HAVANA CUBA.- After opening the rusty padlock placed at the entrance of the destroyed premises, the door frame fell off and an army of rats scared by the light ran to take refuge in any hiding place. In addition, the ceiling beams were loose and damp patches covered the entire side wall. Osmany, owner of the winery located west of Havana, tells more details about his business.
“We removed a ton of dirt and spent two months cleaning the place. I invested the equivalent of 90 thousand dollars in renovating that dilapidated warehouse. I had to pay under the table for the Mayor of the municipality and the ONAT (National Tax Administration Office) to rent the premises to me. When I bought the first two containers of food in Panama, the regulations then approved for MSMEs established one year without paying taxes. “Something normal in the world to try to recover the initial investment.”
“I hired a dozen employees with two twelve-hour work shifts, who on average earn 20 thousand pesos a month, three times more than a professional who works for the State.. They can also earn extra money based on sales. In a good month they charge 30 thousand pesos and at cost price they can purchase oil, powdered milk and some foods. They are happy and strive to treat customers kindly. My brother and I live in the United States and when we decided to open the business, the plan was that we could earn money legally and make a life plan in Cuba. I had friends who warned me: when these people (the government) see that you are making money, they will start with their prohibitions. And after four months the obstacles and prejudices began.”
Before the end of the twelve months since the MSME was formed, they removed the year of moratorium without paying taxes. And at the beginning of 2023 they decreed that they could sell up to 80 thousand pesos a day and 120 thousand pesos a month. A nonsense, because in one day sales exceed 200 thousand pesos (a little more than 750 dollars at the exchange rate in the informal market). The authorities increased inspections and controls and began to demonize MSMEs. Not all of them, since there are ventures that belong to relatives of government heavyweights, such as the business owned by Vilma, a granddaughter of Raúl Castro, and no one bothers them. “It is an offensive to take out businesses that are on their own and have no connections with the State.”
“Certain sections of the government are annoyed that MSMEs have caused the decline in sales in MLC stores. In its original design, the authorities’ strategy was for us to alleviate the deficit of goods and food, but without interfering with state chains. We have moved forward because we have a better business plan. We sell in pesos and at a better price than in foreign currency stores. If you compare the products sold in MLC against those sold in MSMEs, multiplying each dollar by 265 pesos, you will see that the price of our items is between 10 and 30 percent cheaper, despite freight costs, to state importers and high taxes. The government has always criminalized private businesses. “Instead of fighting misery, they persecute those who generate wealth.”
What could happen to entrepreneurs in 2024 when tariffs on finished products rise by 50 percent?I asked Osmany. “I am convinced that the majority of businesses that are not plugged in or have the approval of the government are going to go bankrupt or close. Many, like me, have still not recovered the initial capital invested in a destroyed State facility. Seeing the panorama, it is best to stop and see what happens. With this measure of raising taxes on imports of finished goods by 50 percent, they are opening the door to a new wave of migration. Many people who tried to create their life project here will now reconsider leaving the country,” he responds.
Josué, owner of a market south of the city, states that “it is unheard of that a government incapable of managing its companies and basic services, wants to dictate with laws what individuals should do. It is unacceptable. They do not have foreign currency to buy flour and make bread for the basic basket and they want us entrepreneurs to link ourselves with these institutions, making losses, just to fulfill their purposes. Some MSMEs have accepted this measure believing that they take off the pressure from the authorities. But no, because the government is very crafty. Due to high taxes and the absence of a legal exchange market, business owners are forced to buy foreign currency on the street. MSMEs sell at prices that state workers cannot afford. It is not our fault that the government pays them such low wages. My business is focused on the sector that receives remittances or has high incomes. “Those who have instituted a country with a ration book and socialized poverty are the regime, not private entrepreneurs.”
In his opinion, 2024 will be an even tougher year. “If we carry out the crusade against MSMEs and raise taxes on finished products, added to the rise in fuel and electricity prices, among others, many businesses will be forced to close, generating greater shortages. I don’t know what letter the authorities have hidden up their sleeve. I don’t know if they will rent the island to the Russians or the Chinese. But if the price of food and medicine continues to rise, street protests will most likely occur. The government is playing fast and loose if it applies a new socialist package,” says Josué.
Gustavo, an economist, agrees with many ordinary Cubans, who consider that “the strategy set by the government to stop the economic crisis, the fiscal deficit and inflation, contains numerous doubts and dangers. Self-criticism is still lacking. The egotistical behavior of ministers and senior officials is extremely irresponsible. Economics is a science, not a set of political doctrines. And improvisation pays dearly. The authorities must separate, once and for all, ideology from the economy. The correct and immediate thing is to liquidate the dysfunctional centralized economy, privatize and transparently tender the undercapitalized or loss-making state companies; give the lands to those who want to work it; authorize cooperatives – and other forms of association – without state interference, and definitively unleash the productive forces. The State must focus on creating opportunities for everyone equally, assisting the poorest and guaranteeing compliance with the laws.”
Economic statistics in the last six years show the structural failure of the welfare and Marxist model implemented by Fidel Castro 65 years ago. Let’s look at some numbers. Pork production decreased from a total of 199,700 tons in 2017 to only 16,500 in 2022. Egg production fell from 6 million a day in 2018 to 2.2 million in 2022, which is barely enough to distribute five eggs per person through the ration book. a month.
Six years ago, 300,000 tons of rice were produced, but due to a lack of fertilizer and fuel, production fell by 20 percent. The bean harvest in 2022 only produced 9 percent of what was achieved in 2016. In the livestock section the figures are shocking. Milk production has decreased by 30 percent compared to 2017. Last year, between illegal slaughter or due to hunger and thirst, more than 200 thousand cows and bulls died. Beef, oranges and seafood are luxury products for Cuban families.
The olive green dictatorship has to repeal more than one and a half billion dollars to import a handful of foods from the basic basket such as rice, peas, an occasional pound of Made in the USA chicken (which for two months they have not sold over the counter to the population adult) as well as the flour used to make the daily 80-gram bread roll also sold through the ration book, in force since March 1962.
State agriculture, despite owning 80 percent of the land, only produces 24% of agricultural food. The sugar harvest does not even reach 600,000 thousand tons per year for domestic consumption and fails to enter between 3 and 5 billion dollars into the public treasury, according to the current price of sugar on the world market. Until 2000, when the dictator Fidel Castro ordered the closure of one hundred sugar mills, the harvest produced between 5 and 7 million tons annually.
The difficulties in Cuba are an accumulation of absurdities in economic, fiscal and political matters that have caused a resounding fall in the local GDP and the devaluation of the currency. Wanting to blame the economic collapse on the embargo, COVID and the war in Ukraine is not serious. Cuba’s problems are systemic. There’s a solution? Of course. Finish burying Castroism and betting on the market economy. If it is accompanied by democracy, much better.
