear the recent increase in COVID-19 cases could lead to further restrictions. After 13 consecutive weeks of declining infections, more cases were recorded in the last days of 2021 than in the previous seven days.

2022 began with Cuban scientists predicting a new wave of infections in the country and the government calling on citizens to act responsibly and adhere to health protocols to stop the spread of the epidemic.

However, it is hoped that with more than 90% of the population (11.2 million people) vaccinated and progressing with the fourth dose of the booster, the situation can be brought under control in the first months of the year. (Editor’s note: The number of new cases is increasing rapidly in the first 9 days of 2022.)

The health situation also depends on whether the country will meet its target of welcoming 2.5 million tourists and manage to increase GDP by a moderate 4% compared to last year.

However, efficiency in the relationship between economic actors, both public and private, is the key to this renewal, in a landscape where SMEs will prove (or not) their resilience. Experts in economic affairs believe that it is necessary to create the conditions for the development of this whole business system.

Read more about Cuba here on Havana Times.


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