Cuba to open economy to incorporate private businesses after half a century of communist economic suppression

Cuba to open economy to incorporate private businesses after half a century of communist economic suppression

Cuban entrepreneurs, running businesses ranging from selling dried fruit to repairing bikes and developing software, are scrambling to understand the opportunities and challenges ahead after a landmark change in the rules governing the Communist-run economy.

Earlier this month, Cuba’s government released regulations about reforms that would allow small- and medium-sized ventures to formally incorporate as businesses and access state financing, ending decades of classifying them as ‘self-employed’.

The measure is seen by many analysts as one of the most important reforms undertaken since all businesses were nationalised in 1968 by former leader Fidel Castro.

Economist Omar Everleny described the reform as “a very positive one, long-sought by many Cubans.”

The proposed reform does have restrictions however, people can own only one business and cannot contract foreign partners or carry out direct foreign trade.

"Given the economic situation and remaining restrictions, it will not mean a big economic improvement in the short term," cautioned Everleny.

For Nayvis Diaz, founder of Velo Cuba, a bicycle repair and rental company with 17 employees in Havana, it marks a significant change, however. "What is important is we are now fully part of the economy and no longer marginalised," she said. "Many people with a lot of social and business responsibilities in the city, and many others in the private sector, were waiting for this.”

The measure forms part of a package of market-oriented reforms undertaken by Cuban President Miguel Diaz-Canel over the last year, as the coronavirus pandemic and tougher U.S. sanctions tipped the shaky economy into a tailspin and led to shortages of food, medicine and other basic goods.

Cuba’s economy contracted by 10.9% in 2020 and shrank another 2% this year through June, compared with the same period in 2020. It remains reliant on tourism and imports.

Hundreds of small businesses have found niches in a state-dominated economy short on imagination and initiative: from gourmet restaurants and 3D-parts manufacture to software development, home delivery, landscaping and construction contracting.

The private sector, excluding farmers, has expanded since the 1990s to encompass more than 600,000 self-employed license holders. It includes small-business owners, non-agriculture cooperatives, their employees and members, tradespeople and taxi drivers.

Image: Anna via Wikipedia


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