Presented at Florida International University, Cuban Research Institute Conference: “Beyond Perpetual Antagonism: Re-imagining U.S. – Cuba Relations.”
February 24, 2017
Presented at Florida International University, Cuban Research Institute Conference: “Beyond Perpetual Antagonism: Re-imagining U.S. – Cuba Relations.”
February 24, 2017
February 1, 2016
Since 2010, Cuba has been implementing a redesigned institutional structure of its economy. At this time it is unclear what Cuba’s future mixed economy will look like. However, we can be sure that it will continue to evolve in the near, medium and longer term. A variety of institutional structures are possible in the future and there are a number of types of private sector that Cuba could adopt. Indeed it seems as though Cuba were moving towards a number of possibilities simultaneously.
The objective of this note is to examine a number of key institutional alternatives and weigh the relative advantages and disadvantages for each arrangement. All alternatives include some mixture of domestic or indigenous private enterprises, cooperative and “not-for-profit” activities. foreign enterprise on a joint venture or stand-alone basis, some state enterprises (in natural monopolies for example) and a public sector. However, the emphasis on each of these components will vary depending on the policy choices of future Cuban governments.
The possible institutional structures to be examined here include:
1. Institutional status-quo as of 2016;
2. A mixed economy with intensified “cooperativization”;
3. A mixed economy, with private foreign and domestic oligopolies replacing the state oligopolies;
4. A mixed economy with an emphasis on indigenous small and medium enterprise.
Option 1. Institutional Status-Quo as of 2016
The institutional “status quo” is defined by the volumes of employment in the registered and unregistered segments of the small enterprise sector, the small farmer sector, the cooperative areas, the public sector, and the joint venture sector, plus independent arts and crafts and religious personnel. The employment numbers are mainly from the Anuario Estadístico de Cuba together with a number of guesstimates, some inspired by Richard Feinberg (2013). The guesstimate for unregistered employment in the small enterprise sector may seem exaggerated. However, a large proportion of the “cuentapropistas” utilize unregistered workers and a proportion of the underground economy does not seem to have surfaced into formally registered activities. These employment estimates by institutional area are presented in Table 1 and illustrated in Chart 1, which also serve as a “base case” for sketching the other institutional alternatives.
The current institutional status quo has a number of advantages but also some disadvantages. On the plus side, adhering to the status quo would avoid all the uncertainties and risks of a transition. It would maintain the possibility of “macro-flexibility,” that is the ability for the central government to reallocate resources by command in a rapid and large scale fashion. However, in view of the numerous “macro errors” made possible by a centralized command economy (the 10 million ton sugar harvest of 1970, the “New Man” endeavor, shutting down half the sugar mills), “macro-flexibility” may be a disadvantage. There are major advantages for the Communist Party in maintaining the institutional status quo in the economy, namely enabling political control of the citizenry (a disadvantage from other perspectives) and continuing state control over most of the distribution of income (also a disadvantage from other perspectives). The approach also helps foster good relations with North Korea (I am running out of advantages).
There are also major disadvantages. The centralized planned economy and public enterprise system generates continuing bureaucratization of production; continuing politicization of state-sector economic management and functioning; continuing lack of an effective price mechanism in the state sector and continuing perversity and dysfunctional of the incentive structure. The result of this is damage to efficiency, productivity and innovation.
OPTION 2. Mixed Economy with Intensified “Cooperativization”
A second alternative might be to promote the authentic “cooperativization” of the economy in a major way. This would involve permitting cooperatives in all areas, including professional activities; opening up the current approval processes; encouraging grass-roots bottom-up ventures; providing import & export rights; and improving credit and wholesaling systems for coops.
This approach has a number of advantages. First, it would strengthen the incentive structure and elicit serious work effort and creativity on the part of those in the coops. This is because worker ownership and management provides powerful motivation to work hard and profit-sharing ensures an alignment of worker and owner interests. This approach would generate a more egalitarian distribution of income than privately-owned enterprises. Cooperatives may possess a greater degree of flexibility than state and even private firms because their income and profits payments to members can reflect market conditions. Perhaps most important, democracy in the work-place through effective and genuine coops is valuable in itself and constitutes an advantage over both state- and privately-owned enterprise. [Workers’ ownership and control proposed in Cuba’s cooperative legislation is ironic and perhaps impossible since Cuba’s political system is characterized by a one-party monopoly. On the other hand it may help propel political democratization.]
The “second degree cooperatives” or “cooperative coalition of cooperatives” called for in the cooperative legislation is particularly interesting as it may permit reaping organizational economies of scale (a la Starbucks, McDonalds, etc. ) for small Cuban coops in these areas.
An emphasis on cooperatives would help to maintain ownership and diffused control and profit-sharing among local citizens, thereby promoting greater equity in income distribution.
But cooperatives also face difficulties and disadvantages. First, are they really more efficient than state and private enterprises? Generally speaking, cooperatives have passed the “survival test” but have not made huge inroads against private enterprise in other countries over the years. Perhaps this is because the “transactions costs” of participatory management may be significant. Personal animosities, ideological or political differences, participatory failures and/or managerial mistakes may occur. And for larger coops, complex governance structures may impair flexibility.
Second, Cuba’s actual complex co-op approval process is problematic and creates the possibility of political controls and biases. Certification of professional cooperatives is unclear. Also, the hiring of contractual workers is problematic
Finally, what will be the role of the Communist Party in the cooperatives? Will it keep out of cooperative management? Will Party control subvert workers’ democracy and deform incentives structures?
OPTION 3. Wide Open Foreign Investment Approach A third possibility would be to open up completely to foreign investment. This would involve a rapid sell-off of state oligopolistic enterprises to deep-pocket foreign buyers such as China, the United States (in due course), Europe, Brazil, or elsewhere. The buyers might be the Walmart’s, Lowes, Subways, or Starbucks of this world, wanting to acquire major access to the Cuban market. This is a strong possibility if existing state oligopolies (e.g., CIMEX and Gaviota) were to be privatized in big chunks. The policy requirements for this approach to occur would be rapid privatization plus indiscriminate direct foreign investment and takeovers by large foreign firms.
This approach does have some advantages.
However, there would also be disadvantages such as:
OPTION 4: Pro-Indigenous Private Sector in a Mixed Economy
A liberalization of micro-, small and medium enterprise would also be necessary to release the creativity, energy and intelligence of Cuban citizens. This would involve open and automatic licensing for professional enterprises; an opening up for all areas for enterprise – not only the “201”; permission for firms to expand to 50 + employees in all areas; creation of wholesale markets for inputs; open access to foreign exchange and imported inputs; full legalization of “intermediaries” ; and permission for advertising.
This approach has some major advantages:
Oligopoly power would be more curtailed compared to Option 3;
There would be some disadvantages with this approach.
Most likely, Cuban policy-makers in the government of Raúl Castro, the government of his immediate successor, and future governments of a politically pluralistic character will design policies that ultimately will lead to some hybrid mixture of the above four possibilities. I of course will have little or no say in the process. However, my personal preference would be for an economy resembling the structure in the accompanying chart, with a large “indigenous” private sector, a significant cooperative sector, of course a large public sector for the provision of public goods, a small sector of government-owned enterprises, and a significant private foreign and joint venture sector. So my bottom-line recommendations for current and future governments of Cuba would be:
Feinberg, Richard E., Cuba’s Economic Change in Comparative Perspective, Brookings Institution, 2013
Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba, 2014
Ritter, Archibald and Ted Henken, Entrepreneurial Cuba, The Changing Policy landscape, Boulder Colorado: Lynn Rienner, 2015
This interesting proposal was brought to my attention thanks to Jose Luis Rodriguez.
Ensayo original: http://www.perfiles.cult.cu/article.php?article_id=291#sdendnote2sym
Seida Barrera Rodríguez
Un debate que comenzó con el maltrato a la propiedad social en las empresas cubanas inspiró este proyecto. Fenómeno observado desde la cercanía con las entidades visitadas como fiscal del 2005 al 2008, la búsqueda de responsables y debilidades formó parte de la cotidianidad, pero faltó la perspectiva científica. El profesor que luego se convertiría en cotutor, insistió en profundizar cada vez más en la idea inicial de la autora de mezclar otras formas de propiedad con la estatal, y sugirió la cooperativa como una de las alternativas principales.
Habiendo presentado resultados parciales en un evento, con el ánimo de encontrar una organización que reuniera los requisitos adecuados para implementarlos, una colega mencionó que en su lugar de trabajo se advertían muchas de las características de una cooperativa, por el modo en que colaboraban los distintos establecimientos y la camaradería mutua entre sus empleados. Inmediatamente fueron solicitados contactos y entrevistas, y así se arribó a la Empresa de Producciones Industriales Cabildo, en lo adelante Cabildo. Su máximo dirigente, una persona de pensamiento flexible y vanguardista, enseguida se entusiasmó con la posible conversión de uno de sus talleres hacia una empresa mixta, donde el Estado cubano sería copropietario y cogestor con una cooperativa formada por trabajadores de la propia entidad. Para lograrlo, sería imprescindible el registro del proyecto como piloto para su seguimiento durante al menos un año.
Cabildo es una de las nueve empresas que gestiona la Oficina del Historiador de la ciudad de La Habana y no se encuentra en perfeccionamiento empresarial. Está conformada por quince talleres y una oficina central; su objeto social es muy variado: abarca desde el diseño de interiores hasta la costura, pasando por la fundición de las bellas farolas que iluminan esa parte de la ciudad, o la elaboración de banderas. En pocas palabras, sus empleados toman los inmuebles recién reparados o acabados de construir, y los proveen de todo lo necesario: muebles, lencería o pintura, intentando mantener el espíritu del casco histórico.
Los motivos para enfocar los esfuerzos en este frente pueden explicarse con la ayuda de las estadísticas: el 77% de los ocupados en la economía son trabajadores estatales, 3 millones 873 mil, por lo que constituye la mayor fuerza de trabajo a nivel nacional, y se encuentra tan necesitada de incentivos como los sectores cooperativo y privado, que solo representan el 23%.1 Además, en sus manos se encuentran la mayoría de los medios de producción que, conjuntamente con el capital humano, son las claves para incrementar los indicadores de productividad. Por último, existe carencia o debate sobre propuestas concretas en el sector, lo cual se confirma por el silencio de los legisladores, y la creciente flexibilización de las formas de gestión no estatales.
Esta brevísima introducción resume dos años de búsqueda de fundamentos teórico-metodológicos. Perseguimos el diseño, puesta en funcionamiento, legalización y seguimiento de cooperativas de producción y servicios a nivel local; con ello pretendemos seguir el Lineamiento 25 de la política económica y social, que promueve la creación de cooperativas en diferentes sectores de la economía.2
Leer mas: EMPRESA MIXTA ESTADO-COOPERATIVA
Cooperativa de Omnibus Aliados, cerca 1952
POR Mirta VUOTTO Revista de Estudios Cooperativos (REVESCO), Universidad Complutense de Madrid El link al ensayo es REVESCO Mirta VUOTTO, COOPERATIVAS CUBA RESUMEN
La contribución de las cooperativas se ha puesto en evidencia desde la década del 70 como principal línea de desarrollo en la producción agropecuaria de Cuba. En contraste, el reconocimiento de las cooperativas urbanas ha sido tardío, aun cuando fuese percibida la necesidad de transformaciones basadas en la realización de la propiedad en diversos escenarios territoriales.
El artículo analiza los procesos de reforma impulsados en Cuba desde la primera década de 2000 centrándose en las iniciativas tendientes a la promoción, constitución y desempeño de las cooperativas no agropecuarias (CNA). Se examina el potencial y limitaciones propias de las experiencias recientes para reflexionar sobre los procesos y transformaciones organizacionales desde la perspectiva de sus miembros.
A modo de conclusión el análisis plantea interrogantes ace ca de la aptitud de estas cooperativas para sustraerse del impacto de circunstancias anteriores y sobre su capacidad para consolidar estrategias diseñadas por los cooperadores que tiendan a fortalecer los principios de adhesión voluntaria y autonomía en que se fundan estas organizaciones.
Contribution of co-operatives has been demonstrated since the 1970s as the main development line in agricultural production in Cuba. In contrast, there has been a late recognition of urban co-operatives, even if the need of transformations based on the realization of property in different territorial scenarios had been identified. The article analyses the reform processes launched since the first decade of the 21st century focusing on the nature of the initiatives fostering formation and promotion of nonagricultural co-operatives including follow up of their performance.
The potential and limitations of the recent experiences are examined in order to reflect on the organizational processes and transformations from the point of view of their members.
To conclude, some questions are posed about whether these co-operatives are capable of avoiding the impact of earlier employment circumstances and of developing strategies aimed at reinforcing voluntary membership and autonomy on which they are founded.
By Mimi Whitefield, Miami Herald, September 2, 2015
Complete Article Here: The Purita Cooperative
Carlos Fernandez, Founder of the Purita Cooperative
Original Essay Here: Cuba Study Group, http://www.cubastudygroup.org/File_id=9ce1d57b-2598-4c7c-91bf-4a9b135a718a
Full Article Here: Yailenis Mulet Non-Agricultural Cooperatives in Cuba
Dr. C. Yailenis Mulet Concepcion
November 7, 2013:
Starting in 1959, when Fidel Castro came to power, countryside cooperatives were established as a way of increasing and developing Cuban agriculture. There are currently more than 5,000 such cooperatives, but for the first time in half a century, urban cooperatives have been authorized as part of the economic plan initiated by the adoption of the economic and social guidelines of April 2011.
The upgrading of cooperativism, which is part of a larger effort to update the Cuban economic model, seeks to enhance efficiency and productivity in the country. With this goal—of achieving greater efficiency in economic activity—the Cuban state has been forced to decentralize the operation of state enterprises and to allow new forms of non-state management. In that environment, urban cooperatives are an alternative with certain noteworthy advantages, but also unquestionable weaknesses since experiences with agricultural cooperatives have so far been mixed.
Urban cooperativism is part of a government program aimed at bringing the non-state sector to “contribute” close to 45% of Gross Domestic Product (GDP) by the end of a five-year period, something that is somewhat doubtful in light of the enormous sluggishness of the program. Approvals for private activity and cooperatives across the country need to be accelerated.
The first non-agricultural cooperatives launched operations just a few months ago. It would be premature to speculate on this new form of management and its role within the updating of the Cuban economic model. Nevertheless, some important aspects can be underlined:
Urban cooperativism is part of a government program aimed at bringing the non-State sector to “contribute” close to 45% of Gross Domestic Product (GDP) by the end of a five-year period.
The establishment of urban cooperatives is a special response to the following guidelines for economic and social policy adopted by the Sixth Congress of the Cuban Communist Party:
Guideline 02: “The management model recognizes and encourages socialist state-owned enterprises, which are the primary structure of the national economy, but also the foreign investment entities stipulated by law (e.g., joint ventures and international association contracts), cooperatives, small farming, usufruct, franchising, self-employment and other economic entities that may altogether contribute to increased efficiency.”
Guideline 25:“Grade 1 cooperatives shall be established as a socialist form of joint ownership in various sectors. A cooperative is a business organization that owns its estate and represents a distinct legal entity. Its members are individuals who contribute assets or labor, and its purpose is to supply useful goods and services to society, and its costs are covered with its own income.”
Cooperatives may be established by natural persons, self-employed or salaried workers, and state-run organizations which decide to change the management structure of their entity to that of a cooperative.
The aim is to improve management structures in sectors that directly impact the population and that have been inefficient for years. At the same time, the State can gradually shed activities that are non-essential to economic development or that have been plagued by productive inefficiency been inefficient for years. At the same time, the State can gradually shed activities that are non-essential to economic development or that have been plagued by productive inefficiencies.
Continue Reading: Yailenis Mulet Cooperatives Cuba
Yailenis Mulet is Doctor of Economic Studies at the Center of the Cuban Economy of the University of Havana. She is also Assistant Professor at the University of Havana and holds a Bachelors in Economics from the University of Holguin (2004). She has given several lectures at various institutions, both in Cuba and abroad, including the United States, Spain, Brazil and Norway.
She has completed approximately 32 professional projects related to assessments, consulting and applications in the business sector, with an emphasis on business intelligence services.Ms. Mulet has served as an advisor for 41 theses and seven master’s theses. Currently she advises five PhD theses related to the topics of Decentralization and Territorial Development. She has published over 25 articles in renowned sources in both Cuba and abroad. She has also taught graduate courses in the business sector, which emphasize managerial training on issues related to business intelligence.
Ms. Mulet has directed several business projects related to the implementation and development of business intelligence surveillance systems and management of cooperatives. Since 2010, she has focused her research on “Decentralization and Territorial Policies” and is currently involved in several research projects related to this topic.
The 2015 Taxi Rutero Cooperative
Financial Times, June 16, 2015
John Paul Rathbone, Latin America Editor; Geoff Dyer, US diplomatic correspondent; Richard Feinberg, Professor, UCLA San Diego; Marc Frank, Journalist based in Cuba; Cardiff Garcia, FT Alphaville reporter
NEW CONNECTION DIVIDES OPINION; President Obama’s overtures play better than expected at home — although not with everyone
STRAITS DEALING BRIDGES MANY GAPS; Retailers in Florida cash in on items needed by customers across the water
GLIMMERS OF GLASNOST BEGIN TO WARM ISLAND; Government retains a firm grip, but there are signs it is loosening a little
NEW PORT ZONE HARBOURS BIG AMBITIONS; A would-be capitalist enclave in a socialist state, the Mariel project is emblematic of change
STATE EXPERIMENTS WITH CO-OPERATIVE THINKING; From garages and restaurants to dealers in exotic birds, co-ops are expanding
CUBA’S NASCENT KNOWLEGE ECONOMY; The island could capitalise on a wealth of expertise in science
US COMPANIES STILL FACE INVESTMENT HURDLES; Bureaucracy, eroded infrastructure and regulatory risk are among hurdles
GOVERNMENT LIKELY TO END TO DUAL CURRENCY; Change would be part of reforms to remove price distortins
COMPENSATION IS KEY TO FUTURE RELATIONS; What now for legal claims by those who lost property in the revolution?
OPINION: WHAT CUBA CAN LEARN FROM VIETNAM; The island has the resources and location to create a balanced economy
There is a new entry among Cuba’s roll of important dates. Alongside Fidel Castro’s 26th of July movement and the January 1 1959 “triumph of the revolution”, there is now December 17 2014. That was the day when Barack Obama and Raúl Castro, the US and Cuban presidents, announced that they wanted to normalise bilateral relations and end more than 50 years of cold war enmity.
To be sure, communist Cuba was already changing. After formally becoming president in 2008, Mr Castro began a tentative economic liberalisation process to boost the country’s flagging economy — especially urgent now that Venezuela’s growing crisis jeopardises the $1.5bn of aid it sends every year. But the December 17 announcement lit a bonfire of expectations among US businesses — even if Cuba’s $80bn economy, for all its exotic allure, is much the same size as the Dominican Republic’s. “There is a new sense of excitement, of US companies coming to look and thinking of starting seed businesses,” says one long-established European investor in Havana. “It makes sense. Start small, learn how the system works and then see how it all goes.”
So, how might it all go? Continue reading: Financial Times SPECIAL REPORT on CUBA June 16 2015
Mauricio A. Font y Mario González-Corzo, Editores, Con la asistencia de Rosalina López
New York: Bildner Center for Western Hemisphere Studies, The Graduate Center, The City University of New York, 2015
Documento Completo: Reformando el Modelo Economico Cubano
Introducción, Mario González-Corzo
Del ajuste externo a una nueva concepción del socialism Cubano, Juan Triana Cordoví
La estructura de las exportaciones de bienes en Cuba 29, Ricardo Torres
Relanzamiento del cuentapropismo en medio del ajuste structural, Pavel Vidal Alejandro y Omar Everleny Pérez Villanueva
Las cooperativas en Cuba, Camila Piñeiro Harnecker
La apertura a las microfinanzas en Cuba, Pavel Vidal Alejandro
Hacia una nueva fiscalidad en Cuba, Saira Pons
Prepared by members of the Socially Responsible Enterprise and Local Development in Cuba Project*
Complete Essay here: Sociall Responsible Enterprise, Cuba
Since the December 17, 2014 joint announcement by Cuba and the U.S.A. that the two nations intended to reestablish diplomatic relations, there has been an upsurge in interest among Americans regarding business relations with the island nation. Business opportunities between Americans and Cubans will most certainly be plentiful, especially in the long-term. However, the media frenzy has overlooked the inconvenient truth that working in Cuba is still extremely difficult for foreigners, and will remain so for a long time to come, especially for Americans. In an attempt to shorten their learning curve and make their experience on the island more rewarding and fruitful, we have developed this Primer. This guide provides newcomers wishing to establish business links in Cuba – whether for profit, not for profit, hybrids, or as social entrepreneurs – with realistic, practical and up-to-date information.
This Primer has been prepared by the members of the Socially Responsible Enterprise and Local Development in Cuba project, an international collaboration of experts on Cuban enterprises and development. Though it is probable that the majority of U.S.-Cuba entrepreneurial activity will be for-profit, Cuba’s national commitment to the social and environmental well-being of its citizens will, nevertheless, require that all business activity be undertaken with sensitivity and accountability over its social and environmental impact. Above all, it is important to remember that engagement with Cuba should be done in a mutually respectful fashion that helps Cubans preserve and enhance the achievements of their Revolution, while minimizing risk and safeguarding the goodwill and limited capital of inspired American entrepreneurs.
Continue Reading: Socially Responsible Enterprise Cuba
ISBN: 978-1-62637-163-7 hc $79.95 $35
A FirstForumPress Book
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“A provocative, compelling, and essential read. The ethnographic work alone is worth the price of admission.” —John W. Cotman, Howard University
“A multifaceted analysis of Cuban economic activity…. Ritter and Henken paint a lively picture of daily life in entrepreneurial Cuba.” —Julia Sweig, Council on Foreign Relations
During the presidency of Raúl Castro, Cuba has dramatically reformed its policies toward small private enterprises. Archibald Ritter and Ted Henken consider why—and to what effect.
After reviewing the evolution of policy since 1959, the authors contrast the approaches of Fidel and Raúl Castro and explore in depth the responses of Cuban entrepreneurs to the new environment. Their work, rich in ethnographic research and extensive interviews, provides a revealing analysis of Cuba’s fledgling private sector.
Archibald R.M. Ritter is distinguished research professor of economics and international affairs at Carleton University.
Ted A. Henken is associate professor of sociology and Latin American studies at Baruch College, CUNY.
TABLE OF CONTENTS
Lynne Rienner Publisher’s page on Entrepreneurial Cuba: https://www.rienner.com/title/Entrepreneurial_Cuba_The_Changing_Policy_Landscape
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