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Cuba Legalizes Small And Medium Private Companies

BySam Brad

Aug 14, 2021

Thousands of private companies will be able to join the Cuban market in the coming months. This reform becomes one of the most important measures taken by the Government of the island in the last 60 years .

In this way, President Miguel Díaz-Canel will allow micro, small and medium enterprises (MIPYMES) to have the character of private companies. Thus, the Cuban leader has taken a step forward with regard to self-employment, allowing the creation of new businesses , which may also be mixed.

Companies will have to compete to survive
According to Cuban economists, this initiative allows certain economic activities to be decentralized and, also, that those that are subsidized begin to be profitable. In the hospitality sector, for example, thousands of companies financed by the government will have to close or, failing that, will have to become cooperatives or private companies to stay .

That is, those activities that until now survived thanks to a state subsidy will begin to play it in the market taking the character of private company to compete with the rest of the sector, which will maintain certain public companies, according to a manager involved in the process interviewed by Reuters .

For 60 years, most of the Cuban economy fell into the hands of the Government, except for a reform that was carried out in the 1990s, which approved the creation of small companies strongly regulated by the State . An initiative that has achieved that, currently, a third of the 4.9 million Cubans employed are under the umbrella of the private sector.

A reform to alleviate the impact of the coronavirus
This reform by Díaz-Canel responds to the bad times that the island is going through, economically demolished by the pandemic. The creation of a private sector, which will allow setting prices, importing, exporting, receiving foreign capital and basically playing with the rules of the free market, will serve to attract to Cuba the resources that it does not have right now , such as food, medicine and other basic goods.

Resources that perhaps could not be obtained from the public sphere due to the economic and commercial blockade of the island.

“It is a starting point for a new stage in the diversification of the economy and its development, in order to make the most of its potential, ” the Minister of Economy, Alejandro Gil, also added that the reform would boost employment and allow for the economy to grow stronger as the pandemic progresses.

Entrepreneurs will have certain restrictions
It should be noted that, despite the freedom that Cuban entrepreneurs and businessmen will enjoy compared to past decades, they will have two important restrictions.

In an attempt to ensure that an entrepreneur does not bring together a majority segment of the market in a sector and prevent him from diversifying his activity in other sectors, reaching a social and economic power that the Government is not willing to endow him with, Cuban administrators have prohibited these companies from have more than 100 workers . Furthermore, entrepreneurs may not own more than one company .

“With this opening, in a few years the non-state sector will represent more than 50% of total employment in the economy,” said Pavel Vidal, a former Cuban central bank economist who teaches at the Pontificia Universidad Javeriana de Cali in Colombia.

Sam Brad

The Great Writer and The Passionate Poet As Well, He Graduated from University Of Florida in Journalism and Brad have around 12 years of experience in news and media section.

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