And the small and medium enterprise?

When at the start of the process of transformation of the Cuban economy President Raúl Castro presented the need to have a more rational state apparatus he mentioned that some 500,000 workers would have to be taken out of their job posts to other sectors. The non-state sector appeared as one of the possible means to resolve that new problem.

In the interval there was a debate about the necessary/wished-for size of the non-state sector in terms of employment and contribution to the GDP.

Today we don’t have the figures for its contribution to the GDP, it is true. It is part of the information we are still missing and which at some time we must, and let’s hope it is sooner than later, systematize. But we do have the number of persons who are working in that sector.

According to the 2016 Statistical Yearbook of Cuba they represent close to 40 percent of all the country’s working persons. In terms of employment it isn’t marginal at all. Those who don’t have an official permit are not considered in that figure.

As in other Latin American countries, that sector, the one of small and medium enterprise about which there has been so much talk and that unfortunately seems to be taking long in reaching Cuba – and which is not informal on the island – makes a great contribution to employment and a very modest contribution to the GDP.

It is a typical asymmetry, almost with a legal character. In Latin America a great many of those who make up that sector are persons with little education, a population segment frequently forgotten by the State itself in their countries.

This is not the case in Cuba, based on the inclusive character of the social policies adopted in Cuba since the start of the Revolution; it should be in our favor and that sector which we have today should be better included in the current policies and in those others that are in the process of being drawn up to make up the development strategy until 2030.

I don’t know, however, that there exists someone or some persons taking care of this segment that today generates 40 percent of the country’s employment.

Following I will tell a real story:

In a Cuban province which I won’t mention, there is a private worker who has been able to innovate and produce a group of food products with special qualities that serve as a supplement for the treatment of some food-related diseases.

I met him some years ago, when he was struggling to not have his business, which in addition benefitted children with certain dietary disorders, shut down. In the end he achieved it and his business is still alive.

Last year, he and his work team were able to process and sell more than 40 tons of food consisting in the paste or puree of some vegetables (it’s the figure he gave me). It is a considerable amount.

However, as a private worker, he continues in the same condition of legal limbo, depending on circumstantial interpretations or states of mind.

While the country spends dozens and hundreds of thousands of dollars importing those same products, he, however, doesn’t have the facilities to purchase the appropriate containers, label his products in a modern way, etc.

He can even less import or contract new machinery. His small business is not included in the program of import substitution! And of course, he does not benefit from that program’s incentives, if there were any.

He has no facilities to grow, qualitatively or quantitatively. He is not part of the state program for the development of the mini-industry!

In short, he gets a marginal treatment; he works in a legal limbo and has to be careful to not raise suspicions associated to his success as a private entrepreneur.

My friend is highly qualified in the activity he carries out. He was, in his time, around the 1980s, a student who benefitted from higher studies in a country of the socialist camp. He studied his specialty there.

Today he is applying what he learned, contributes to his province’s economy, produces the necessary products for a healthy diet, pays taxes and employs his compatriots. I don’t know how much wealth he has amassed, but I do know that he contributes to his province’s economy.

What is distorted here? Self-employment and the new cooperatives, or the regulations that marginalize him and continue distant from the basic idea of integrating him to the general dynamics of the national economy and to the process of the construction of a socialist, prosperous and sustainable society?

Is it that fear that persons accumulate wealth through their work and aptitudes to develop a business – and to make a business grow and improve in another way – will lead us to renounce one of the probable influences for growth?

Cuba already went through the experience of the marginalization of what was private and as part of that process, the marginalization and demonizing of self-employment.

During all these years, since the 1960s, we have lived a love/hate relationship, of negation and acceptance, which began when after the “Revolutionary Offensive” – just a few years later -, it was recognized in the official documents of the Communist Party that mistakes of economic romanticism had been made.

However, we have never been totally consistent with the recognition of that mistake and the policies have always stayed halfway in the attempt to right it.

No one has calculated the cost of the indecision, but we could make an approximate estimate.

Let’s look at how much the State pays in wages in the “Commerce and repair of personal effects” sector; a weakened sector, absolutely not strategic, which doesn’t decide anything about the future of national development or security.

Let’s see how much that sector costs us, a sector that today employs 457,200 persons, almost as many as the education and health sectors and 16 times more than the science and technology sector.

According to the 2016 Statistical Yearbook of Cuba (chapter 7, chart 7.4), the monthly average wage in the “Commerce and repair of personal effects” sector that year was 717 Cuban pesos (CUP), a 27 percent increase in relation to 2014 (when it was 566 CUP) while the monthly average wage in the education sector was 533 CUP, 184 CUP less than the Commerce sector, and its increase in relation to 2014 was 1.1 percent.

Estimated by the author by multiplying the monthly average wage per amount of total workers in each sector. (Statistical Yearbook of Cuba, chapter 7, charts 7.3 and 7.4)

Estimated by the author by multiplying the monthly average wage per amount of total workers in each sector. (Statistical Yearbook of Cuba, chapter 7, charts 7.3 and 7.4)

MONTHLY AVERAGE WAGE
TOTAL PAID TO THE SECTOR OF:

COMMERCE AND REPAIR OF PERSONAL EFFECTS: 327 MILLION CUBAN PESOS.

EDUCATION: 269 MILLION CUBAN PESOS.

SCIENCE AND TECHNOLOGY: 28 MILLION CUBAN PESOS.

———-

AT PRESENT, 19 FOREIGN CHAINS OPERATE IN CUBA IN TOURISM THROUGH 85 HOTEL MANAGEMENT AND MARKETING CONTRACTS

AND THEY ARE RESPONSIBLE FOR 42,275 ROOMS (62.2%)

On the other hand, 317.2 million CUP were spent on Social Assistance in 2016 (2016 Statistical Yearbook of Cuba, chapter 7, chart 7.15), while the annual wage paid in the Commerce Sector was 3.924 billion Cuban pesos.

If the priority means among other things the assignment of resources, if among those resources are the monetary resources, then one would have to say that the “Commerce and repair of personal effects” sector has more priority than Education, than Health, and the benefits of Social Assistance.

If it’s a question of employing those persons, or of not leaving them unemployed, then think that the sane employees could become cooperative members or private workers.

If it’s a question that from the income the State gets – 70 percent of the Cuban family’s consumption spending is carried out in the state-run commerce sector – there are sufficient fiscal instruments to achieve it, in addition to the fact that the cost of obtaining those incomes (wages for employees, state investments in the sector, spending on electricity, water, etc., plus the cost of the systematic theft of products) would be substantially reduced.

On what is it more adequate to spend that money to achieve our vision of country? Isn’t it perhaps better to use it on schools and hospitals, pay better wages to the primary education teachers, the doctors, our scientists, or continue paying wages and investing in sectors that are not decisive for the nation’s development, strength and security?

How is it possible than in such a decisive sector as tourism forms or types of businesses where the public and the private coexist have been adopted and that they add to the country’s aims and in this other sector, which we all recognize as non-fundamental and with low productivity it is not possible?

In tourism, there are more than 64,000 rooms in three-, four- and five-star hotels. Out of those rooms, thousands are under foreign management contracts, which is a formula in which the “public or state-run” – in this case the ownership of the hotel and the investment made in its construction – is in the hands of the State and the management is in private hands (Meliá, Iberostar, etc.).

Why can’t that same type of associations be made in other “non-fundamental” sectors and the Cuban non-state sector?

Source: Cubadebate, “National Assembly: ¿Cómo se ha comportado el turismo en Cuba?” December 20, 2017.

In the same way, in transportation, non-state forms together with state means, assume today an important part of passenger transportation.

The economy only exists if the adequate institutions exist. It depends on those institutions, that is to say, on the rules of the game, which must create above all incentives, confidence and guarantees for the future.

Without them there will be no economy, neither state-run, nor private, nor joint or better said there will be some type of economy that will be barely able to meet its task or that will divide the country into circuits or stagnant compartments with high costs in effectiveness and efficiency and will distance it from the goals it has set for itself.

The economy is, as we all know, an essentially political matter.

Finding the coherence between both types of institutions (the political rules of the game and the economic rules of the game), achieving that the intersection between both be evermore bigger and point to the purpose of wellbeing and prosperity, of equity and social justice, of productivity and efficiency, with the participation of all the economic agents, is one of the most difficult exercises than can be attempted, but the attempt must be made and the sooner the better.

Only this way will the private worker from that province be able to at last become a small entrepreneur, will have the appropriate relations with suppliers, will be able to invest in improving the technology, will innovate in new formulations and perhaps, why not, export his products to some of the Caribbean islands. His contribution to prosperity, growth and development of his province and his country would be greater. Am I too much of a dreamer?

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