Cuentapropistas in court

Cuba’s Supreme Court issued a decision about court cases involving entrepreneurs, trabajadores por cuenta propia, that clarifies how their cases should be handled.

It can be found in the Gaceta Oficial, the January 23 issue, decision number GOC-2019-89-O2. There is also an explanatory article on the court’s website (didn’t know they did these) written by Liliana Hernández Díaz, the chief judge of the court’s division that handles economic matters (Presidenta de la Sala de lo Económico).

The decision is procedural. Apparently there have been many cases involving disputes between cuentapropistas, and between them and clients and creditors. The decision clarifies that these cases should be heard and where they should be assigned.

It also says that in contract disputes, as the judge puts it in her article, that when it comes to contract disputes, cuentapropistas “litigate under equal conditions and respect for rights and procedural guarantees as state enterprises and other legal entities and economic actors.”

So while they remain – for now – individuals with licenses as opposed to legally constituted businesses with personalidad jurídica, they have standing in court when it comes to contract disputes.

"Private property" in the constitution

Before and since the proposed new Cuban constitution (pdf) was released, there has been lots of talk about how it “could permit owning private property,” as a Washington Post editorial put it.

Sure enough, it deals with private property – but not exactly in that new-dawn-of-private-property way, which wouldn’t make sense because it is already permissible for Cubans to own private property, as we use the term. The vast majority of Cuban homes are owned outright with property titles and since 2011, residential properties are bought and sold on the open market. Many but not all individual farmers own their land and homes outright. Cars are owned and traded. Personal effects, of course, are privately owned.

What the new constitution does is to enumerate different kinds of property – and among these, to draw a distinction between personal property and private property. (See paragraphs 93 and 94 in the text linked above.)

The distinction is immaterial to a capitalist but significant to Marxists, and it goes like this: “personal property” refers to personal effects that have no economic purpose, while “private property” is defined as private ownership of means of production.

Hence a socialist constitution that stresses the state’s predominant economic role will also enshrine this concept of property, and with it the private sector’s role in the economy.

A narrow way to view this is that the constitution is catching up with reality, because private entities, both individuals and cooperatives in farming and other sectors, already own their means of production.

Another way to view it is as a more solid legal foundation for future legislation governing the private sector, such as the pending laws on enterprises and cooperatives.

If, that is, the Cuban government decides to take advantage of it when it comes time to write those laws.

A win for the control freaks

Cuba has legalized the operation of private bars where a maximum of 50 customers can enjoy alcoholic beverages “in their natural state or in cocktails,” and there can be recorded music, or live performances as long as the artists are hired in full compliance with Ministry of Culture regulations.

This is a trivial aspect of Cuba’s new small business regulations, and like many over the years it legalizes something that has been going on already.

But it makes you think back to March 1968 when Fidel Castro railed against private bars and other businesses during his Ofensiva Revolucionaria (see speeches here and here). He professed shock that there were 955 bars in Havana. He disclosed that undercover investigations found that 72 percent of their patrons “maintain an attitude contrary to our revolutionary process” and 66 percent “are anti-social elements.” He didn’t like other private businesses either, nor the people who ran them. His speeches often included the descriptor “lumpen.”

So he closed virtually all Cuba’s remaining private businesses, tens of thousands of them, including all the bars, because of a perception that they weren’t needed and they engendered the wrong kind of thinking.

So if you root for the privados, 1968 is the low point in the Cuban government’s long struggle to figure out how much private property and private enterprise are to be permitted in the socialist system.

And 1968 is why Cuba had just a few thousand private businesses when it opened up trabajo por cuenta propia in 1993, and it’s why when Raul Castro took office a decade later and took a fresh look at the economy, he noted that the government was unnecessarily and badly running state enterprises to provide almost every service: repair services of all kinds, worker cafeterias, beauty and barber shops, etc.

No one ever made a speech that explicitly threw the thinking of 1968 out the window, but that is what happened when small enterprise regulations were significantly liberalized in 2010. Individual entrepreneurship has since quadrupled in Cuba, from about 150,000 to nearly 600,000, now comprising 12 percent of a labor force where about one in three persons is employed outside the state. These entrepreneurs are essential sources of job creation, tax revenue, and services. Their bed-and-breakfasts sustain tourism centers such as Trinidad and Vinales where hotel capacity is minimal. They are in every city and dusty small town, with the common characteristic that they improve family income, usually quite a lot.

The new regulations (linked here), a package of new norms signed by Raul Castro and various ministers between February and July, are advertised as “updating, correcting, and strengthening” trabajo por cuenta propia.

Actually, “controlling” might be a better word.

New rules coming for Cuba's entrepreneurs

The news starts about ten paragraphs into this Granma story on a Central Committee meeting on economic policy. New “legal norms” affecting Cuba’s more than 580,000 cuentapropistas have been signed and will soon be issued, and there will be some kind of “training” for them and 30,000 officials, presumably to promote tax and regulatory compliance.

Apart from that, monetary unification remains a high priority, there are plans to continue investing in the industries (construction materials, etc.) that enable improvement of housing stock, and work continues on constitutional reform to make Cuba’s constitution reflect “the principal economic, political, and social transformations” resulting from the last two party congresses. No mention of term limits or new laws governing the election process, comminications media, or non-government entities, all of which have been said to be under consideration.

Reuters story here.

A wholesale market!

Granma reports that the first wholesale food market has opened in Havana, fulfilling a longstanding policy commitment to create wholesale supply outlets for the growing private sector.

For now, the clientele will be restricted to non-farm cooperatives (former state restaurants converted into private cooperatives). Later, it will serve entrepreneurs renting space in state facilities, and it makes no mention of serving the thousands of private paladares and cafeterias that also need access to these supplies – not to mention their customers who would appreciate lower prices, and Cuban consumers who don’t enjoy seeing entrepreneurs at their local food store buying 12 cases of beer or 10 kilos of cheese at a time.

Every time the subject comes up, Cuban officials speak of the need to move gradually, and they express worry about the cost of excess inventories in their retail system (for example, here and here and here). So it’s not surprising that stores will only open in other provinces after this one in Havana is in a state of “optimal functioning,” an official explains in the article.

But it’s a start.

An opening to apps developers? (Updated)

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The February 26 issue of Cuba’s Gaceta Oficial contains a September 2017 resolution from the communications ministry (No. 256/2017) that appears to allow both enterprises and entrepreneurs who are licensed to work as programmers to develop and sell applications under that license, if they apply for a separate permit for that purpose.

I say “appears” because it would be nice to have some coverage in Cuban media or a policy statement that explains the intent. But the resolution’s language is clear, and it looks like a positive step at a time when the wind is blowing in the opposite direction. Cuba’s IT sector is proficient but its commercial activity has been restricted to state enterprises. If this is a recognition of the value of young UCI grads developing apps on their own, then it’s a sign that someone is doing something about a self-imposed obstacle to innovation, economic development, and smart young Cubans staying in Cuba. Let’s hope it continues.

Update: The Ministry of Communications published the resolution here.

A step back, a step forward

Cuba’s boom in small enterprise has given new jobs to nearly 300,000 workers since 2010.  There are now 436,000 working in this sector, one part of a growing private sector that includes private farmers and a growing number of private non-farm cooperatives.  (Last week, 73 new cooperatives were created, 41 of which were formerly state enterprises and 32 are start-ups created by citizens who joined together and filed an application to create a cooperative.)

Apart from new restaurants and cafeterias, small-scale stores are one of the most visible changes that one sees all around.  Taking advantage of connections abroad, and now taking advantage of their ability to travel abroad, many entrepreneurs set up places where they sell imported merchandise.  An example is shown in the photo above, taken in June in Havana – a typical front-porch store with hundreds of garments flown in from Miami. 

For stores like these, the party seems to be over as the state is re-asserting its role as the sole importer.  Entrepreneurs with licenses as seamstress or tailor will no longer be permitted to sell imported goods, which will likely return things to where they were before – a much smaller-scale business where people sell person-to-person, not in streetfront stores often set up in porches or rooms rented from someone whose house is in a good location.  The government is also moving to end the resale of hardware items and other goods bought in state stores.

With that step back, there’s also a step forward.

New regulations issued last week expanded the list of approved lines of work to 201.  Among the 18 new ones are real estate agent, farm produce wholesaler, and building construction and repair – all activities that have been going on already, but now can be licensed in the open.

See coverage by Reuters, AP, AFP, and Granma.

Odds and ends

• Juventud Rebelde: There are now 436,432 Cubans working in the small entrepreneurial sector, nine percent more than were working last November.  18 percent of that number are employees, mainly in food service and transportation businesses.

• Reuters: 46,662 Cubans emigrated in 2012, the most since 1994.

• In Havana Times, Emilio Morales of the Havana Consulting Group estimates the economic impact of the half-million U.S. visitors to Cuba each year.

• In the Herald, columnist Fabiola Santiago writes that it is wrong for the United States to be granting larger numbers of visas for Cubans to visit or immigrate to the United States at a time when the Cuban government is engaged in misdeeds.  It’s hard to find a clearer argument in favor of punishing the people for their government’s actions.  Ugly.  She doesn’t mention ditching the sacrosanct Cuban Adjustment Act.

• Buy a fake birth certifícate for $10,000 or more, get yourself a bad sunburn, and present yourself as a Cuban – CNN on how non-Cubans fake Cuban citizenship to gain admission to the United States.

• CNN: Alan Gross was examined by U.S. doctors who traveled to Havana last month.  Background from last fall here.

• Internet monitor Renesys says that the Internet is getting faster in Cuba as satellite links are increasingly replaced by undersea cable connections.  (If you read the report, “latency” refers to speed of connection between a user in Cuba and a point outside Cuba; lower latency means higher speed.)

• Reuters on slugger Jose Daniel Abreu of Cienfuegos, who left Cuba and seems headed to the big leagues.  More from USA Today.

• This letter to the Economist from Stephen Purvis, the British businessman released from jail in Cuba, is well worth reading.  Note his observation that more are in jail than have been reported, and that there seems to be a particular risk for those who don’t come from Brazil, China, or Venezuela, i.e. those whose investments are not part of a government-to-government assistance program.

• AP: Some munitions are turning up in the Panamanian search of the seized North Korean freighter.  Panama’s work is done, CNN reports, and UN offials are now examining the cargo.

• Florida International University is digitizing interviews from its oral history project and has posted two about Operation Peter Pan: with Monsignor Brian Walsh and James Baker, director of an American school in Havana, both from 1997.

• Cuban American trumpet virtuoso Arturo Sandoval will receive the Presidential Medal of Freedom.

429,458 entrepreneurs…

…triple the amount that was working in late 2010.  The figure comes from a labor ministry report cited by Xinhua.

This sector is not the solution to all Cuba’s economic problems, but it is the most visible reform, changing the look of every town and the job options of people across Cuba.

A course for entrepreneurs

On her Twitter feed, Yoani Sanchez posts a photo of a sign announcing a training course for entrepreneurs in a Santiago church.