Authorities investigate state-owned companies that pay “millions” to the private sector
14ymedio, Havana, 8 August 2024 — The leaders of Sancti Spíritus, Cuba, aspire to become the elite squad in the government’s crusade against MSMEs. President Miguel Díaz-Canel had asked, during a session in Parliament last month, to liquidate the “excessive payments from the state sector to the non-state sector,” a statement that was endorsed by Prime Minister Manuel Marrero, who accused the private sector of tax evasion and announced that measures would be taken.
The Sancti Spiritus branch of the Ministry of Finance and Prices echoes the “combat order” that the president issued at the time: “We know that there are leaders who, without having gone through the collegiate management mechanisms, have made the decision to establish contracts without looking at the prices that are being proposed to solve a problem, taking money from the budget and spending it excessively.”
With the 2024 ministerial resolution 209 in hand, the leaders warn that they will put a “stop” to the excessive payments that the Government has “detected.” These are nebulous “economic relations” between both sectors, whose accounts are not clear. “Today any state company or any budgeted unit hires a service or acquires a product from a non-state management form and pays million-dollar figures, so to speak, without pain to the disbursement of its state entity,” Miskel Acosta Paredes, director of Finance and Prices in Sancti Spíritus stated in an interview with Escambray, the local newspaper.
With 2024 ministerial resolution 209 in hand, leaders warn that they will put a stop to excessive payments
Acosta predicts radical control for “the economic contracting process with non-state forms of management for the acquisition of goods and services.” The confusion over “prices and rates” is over, he claims. With the new regulations, the profits that SMSEs benefit from cannot exceed 30% of the total costs and expenses.
The Achilles heel of the measure is that there is no way to avoid –in Acosta’s opinion– an under-the-table agreement between the heads of state companies and the owners of the contracted SMSEs, so that they approve one set of numbers and “in reality another figure is set” on paper.
The plan of the Finance and Prices department is to force state leaders to clarify their documents through a “list of attendance,” a kind of agenda where all meetings and negotiations with private companies will be set out. In this way, inspectors will be able to review the process step by step.
Acosta sees his colleagues in Finance and Prices as champions of the “protection of the company and the budgeted sector.” “They have money, a plan, a financial capacity and they have to defend it, they have to negotiate, they have to haggle, just as we Cubans do in our daily lives,” he asserts.
“Money without pain” – a phrase repeated by the leader – is proof of corruption, which “generates profits for some representatives of the state sector as well.” For Acosta, this situation will have to stop if the regulation is respected. “When we have reviewed reports from the Comptroller General of the Republic, a large number of alleged criminal acts related to contracting actions between non-state actors and the state sector have been detected,” he reveals.
State corruption also takes the form of “favoritism with certain non-state actors.” In fact, he says, “enrichment of people has been detected through the contracting of products and services.” The inspectors under his command, he says, will attack the accounting books of both sectors to guarantee what he considers to be their mission: the “tranquility and transparency” of the socialist economy.
State corruption also takes the form of “favoritism with certain non-state actors.”
Marrero and Díaz-Canel – in various speeches and parliamentary announcements – promised dark times for the private sector, to which the prime minister attributed the evasion of 50 billion pesos, “a third of the fiscal deficit” of the country. Something did not add up in the numbers –that same day it had been reported that the deficit did not reach 100 billion – but the message against the MSMEs was given.
“It is not clear how the emerging non-state sector would have been able to defraud the omnipresent Cuban government to the tune of 50 billion pesos,” economist Pedro Monreal commented at the time in X. “If that were the case, we would be facing a case of colossal governmental incompetence.”
The official economist Iliana Díaz had complained that same week about the “little battle” against the private sector. After diagnosing the “exhaustion” of the Cuban economic model in front of the cameras of Cuban Television, Díaz demanded a truce in the face of the numbers revealed to Parliament: 1,831 fines to the non-state sector, 115 regulations to small business owners who wanted to travel, 127 requests for temporary withdrawal and 24 for permanent withdrawal of the license to engage in economic activity.
The solution is not to ambush MSMEs with administrative measures, Díaz summarized, but to encourage their development and to not assume that the state sector – which has “functioned poorly ” for decades – is the cornerstone of the Cuban economy.
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