HAVANA CUBA.- In November 2021, Richard attempted to negotiate a tender with Communist Party officials in the Diez de Octubre municipality, south of Havana, to open a grocery and beverage store, located less than a hundred meters from the busy Esquina de Toyo, the epicenter of the massive protests of 11J.
His proposal was rejected. “It was a solid project that would provide jobs for twenty young people in the area with salaries between 20 and 30 thousand pesos a month. The strategy was to open a wholesale market, with a retail stand and later open a bar and a pizza and sandwich shop. We had chosen an old abandoned warehouse next to a foreign currency store. Since it was a state establishment, a rental permit was needed. In any normal country there is a commission that studies the proposals and chooses the one that best suits the community, generates the greatest number of jobs and taxes to pay,” explains Richard.
“But Cuba is not a normal country. And to get your business approved you have to give ‘gifts’ to municipal officials. I spent close to 5 thousand dollars on cans and bills that I passed under the table. I had to explain even the smallest details of how the business would work. When it seemed that they were going to give me the OK, a higher authority in the government disapproved of my initiative. They claimed that by selling cheaper products at wholesale prices than in the MLC store next door, that would cause them to lose customers and the government would receive less foreign currency. I believed that story. A year and a half later I found out that a retired colonel from the FAR copied my idea and opened the store selling at wholesale prices without any problem. In Cuba we are not all equal,” says Richard.
Let’s call him Frank, a Cuban resident in Europe, who despite suffering what he considers a dispossession (they confiscated a restaurant from him), continued with his project of an MSME together with several foreign partners based in Havana.
“I have lived abroad for twenty-five years. I was always interested in investing in my country. When the MSMEs were approved, I spoke with a couple of acquaintances who have businesses here about the possibility of supplying them with top-quality food and drinks. They agreed. I repatriated, they approved my business and everything was going swimmingly. Two years earlier I had opened a paladar (private restaurant) in the name of a relative. The paladar was a success. Even during the pandemic we had home delivery sales at an acceptable level. But a party official from the Mayabeque municipality liked it and started a legal persecution against my business, abusing her position. In the end, they closed the restaurant. The following year it opened again. Do you know who the owner was? The husband of the party official in Mayabeque,” says Frank, who accepted the theft because he had already invested thousands of dollars in importing products to Cuba.
“I started to operate again, but with greater caution. I am taking the profits out of the country and gradually withdrawing from the scene. I am not surprised by this state hunt to cap prices and to control MSMEs even more. The real background is to take out of the game the independent businesses that are not supervised by the government. A group of MSMEs, the most important ones, are connected with influential officials and nobody messes with them. These price regulations do not affect them, because they directly import containers of chicken or beer and sell wholesale to retail businesses that are the ones that must lower their prices. Almost all state establishments converted into MSMEs are an alibi where former party officials or trusted military officers change the financial scheme. And they go from depending on the government budget to being independent.”
Where does the capital come from? I ask him. “Nobody knows. As if by magic, an apparatchik appears, a former diplomat or a retired captain from the MININT with enough dollars to start a project in the field of construction, transportation or software export. These people have no competition and nobody harasses them. So far this year they have spent between 20 and 30 million dollars buying cars in the United States. They are busy buying bankrupt businesses and houses. They live like oligarchs. Behind these regulations and prohibitions there is a government purpose: that a group of businessmen authorized by them concentrate the largest possible amount of business and capital. Russian style,” says Frank.
Eusebio, who converted his garage into a small market selling groceries, toiletries and drinks, smiles ironically when asked about price regulations and the six decrees approved on July 13 by the Council of State, which impose more control and relegate the private sector as a mere complement to the economy. “A good part of Cubans are naive people. Time and again the government uses private businesses as hostages in times of crisis. The ideology that sustains the regime sees private individuals as alleged criminals. At present there are 11 thousand MSMEs. But let us not forget that in March 1968, Fidel Castro closed more than 68 thousand small businesses in one night. In the 1980s he allowed private agricultural markets and crafts fairs and then put many in jail, accused of illicit enrichment.”
“In the 90s, during the Special Period and after the Maleconazo, on August 5, 1994, with blackouts just like now, for twelve hours a day and also with people fainting from hunger in the streets, they allowed self-employment again. But with high taxes, inspections and regulations they suffocate private businesses. With the MSMEs off their radar, it was known that the same thing was going to happen. They (the regime) say it actively and passively. It appears in the Guidelines of the Communist Party and in the Constitution that they created to their measure: they will not allow the concentration of property or enrichment in private businesses. They play with their cards face up. I do not understand how Cubans abroad and in the White House fall into the government’s trap. Those of us who live in the heat, like me, who have no relatives in Miami or Madrid, take advantage of any loophole to open a small business and earn money that can help us emigrate,” argues Eusebio.
“SMEs are part of their tricks. More smoke than reality. In the Dominican Republic there are more than half a million SMEs. According to experts, 40 percent of SMEs are forced to close in their first year. You have to be very creative and open a niche market in a place where on one corner there is a National Supermarket and on the other a Carrefour. In Cuba, if the government had a democratic spirit, in these three years a million small and medium-sized businesses would have opened. And many could get ahead thanks to the inefficiency of state companies and food production that is bankrupt. But there are only 11 thousand. And probably half of them are their cronies. There is a reconversion of the economic model. In the future, the private sector will be owned by former generals and high officials of the regime. That is what is coming. The rest will only be allowed to be subsidiaries, to earn a few pesos so they do not die of hunger. These price caps, as if the money we invest were theirs, in a country where banks do not sell foreign currency and we must buy it on the street at three times the official rate, are to tear the heads off a group of businesses that overshadow them. We Cubans are already accustomed to these swings of the State. The solution is simple: to move the business from legal to illegal,” suggests Eusebio.
Yamila, owner of a Shein clothing store, believes that these new price regulations will cause many businesses to close. “The government’s first declaration of war on MSMEs, non-agricultural cooperatives and self-employed workers was when in January 2023 they imposed a limit of 80 thousand pesos per day in sales and 120 thousand per month. Any more or less successful business sells 200 or 300 thousand pesos in a day. Then came banking and now the increase in taxes on finished products and on the income of the workers we hire. They are very clever. Instead of deploying a police operation to confiscate your business, they attack you with the tariff weapon to suffocate businesses and generate losses. Before, a worker paid 5 percent of his salary in taxes. Now he must pay 20 percent. If you earn 30 thousand pesos, the Ministry of Finance takes 6 thousand pesos from you,” describes Yamila.
“And the taxes on most small businesses that import goods that are not of interest to the government are raised by 50 percent. It is incredible. They attack private management that has created 1.6 million jobs with a 35 percent tax on profits, another 10 percent tax on sales or services rendered, a 5 percent tariff on the use of labor, paying one percent to support local governments and social security contributions equivalent to 14 percent of the workers’ salary. In addition, the owners of MSMEs have to pay up to 20 percent in taxes on dividends. All these payments are to prevent you from earning a lot of money. The Cuban government is allergic to wealth. Except for them,” concludes Yamila.
Entrepreneurs consulted for this article agree that the new price regulation could increase the food shortage and inflation. Three days after the regime capped the prices of six products, Diario Las Américas visited several markets in Havana and did not find any cut chicken, powdered milk or oil. Now they can only be bought in the informal market.