Tag Archives: Small Enterprise

The Cuban Economy: Private, Cooperative and Underground

Attached is a Power Point Presentation delivered at Kennesaw State University on October 24, 2019.  Kennesaw Presentation on Cuban Economy, October 24, 2019

 

 

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THE REVENGE OF THE JEALOUS BUREAUCRAT”: A CRITICAL ANALYSIS OF CUBA’S NEW RULES FOR CUENTA-PROPISTAS

ASCE Conference Proceedings 2018

Ted A. Henken 

Original Article: Cuba’s New Rules for Cuenta-propistas

The quantitative expansion of self-employment from150,000 to nearly 600,000 licensed cuenta-propistas between 2010 and 2018 during the presidency of Raúl Castro can be celebrated given its expansion of economic freedom, the provision of job opportunities, greater productivity and efficiency, and a markedly higher quality of goods and services for those who can afford them. However, it is also curious that the Cuban government has embraced the micro-enterprise sector historically only during times of economic crisis when it could no longer provide enough jobs, goods, or services for the people (Mesa-Lago and Pérez-López 2013).

Indeed, this is one of the mantras most commonly repeated in the official press when justifying the downsizing of the state sector and the expansion of cuenta-propismo (i.e., self-employment or literally “on-your-ownism”): The state must “lighten its load” so it can focus on the fundamental sectors of the economy.

Given such a context, Cuban workers can be forgiven for concluding that Castro’s much trumpeted economic “updating,” constant calls for greater productivity and efficiency, and sharp criticisms of Cuba’s “inflated state payrolls, bulky social spending, undue gratuities, and excessive subsidies” (2010) are simply fancy words for the state’s abandonment of its  historic commitment to them under the Revolution.

Indeed, entrepreneurship has an elastic history in revolutionary Cuba and has undergone oscillating phases of relevance, vigilance, legality, and illegitimacy.  In that context, Cuba’s successful cuenta-propistas (the island term that lumps individual freelancers, together with private business owners and their employees, without giving formal, legal recognition to Cuba’s emergent small- and medium-sized enterprises, SMEs) have often found themselves in the frustrating position of being counted on to supplement the moribund state enterprise sector by providing private employment, high quality goods and services, and economic productivity and efficiency, while simultaneously doing without any legal personality or legal standing (personalidad jurídica) as true business enterprises.

This restriction prevents them from opening bank accounts, signing contracts, importing needed inputs, or exporting their goods or services abroad. That is, while Cuba’s cuenta-propistas may be individually licensed to operate as freelancers (i.e.,personas naturales), “Cuban law does not recognize1. In some cases, the expansion of the private sector has also driven down prices. However, because of extensive subsidies and price controls in the state sector, combined with chronic material scarcity and a dual currency system where a good portion of the private sector operates in hard “convertible” currency, prices for most goods and services available in Cuba’s private sector are very high relative to the state sector.

 Continue reading.

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LETTER FROM HAVANA: THE SUDDEN CIVIL SOCIETY AWAKENING

December 17, 2018

Richard Feinberg, Non-Resident Senior Fellow, Brookings Institution.
Original Article: Brookings Institution,  Letter from Havana

As the Castro brothers fade into history, green shoots of civil society are visibly emerging in Cuba. Make no mistake: The Cuban Communist Party retains its authoritarian hegemony. Nevertheless, and largely unnoticed in the U.S. media, various interest groups are flexing their youthful muscles—and with some remarkable albeit very partial policy successes.

These unanticipated stirrings of civil society present a serious challenge to the cautious new president, Miguel Díaz-Canel, who assumed office this April. In recent weeks, three significant interest groups have pushed back against newly restrictive government regulations issued in the usual way: by government fiat, with few if any opportunities for public input. The new regulations aim to reduce profit margins of independent entrepreneurs, driving some out of business altogether, and to impose new censorship rules on cultural expression.

In response to these threats, the emerging private sector—some 600,000 employers and workers, over 10 percent of the workforce by official count—pressed the authorities to retract proposed limitations on individual capital accumulation. To everyone’s great surprise, the authorities suddenly offered significant concessions. Entrepreneurs will be able to own more than one business, the government agreed, and restaurant and bar owners will no longer face occupancy ceilings of 50 customers each.

Nevertheless, other restrictive anti-business clauses remain on the books. Apprehensive entrepreneurs are waiting to see whether government bureaucrats and inspectors apply their new discretionary powers with a light or heavy hand.

For their part, Cuba’s large army of cultural workers, in music, film, theater, and the visual arts, vigorously pushed back against draft regulations requiring prior approval of public performances and threatening censorship of “unpatriotic” content. At the last minute, again the government stepped back, agreeing to consult with representatives of the arts community prior to implementation.

In yet another challenge to government authority, Havana taxi owners and drivers staged an informal strike against a complex set of new rules. The government is seeking to impose burdensome reporting of all revenues and expenditures, higher effective taxes, more rigorous safety requirements for certain vehicles, and on some routes a lower ceiling on taxi fares. In protest and despair, many taxi drivers have turned in their licenses. Moreover, public buses are running less frequently, apparently due to scarcities of gasoline and spare parts. The result: a daily transportation headache for Havana’s work force.

The government has promised to import more buses. Meanwhile, the authorities seem incapable of foreseeing the practical outcomes on daily life of bureaucratic innovations. Intent upon raising tax revenues and imposing order over Havana’s unruly transportation grid, the authorities failed to anticipate the market-driven reactions of the regulated taxi owners and drivers.

In all three cases—the disgruntled business owners, the alarmed artistic community, and the frustrated taxi drivers—the civil protests took similar forms. Brave citizens signed carefully crafted letters, respectful but firm, addressed to ministers and President Díaz-Canel. (Some signatories reported subsequent government harassment, including menacing phone calls.) Spreading social media (on-island and offshore) buzzed with sharp criticisms of government policies. In a few notable cases, intrepid protesters gathered in public spaces, provoking brief police arrests. One prominent state TV program, “Mesa Redonda” (Roundtable), gave voice to some of the popular complaints, politely challenging official guests.

To access social media, most Cubans have had to locate scattered Wi-Fi hotspots. But this month the government has enabled 3G technology throughout the island. This belated entrance into the world of modern telephony may be another game changer. Cuban citizens who sport cell phones will now be empowered to upload immediately content to Facebook, WhatsApp, and Twitter.

These struggles over economic and cultural freedoms between the authorities and civil society come in the midst of a major re-write of the nation’s constitution. The Communist Party submitted a draft document for public comment in innumerable meetings convened throughout the island. Initial skepticism has given way to anticipation that the authorities may prove responsive to citizen suggestions and significantly amend the final draft, even as one-party rule and socialist planning will persist. A popular referendum on the new constitution is scheduled for late February.

Overall, the heated conversations over constitutional reform and the government’s responsiveness to civil society voices, however belated and partial, have raised hopes: Maybe post-Castro Cuba will gradually evolve toward a more responsive governance. Emboldened by cracks in government stone-walling, Cubans may seek to widen the space for civil society expression.

At the same time, while many welcome the young administration’s relative responsiveness to independent voices, some party stalwarts and ordinary Cubans accustomed to authoritarian rulers see only weakness and improvisation. Backsliding is certainly a feasible scenario. Already some anti-government skeptics see only one half-step forward, two steps backward.

Nevertheless, some Cubans harbor this aspiration: That President Miguel Díaz-Canel, who so far has championed continuity over change, will eventually gain the authority and confidence to tackle the other elephant in the room—the long-stagnant economy. For only comprehensive economic reforms could lift the economy from its deepening recession, the root cause of the government’s anxieties and the popular discontent.

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CUBA: PRIVATE, OWNED. New rules make it even harder to do business in Cuba.

The Economist, December 8, 2018

Editor’s note (December 6th, 2018):

Late on the evening of December 5th, after this piece had been edited and fact-checked but before it went to press, Margarita González Fernández, Cuba’s Minister for Work and Social Security, announced last-minute changes to new regulations governing Cuba’s private sector. Happily, the modifications address some of the more unpopular aspects of the new regulations, which were first announced in July. Of greatest significance is the change that will allow Cuban cuentapropistas, or the self-employed, to keep multiple work licences, rather than having to surrender all but one, as previously announced. (Bookshops with attached cafés will no longer be breaking the law.) The percentage of earnings that cuentapropistas must deposit into designated bank accounts has been lowered from 80% to 65% and the rule to prohibit restaurants from seating more than 50 patrons at a time has been dropped. The last-minute modifications are a sign that while the government is far from enabling the private sector to flourish, it is concerned with creating too much discontent and is, if ever so slightly, considering public opinion when making its decisions.

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EIGHT YEARS ago Cuba’s government laid off a tenth of the country’s workforce—some half a million people—and encouraged them to start their own businesses. They did, with gusto. Nearly 600,000 Cubans have become cuentapropistas, or self-employed, opening restaurants, boutiques, repair shops, beauty parlours, bakeries and bars. They have renovated and rented out spare bedrooms in their homes, turned family cars into taxis and poured their savings into design studios, creating an additional 400,000 jobs and a much-needed, if still tiny, tax base. Many now earn much more. The average state wage is 848 Cuban pesos ($33) a month; a taxi driver with a decent ride can make more than ten times that. But new regulations, which run to 129 pages and take effect on December 7th, look likely to damage the country’s nascent private sector. They come at a particularly bad time for Cuba’s economy, which is already suffering from stagnant exports, broke allies and disappointing tourist numbers.

The most devastating new rule is one that makes it illegal for individuals to hold more than one licence to engage in private business. Cuba issues licences in only 123 categories—and if a licence for a job does not exist, neither does that job, at least officially. There is little logic to the system. A single licence does the trick for any computer-related business, allowing a cuentapropista to provide everything from software to online marketing services. Separate licences for massages, manicures and braiding have been consolidated into one, to the delight of salon owners. But other categories are narrower: selling hardbacks and brewing coffee require two separate licences, effectively making bookshops with cafés illegal. Restaurants that double up as bars face the same fate.

Officials at the Ministry of Labour and Social Security say that the new regulations are meant to discourage black-market trading and tax evasion, while also reducing inequality. The expansion of private businesses over the past few years has indeed contributed to these problems. But the government’s proposed solutions will either have no real effect—business-owners will acquire licences in the names of friends or family—or exacerbate them.

Take wholesale markets. There is only one on the island. Most businesses must rely on state-run shops, which offer a limited range of goods, or acquire products on the black market. The government’s answer is to require cuentapropistas to open bank accounts so that it can track where they spend their money. Drivers of almendrones—ride-shares that substitute for a functioning public transport system in Havana—will be given magnetic cards with which they are expected to buy a set quantity of “subsidised” petrol every month. But since subsidised fuel costs more than the black-market stuff, many drivers are simply handing in their licences.

Cubans who rent out rooms or run other small businesses, such as restaurants or repair shops, must deposit 80% of their income in a designated bank account. They are understandably loth to do so in a cash-based economy where simple transactions at the bank can take hours. They can withdraw money from this account to cover business expenses and will be given a card that entitles them to small discounts when they buy items for business. But few stores accept cards.

The state has also found a novel way to tackle the concentration of wealth: restaurants are now limited to seating only 50 patrons at a time, ostensibly to keep owners from consuming too many resources. And under a new tax scheme, any cuentapropista who wants to hire more than 20 workers must pay onerous wages for each additional employee. The government is happy for people to start businesses, so long as they do not make too much money.

A few helpful new rules have snuck in among the enterprise-throttling ones. Employers will be required to have formal contracts with their workers. They face the suspension of their licence if they are found to be discriminating on the basis of race, sexuality or disability. And business-owners no longer need to close up shop if they fall sick or have a family emergency; they can appoint an interim manager and take some time off.

Yet the overall effect of the new regulations will be to slow the budding private economy. “Being a cuentapropista is the only opportunity we have at a better life without leaving the country,” says the owner of a modest craft shop in central Havana. Her monthly taxes will triple this week; the new rules impose higher taxes on certain businesses in central Havana. “If they take that away from us, what’s left?”

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“EN VEZ DE SERVIR PARA REGULAR, LA LEY SIRVE PARA CONVERTIR A LA POBLACIÓN EN DELINCUENTES”

Hypermedia, 10 de Diciembre de 2018.

Ted A. Henken & Archibald R. M. Ritter

From Hypermedia, LA LEY…..

Original from the book entitled Entrepreneurial Cuba, The Changing Policy Landscape, Lynne Rienner Publishers, Boulder Colorado.

En el verano de 1992, el gobierno cubano despenalizó la posesión y el uso del dólar estadounidense, legalizando así una actividad realizada por un gran número de personas. Esta medida aceleró el proceso de “dolarización” de la economía y estimuló y legitimó aún más la búsqueda popular del dólar mediantes actividades de la economía clandestina. Posteriormente, el 8 de septiembre de 1993, entró en vigor el Decreto Ley 141 que legalizaba el trabajo autónomo, bajo el término “trabajo por cuenta propia” (Granma). Esto representó un cambio de política decisivo, que permitió a estas microempresas salir de la clandestinidad y funcionar de manera más eficaz, eficiente y rentable.

Con la aparición de la microempresa fuera de la clandestinidad en aquellos años, comenzó a evidenciarse una suerte de jerarquía. El espectro de escala y éxito sería más pronunciado en las escasas ocupaciones de mayor envergadura y dinamismo, especialmente: las casas particulares, los taxis, y los paladares que estaban conectados con la floreciente industria del turismo.

La ley del trabajo por cuenta propia se creó originalmente para aplicarse a los cubanos que ya brindaban servicios a otros ciudadanos, por lo cual la mayoría de las licencias y las tarifas fijas mensuales se pagaban en pesos. Sin embargo, con la expansión acelerada del turismo a lo largo de la isla en la década de 1990, algunas empresas, especialmente en las áreas de los servicios alimenticios, el transporte, y el alojamiento, comenzaron a brindar servicios a extranjeros y a cobrarles en dólares americanos. Como consecuencia parcial, se añadieron algunas modificaciones a la legislación original entre 1995 y 1997, incluyendo la expansión de los servicios alimenticios (1995), el transporte (1996) y el alquiler de casas particulares (1997), en la lista de ocupaciones permisibles, puesto que los cuentapropistas de estos tres sectores, a menudo, brindaban sus servicios a extranjeros y obtenían ingresos en dólares.

Estas tres ocupaciones —el transporte, el alquiler de habitaciones y los servicios de alimentos — se convirtieron rápidamente en las ocupaciones privadas más populares durante el “Período Especial”. Y una vez más reemergieron como las más comunes —junto a los trabajadores contratados—, luego de la reapertura y la expansión significativa del trabajo por cuenta propia después de octubre de 2010.

Para continuar: La Ley…..

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PUNTO FIJO: CUENTAPROPISTAS

El Nuevo Día,  miércoles, 13 de mayo de 2015

por Jorge Duany

En febrero pasado, el gobierno cubano reportó 489,929 trabajadores por cuenta propia, el 9.6% de la fuerza laboral. Dicha cifra representa más del triple de la cantidad registrada inicialmente cuando el gobierno autorizó el autoempleo en 1993, en plena crisis económica bautizada como “Período Especial en Tiempos de Paz”. Conocidos popularmente como “cuentapropistas”, miles de cubanos emprendedores han establecido pequeños negocios privados, especialmente en la elaboración y venta de alimentos, el transporte de pasajeros y el arrendamiento de viviendas.

Este es el tema central del valioso libro del economista canadiense Archibald R. M. Ritter y el sociólogo estadounidense Ted A. Henken, “Entrepreneurial Cuba: The Changing Policy Landscape” (Boulder: FirstForumPress, 2015). Los autores se proponen explicar las causas y consecuencias socioeconómicas del auge del trabajo por cuenta propia durante la era de Raúl Castro (2006–2014).

El estudio se basa en entrevistas a profundidad con 60 microempresarios cubanos, completadas entre 1999 y 2009, así como en extensas observaciones sobre el terreno de varios negocios independientes. Su análisis se concentra en tres sectores  económicos vinculados a la industria turística: los paladares (pequeños restaurantes familiares), las casas particulares (alquiladas a extranjeros) y los taxis privados, incluyendo los “bicitaxis”, “cocotaxis” y “almendrones”, como llaman los cubanos a los antiguos carros americanos. En el 2010, el gobierno cubano anunció el despido de 500,000 empleados estatales “redundantes” como parte de la “actualización” del modelo económico en la Isla. Al mismo tiempo, fomentó la expansión de empleos en el sector no estatal, muchos de los cuales ya se realizaban clandestinamente.

El número de oficios autorizados para el trabajo por cuenta propia incrementó de 55 en 1993 a 201 en el 2013. El grueso son ocupaciones de servicios poco calificados, como aguador, amolador, barbero, jardinero, limpiabotas, mago, masajista, mensajero, payaso, peluquera y productor de piñatas. A la vez, se sigue prohibiendo el autoempleo en los servicios profesionales y técnicos, excepto profesores de idiomas, música y arte, programadores de computadoras y reparadores de equipos electrónicos y de oficina. Según Ritter y Henken, aún persisten numerosas restricciones burocráticas, desincentivos económicos y obstáculos ideológicos al trabajo por cuenta propia en Cuba. Para empezar, las tasas impositivas mucho más onerosas que para la inversión extranjeramantienen artificialmente el tamaño pequeño de las empresas. Más aún, la estigmatización de los cuentapropistas como “macetas” (adinerados, en el argot cubano) niega la legitimidad del motivo de lucro individual. El discurso oficial ni siquiera utiliza los términos “mercado” o “sector privado” al referirse a las pequeñas empresas independientes, sino al “sector no estatal”. El crecimiento del cuentapropismo tiene implicaciones políticas en Cuba, en tanto permite ensanchar un segmento de la población que no depende del gobierno para su sustento. Asimismo, subvierte algunas premisas claves del gobierno, como el monopolio estatal de los medios de producción, la planificación central, la distribución equitativa de los ingresos y la política de pleno empleo.

Los autores de “Entrepreneurial Cuba” recuerdan que la confiscación estatal de todos los establecimientos comerciales privados a fines de la década de 1960 agravó la escasez de productos básicos, infló los precios de bienes y servicios y deprimió los niveles de vida de la población cubana. La intensa antipatía oficial contra cualquier “timbiriche” (pequeña tienda al aire libre) estuvo vigente hasta principios de la década de 1990. Según los autores, las reformas económicas iniciadas por el gobierno de Raúl Castro han impulsado la recaudación de impuestos, ayudando a subsidiar servicios sociales y estimulando nuevas fuentes de ingresos. Sin embargo, Ritter y Henken recomiendan legalizar el autoempleo en todas las actividades económicas incluyendo los servicios profesionales, reducir los impuestos y aumentar la cantidad de trabajadores empleados en cada empresa. Solo entonces podrá el cuentapropismo desempeñar un papel protagónico en la revitalización de la precaria economía cubana.

Jorge Duany

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IS CUBA’S VISION OF MARKET SOCIALISM SUSTAINABLE?

William M. LeoGrande

Tuesday, July 31, 2018

Just three months after Miguel Diaz-Canel took over the presidency of Cuba from Raul Castro, his government has unveiled a new Council of Ministers—essentially, Cuba’s Cabinet—along with the draft of a new constitution and sweeping new regulations on the island’s emergent private sector. While the changes announced represent continuity with the basic reform program Raul Castro laid out during his tenure, they are nevertheless significant milestones along the road to a more market-oriented socialist system.

The discussion and approval of the draft constitution was the main event of last week’s National Assembly meeting. The revised charter will now be circulated for public debate, revised, reconsidered by the National Assembly, and then submitted to voters in a referendum early next year. The avowed reason for revamping the constitution is to align it with the economic reforms spelled out in 2011 and 2016 that constitute the blueprint for Cuba’s transition to market socialism. Cuba’s 1976 constitution, adopted at the height of its adherence to a Soviet model of central planning, reflected “historical circumstances, and social and economic conditions, which have changed with the passing of time,” as Raul Castro explained two years ago. …

Continue Reading: Is Cubas Vision of Market Socialism Sustainable_

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GACETA OFICIAL NO. 35 EXTRAORDINARIA, DE 10 DE JULIO DE 2018:

New Regulations for Cuba’s Non-Agricultural Private Enterprises as of July 10, 2018

Complete Document available here:

Gaceta-Oficial-Extraordinaria, 10 de Juliode 2018, _CYMFIL20180710_0001

 

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CUBA MOVES BACKWARDS: NEW REGULATIONS LIKELY TO IMPEDE PRIVATE SECTOR GROWTH.

Brookings, Friday, July 13, 2018

Richard E. Feinberg, Nonresident Senior Fellow – Foreign PolicyLatin America Initiative and Claudia Padrón Cueto, Reporter – El Toque (Havana, Cuba)

In a leap backwards, the Cuban government has published a massive compendium of tough new regulations governing the island’s struggling private enterprises. The new regulations—the first major policy pronouncement during the administration of President Miguel Díaz-Canel—appear more focused on controlling and restricting the emerging private sector than on stimulating investment and job creation, more concerned with capping wealth accumulation than in poverty alleviation.

Many small businesses that cater to foreign visitors are already suffering from Trump-era restrictions and travel warnings that have decimated the U.S. tourist trade in Havana. But the new regulations are more a product of domestic Cuban politics than foreign pressures.

On a positive note, the Cuban government promises to renew the granting of licenses for many categories of private businesses by year-end, repealing the extended suspension announced last summer. But the new regulations greatly empower government rule-makers and intrusive inspectors, casting a gray cloud over the island’s business climate. Many existing businesses are likely to retrench if not close altogether.

The private sector grew dramatically in recent years, to include nearly 600,000 owners and employees by official figures, with many more enterprising Cubans working informally; in contrast, the state sector stagnated and further decapitalized. Indeed, many thriving private businesses began to compete successfully against state entities, notably in restaurants, bars and night clubs, guest houses, construction, and transportation. The healthy wages paid by profitable private firms often eclipsed the meager salaries paid to disgruntled government officials and factory workers.

The extensive, highly detailed regulations, which go into effect in December, read like “the revenge of the jealous bureaucrat.” Drawing on a multitude of ministries and operating at all levels—national, provincial, and municipal—interagency committees will now be empowered to authorize, inspect, and regularly report upon private businesses under their jurisdictions. The regulations are replete with astoundingly specific performance requirements and innumerable legal breaches that seem crafted to allow government officials wide discrimination to impose heavy fines (or extort bribes), suspend licenses, and even seize properties.

To cite but a few such regulations: Private restaurants and guest houses must cook food at a minimum of 70 degrees Celsius for the time required for each food; day care centers must allocate at least two square meters per child, have no more than six children per attendant, and be outfitted with pristine bathroom facilities described in exquisite detail (private schools and academies are strictly prohibited); and private taxi drivers must document that they are purchasing fuel at government gas stations, rather than buying on the black market. Further, local officials can deny new licenses based on “previous analyses,” even if the proposed business plan meets all the other specifications, and can fix prices “when conditions warrant.”

The regulations could help shield state enterprises from unwanted private competition. The very ministries that stand to lose market shares are in charge of approving licenses in their sector. For example, the ministry of tourism has the lead in judging licenses for private guest houses. Appeals are possible, but to administrative authorities, not to judicial courts.

Government agencies are also seeking to reassert control over the island’s vibrant artistic communities. The regulations prohibit artists from contracting directly with private restaurants and bars; rather they must be represented by public-sector entities that charge commissions up to 24 percent of revenues. Moreover, performers must not use “sexist, vulgar or obscene language,” which if enforced could imply the banning of popular hip-hop and reggaeton songs and videos.

Perhaps most telling are the restrictive rules squarely aimed at inhibiting private capital accumulation. In a sharp turn from past practice, Cubans will now only be allowed one license for one business, effectively outlawing franchising and diversification. Capacity at restaurants and bars is capped at 50 guests. Most biting, the new regulations establish an upward-sloping wage scale (whereby wages rise as more workers are hired); hiring more than 20 workers becomes prohibitively expensive (six times the average wage). Unlike in the past, employers will now have to pay taxes on the first five workers hired as well.

Many private businesses must also record their transactions (revenues and expenditures) in an account at a government financial institution and keep three months of prospective taxes on deposit. Intended to reduce under-reporting of income, this measure will significantly raise the effective rates of taxation. Investors must also explain their sources of funds. In a country where political authority is unchecked, these financial impositions alone will discourage many potential entrepreneurs.

The Cuban authorities have repeatedly asserted their interest in attracting foreign investment, to compensate for weak domestic savings. However, foreign investors are likely to view these new regulations, even though they apply to domestically-owned firms, as indicative of an official wariness if not hostility toward private enterprise in general. Risk-averse foreign investors will also note that the Cuban government is quite capable of precipitously altering the rules of the game.

The new regulations are the first major policy initiative promulgated during the administration of President Miguel Díaz-Canel. Many of the resolutions were approved by the Council of State under Raúl Castro, prior to Díaz-Canel’s inauguration in April, but nevertheless were issued during his young tenure. Not a good sign for those hoping that Díaz-Canel, 58 years old and ostensibly representing a younger generation, might quickly place his own imprimatur over the extensive state apparatus.

The new regulations make one thing abundantly clear: The Cuban government, state-owned enterprises and the ruling Cuban Communist Party do not want to risk major competition to their own interests—economic, commercial, and political—from a potentially capital-rich, diversified emerging private sector. Apparently, perceived interests in security and stability have overruled Cuba’s own declared economic development goals.

 

 

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CUBA IMPOSES MORE TAXES AND CONTROLS ON PRIVATE SECTOR AND INCREASES CENSORSHIP ON THE ARTS

BY NORA GÁMEZ TORRES

Miami Herald, July 10, 2018 07:01 PM

The Cuban government announced that it will start issuing licenses to open new businesses — frozen since August 2017 — but established greater controls through measures intended to prevent tax evasion, limit wealth and give state institutions direct control over the ‘self-employment’ sector

Original Article: TAXES, CONTROLS, CENSORSHIP

The Cuban government issued new measures on Monday to limit the accumulation of wealth by Cubans who own private businesses on the island. The provisions stipulate that Cubans may own only one private enterprise, and impose higher taxes and restrictions on a spectrum of self-employment endeavors, including the arts.

The government announced that it will start issuing licenses to open new businesses — frozen since last August — but established greater controls through a package of measures intended to prevent tax evasion, limit wealth and give state institutions direct control over the so-called cuentapropismo or self-employment sector.

The measures will not be immediately implemented. There is a 150-day waiting period to “effectively implement” the new regulations, the official Granma newspaper reported.

Cubans who run private restaurants known as paladares, for example, will not be able to rent a room in their home to tourists since no citizen can have more than one license for self-employment.

“There are workers who have a cafeteria and at the same time have a manicure or car wash license. … That is not possible. In practice, he is an owner who has many businesses, and that is not the essence and the spirit of the TCP [self-employment], which consists of workers exercising their daily activities,” Marta Elena Feitó Cabrera, vice minister for labor and social security, told the official Cubadebate site.

About 9,000 people, half in Havana, are affected by the measure, said the official.

In addition, all private sector workers must open an account in a state bank to carry out all their business operations. And the boteros, those who work as private taxi drivers, must present receipts to justify all their deductible expenses. Other measures curb the hiring of workers in the private sector, which currently employs 591,456 people, or 13 percent of the country’s workforce.

The government also stated it would eliminate the tax exemption for businesses that have up to five employees and would instead impose a sliding scale that increases with each worker hired. It also ordered an increase in the required minimum monthly taxes of businesses in various categories.

Government officials quoted by Granma said that the measures will increase tax collection and reduce fraud. But economists have warned that more taxes on hiring employees could dramatically hamper the development of the private sector at a critical moment. A monetary reform — which could bankrupt nearly half of the state companies, potentially leaving thousands unemployed — is expected to happen soon.
The new measures also maintain a halt on new licenses for things such as “seller vendor of soap” and “wholesaler of agricultural products,” among others.

One significant provision states that those who rent their homes to tourists and nationals may also rent to Cuban or foreign companies but “only for the purpose of lodging.” That would presumably prevent renters from subletting units.

The “rearrangement” of self-employment, as the new measures were framed in the official media, reduces licenses by lumping together various elements of one industry while limiting another. For example, while there would be only one license for all beauty services, permits for “gastronomic service in restaurants, gastronomic service in a cafeteria, and bar service and recreation” were separated — meaning that one can own a restaurant but not also a bar.

To increase controls, each authorized activity will be under the supervision of a state ministry, in addition to the municipal and provincial government entities, which can intervene to set prices. The level of control reaches such extremes that the Official Gazette published a table with classifications on the quality of public restrooms and the leasing rates that would have to be paid by “public bathroom attendants,” one of the authorized self-employment categories. Some public bathrooms are leased by the state to individuals who then are responsible for upkeep and make their money by charging users a fee.

The regulations are the first significant measures announced by the government since Miguel Díaz-Canel was selected as the island’s new president in April. But the proposed regulations had been in the making for months by different government agencies, according to a draft of the measures previously obtained by el Nuevo Herald. The announcement comes just as the Cuban economy is struggling to counter the losses brought by the crisis in Venezuela — its closest ally — and the deterioration of relations with the United States.

The new measures could also have a significant impact on the cultural sector. The decree may be used by the Ministry of Culture to increase control over artists and musicians and impose more censorship in the country.

Decree 349 of 2018 establishes fines and forfeitures, as well as the possible loss of the self-employment license, to those who hire musicians to perform concerts in private bars and clubs as well as in state-owned venues without the authorization of the Ministry of Culture or the state agencies that provide legal representation to artists and musicians.

Many artists in urban genres such as reggaeton and hip-hop, who have been critical of the Cuban government, do not hold state permits to perform in public. However, many usually perform in private businesses or in other venues.

Painters or artists who sell their works without state authorization also could be penalized.

The measures impose sanctions on private businesses or venues that show “audiovisuals” — underground reggaeton videos or independent films, for example — that contain violence, pornography, “use of patriotic symbols that contravene current legislation,” sexist or vulgar language and “discrimination based on skin color, gender, sexual orientation, disability and any other injury to human dignity.”

The government will also sanction state entities or private businesses that disseminate music or allow performances “in which violence is generated with sexist, vulgar, discriminatory and obscene language.”

Even books are the target of new censorship: Private persons, businesses and state enterprises may not sell books that have “contents that are harmful to ethical and cultural values.”

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