Tuesday, December 11, 2012

Cooperatives law aims to boost private sector jobs

Cuba’s turn toward a larger private sector has depended so far on small-scale entrepreneurship and the expansion of private farming.  Employment in the small entrepreneurial sector has grown from about 140,000 in 2010 to 395,000 today, benefiting from liberalized regulations that allow the hiring of employees and more favorable tax treatment than before.  Private farming has expanded with the distribution of 170,000 parcels of government land in no-cost leases.

But these steps are not enough to meet the government’s goals for reducing state payrolls and creating large numbers of private sector jobs. 

With new laws published today in the Gaceta Oficial and summarized in Granma, the government is taking the next step: the creation of private cooperatives outside the farm sector.  This action, one more step in the implementation of the 311 economic and social policy reforms approved in the 2011 Communist Party Congress, opens the door to the creation of a small and medium-sized business sector in a socialist style, organized in the legal form of cooperatives where each member has one vote. 

I’ll get to the fine print in the actual laws, but for now, from Granma’s summary, this is a substantial step forward:

·         Soon, about 200 coooperatives will be created around the country in transportation, food service, fishing, personal and domestic services, recovery of raw materials, production of construction materials, and construction services. 

·         The cooperatives “will not be administratively subordinated to any state entity.”

·         Earnings will be taxed at rates lower than those charged to small entrepreneurs.

·         The cooperatives will set their own prices (except in unspecified cases where the state controls prives) and decide on their own how to distribute revenues among their members.

·         It is not clear if there is a list of permitted lines of work in which cooperatives can engage.

·         Good news: Start-up cooperatives are allowed where three or more persons decide to form one.  Applications are submitted to local government offices and – bad news – go all the way up the chain to the Council of Ministers for approval. 

·         Cooperatives can compensate members for goods that they bring to the cooperative.

·         There is an unspecified limit on the hiring of temporary employees in order to maintain the character of cooperatives where all who work in them have a vote in their governance.

·         Some cooperatives will be formed by converting state enterprises into cooperatives.  First preference will be given to those already working in the establishment and who wish to try the cooperative arrangement.

·         A bidding process is established to lease idle state installations to newly formed cooperatives.

More later.

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