Havana. Almost two years after the new laws on the establishment of small and medium-sized enterprises (SMEs) came into force in Cuba, the government is planning changes to the existing regulations.
“It is now up to us to propose the necessary changes to ensure their effective integration into the economy and tangible benefits for the population,” Economy Minister Alejandro Gil said at a Ministerial Council meeting last week. For the forthcoming reform, the most important “results, deficiencies and obstacles” of the past two years would be evaluated. In addition, the minister announced that a new institute would be created to monitor and coordinate the new actors.
In September 2021, Cuba allowed the creation of SMEs in all sectors of the economy except for a 112-point negative list and reduced taxes. This enabled purely private companies with up to 100 employees in the socialist country to constitute their own legal entities for the first time. The aim of the “new economic strategy” announced in 2020 is to create comparable framework conditions for all economic actors so that they can interlock with each other and create synergies. To date, over 7,000 SMEs have been set up, employing 180,000 people across the country.
The partial dollarization of the economy and the existence of two exchange rates are still a major problem. Gil admitted that the currency distortions made it difficult to implement the desired cooperation between the various sectors. Contracts between the state and the private sector are currently mainly in foreign currency, which most private companies hardly have at their disposal. The newly created possibility of importing goods and intermediate goods often cannot be used in practice. In addition, there is a lack of start-up financing. The contribution of the new players to improving the supply situation has so far remained small.
In order to solve the problems, the government plans to implement a macroeconomic stabilization program this year, which envisages, first of all, changes in the foreign exchange allocation mechanism. The program is part of a comprehensive reform of state-owned companies, which will result in a new company law at the end of the year. State-owned companies are to be given more autonomy, and the provincial powers are to be strengthened. “Given the extremely difficult situation of our economy, we have to do things differently to achieve recovery and growth,” said Prime Minister Manuel Marrero.
Cuba plans to grow its gross domestic product by three percent this year. This can and must be done “in the midst of the global crisis, which is characterized by inflation, rising interest rates and a fall in investment,” said Economy Secretary Gil.
In addition, the island economy is suffering from the economic blockade imposed by the USA more than 62 years ago, which has also excluded Cuba from the global financial markets since ex-President Donald Trump listed it again as a “state sponsor of terrorism” in 2021.