Havana. Socialist Cuba is currently working on a comprehensive reform of state-owned companies. The upcoming “Ley de Empresas” is intended to replace the previous regulations for the management of the state enterprise sector. Representatives of the Ministry of Economics and economists involved in the reform presented the cornerstones last week.
Cuba currently has 2,417 state-owned companies. They employ 1.43 million people and generate 87 percent of the gross domestic product. State-owned companies account for 75 percent of all exports and 92 percent of all sales. The average monthly wage in state-owned companies was 4,856 pesos at the end of April, which corresponds to around 40 euros at the official exchange rate for the population of 120:1.
278 companies are constantly making losses, while 309 companies have sales revenues of less than two centavos per unit and are therefore practically stagnating. 80 percent of all profits are generated in just 56 companies.
Excessive bureaucracy, a lack of incentives and credit, and the limited scope of company directors were identified as the main problems. The aim of the reform is to make the state sector more competitive and to enable it to increasingly compete on the world market with export products. The previous gradual reform approaches are to be replaced by the new legislation.
The “Ley de Empresas” envisages providing three different categories of state-owned companies with appropriate management systems.
The first group should include well over 1,000 companies, which will be granted extensive autonomy. In the future they will compete with each other and obtain their supplies from the market. Insolvencies are also possible.
The second category includes monopolies, which include, for example, the state-owned energy supplier Unión Eléctrica or the oil company Cupet. This group of around 200 farms will continue to receive subsidies, but management autonomy remains limited.
The third group consists of heavily subsidized companies that make an important contribution to basic services. These include state pharmacies, opticians and municipal services. They should continue to work with fixed prices and predetermined salary tables.
The establishment of chain stores and state micro, small and medium-sized enterprises, which is already possible, should increase, and the opportunities for association between the various companies and with foreign investors should be simplified.
As the economist Ileana Díaz Fernández, who was involved in the reform, explained, the administrative allocation of resources is to be largely replaced by market mechanisms. Prices would have to perform a measure and signal function and provide managers with information to make decisions. They should “work in an environment in which they can make and execute business decisions and thus make a greater contribution to the country,” Fernández summarized.
“Negating the market is not the solution. The state needs to be able to compete with the private sector,” Cuba’s former economy minister, José Luis Rodríguez, said recently.
The reform is to be implemented “gradually”. An inventory is currently being carried out in the public sector, in the context of which the establishments are assigned to the various types. The draft of the company law is to be published in the coming months. Its adoption by the National Assembly is scheduled for December.
2023-06-29 03:22:36
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