The Communist Regimea€’s First Measures for Cuban Entrepreneurs: A Small Step

Passengers getting out of a private shared-taxi operated by a ‘botero’ in a time before the Covid-19. (14ymedio)

14ymedio biggerElías Amor Bravo, Economist, March 21, 2020  — Gradually we are learning about some of the measures the communist Cuban government is using to reduce the impact of COVID-19 on the activity of the private sector on the Island, led by the small businesses of self-employed workers.

In particular, apparently the Regime has approved a series of tax, work and lending measures that, generally, resemble those that other countries have adopted for self-employed persons and independent professionals. The details are given below.

The measures have already received positive reviews by some Cuban businessmen on Twitter and are considered “an important support for the thousands of enterprises that right now are completely affected by the world epidemic situation,” says Oniel Díaz, co-founder of AUGE and MP de Kreab in Cuba, which does consulting for private businesses.

“Furthermore,” he adds, “it was a wise decision for the prime minister to obtain cooperation from the private sector to make it possible for the more than 11,000 tourists who are staying in private rentals to leave Cuba. It’s not a minor detail.”

And, he emphasizes finally, that “cooperation, alliances and dialogue are the tools we have at hand to face together, in addition to this challenge, everything  ahead of us on the national economy front.”

I’m afraid that we must greatly lower expectations and say that with these measures, what’s most probable is that the entire Cuban private sector will have to struggle with an elevated mortality rate for small businesses and establishments. I have the impression that the measures have been designed specifically for the tourism sector, and they haven’t taken into account the fact that self-employment in Cuba is really much more diverse and varied, fortunately. What we need is reflection and a more accurate approach.

I understand that mortality won’t happen, for example, in the case of the high official of the Regime who rents rooms in his residence in Havana’s Plaza or Miramar neighborhoods to foreign tourists, because the income he gets from this activity complements his salary, which is higher than average. And he can even benefit from the fiscal cuts announced, because foreigners are not going to be arriving in the next months and his income will be temporarily crushed. The renegotiation of a loan, for those who are credit-worthy, can also benefit him.

In the case of many retired business people, the impact of COVID-19 and the measures detailed below can be inconsequential if the government keeps their employment and salaries intact.

Those Cubans who bet exclusively on self-employment activity and not only on tourism will have problems.

We are thinking, for example, about the thousand brave Cubans who travel every day with Spanish passports to the duty-free zones in Cancún, the Dominican Republic and even Haiti to bring back every kind of provision to be sold on the island. The brakes will abruptly be put on this channel because of the general closing of borders, and this was the main way for many small businesses to get goods and services. Without this supply, more small businesses will fail, since we can’t wait for the Communist Regime to improve the logistics of distribution in Cuba.

And what can the tenant farmer hope for when he can’t find the supplies he needs for production in the local economy? He has been forgotten, except for his debts with the bank which could be renegotiated. The crops will have to be harvested and brought to the markets, and in a situation of isolation and extreme hygiene measures, you have to ask what will happen to the small business workers who bring the merchandise and food to homes, like the pushcart vendors.

Even the brave taxi drivers (known as “boteros” or “boatmen”) in the Havana tourist zones could benefit from the planned measures for the reduction of income or exchange for credit, if they existed. In this case, the question is that if the boteros not only drive tourists but also a good part of the population, why is adequate public transport lacking? When isolation begins and the demand for national trips no longer exists, the situation will be much more serious. It won’t seem fair to the boteros, and they are right to ask why their monthly taxes aren’t reduced by 50% like they are in the case of food service activities. Why not them, too?

With these considerations, what I want to convey is that the measures of the Cuban Communist Regime are interesting for private tourism and are focused on something less than 3% of the economy’s GDP. The private activity in restaurants and lodging are important, but the reality is that most tourists stay in the hotels owned by the conglomerates of State Security and the Army, and they use the services of these networks.

The rest of the rich and varied private economy of professionals, designers, sellers and providers of personal services, in the spheres described and in others, find themselves abandoned and with an evident lack of response on the part of the authorities, who should be planning as the crisis advances. If this continues, the emerging private sector in Cuba will be pitiful after COVID-19.

Taxation

  • Extend the time for tax payments for businesses that suspend activity on their own or by governmental decision.
  • Reduce by 50% the payment of monthly fees for food service activities.
  • Authorize a reduction in monthly fees for administrators of tourist centers and sites with a high concentration of tourists.
  • Decrease to one single minimum payment the tax on bank accounts.

Employment

  • Protect the salary for contracted workers who continue to work at no less than the minimum wage of the country.
  • Extend the period of authorization for designated workers who fill in for an owner who is out of the country and unable to return for 3 months.

Loans

  • Stop collecting on authorized loans that can be restructured.

Translated by Regina Anavy

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