Defining "Transformative"- Cuba Ratifies Decree-Law Authorizing SME's: Micro (1-10 employees), Small (11-35 employees), Medium (35-100 employees). The Private Sector Has Returned.
/Regardless of the reasoning, the rationale, by the Diaz-Canel-Valdes Mesa Administration (2019- ) in Havana, the impact of the decisions during the last three months relating to re-empowering and re-emerging private sector is for the Republic of Cuba both transformative and irreversible.
Significantly, the regulatory changes by the government of the Republic of Cuba provide the Biden-Harris Administration (2021- ) with additional basis for re-engagement to support the private sector by authorizing direct investments, direct loans, direct correspondent banking, resurrecting U-turn banking transactions, and re-creating an efficient electronic and transparent remittance transfer platform.
AFP
Paris, France
7 August 2021
On Friday night, the Cuban government ratified a decree-law authorizing the operation of private and state small and medium-sized businesses, a measure geared toward economic reforms in the socialist state, in which public corporation prevails.
“The State Council approved the Decree-Law on Small and Medium Enterprises, which facilitates their inclusion in a coherent manner in the legal system as an actor affecting the productive transformation of the country,” a note on the page stated. Website of the National Assembly of People’s Power of Cuba.
The decision, long awaited by Cuban businessmen, comes nearly a month after unprecedented demonstrations erupted on July 11 and 12, chanting “We are hungry” and “Freedom” in more than 40 cities on the island, leaving dead and dozens injured. Hundreds were arrested.
“For the Cuban economy, not only in the economic sphere, but also in the historical sphere, this represents a giant step that will have consequences in the medium and long term” to reshape the national economy, O’Neill Diaz, consultant, told AFP specializing in business development and communications and public affairs in Cuba.
In a regular session of the State Council, in which President Miguel Diaz-Canel participated via video link, other measures aimed at developing non-agricultural cooperatives and self-employed or self-employed workers were approved.
– ‘A very important moment’ –
The assembly decided that small and medium businesses could be government, private or mixed and that small businesses could have from one to 10 employees, small businesses from 11 to 35 people and averaged up to 100 workers.
Last February, the government expanded more than 2,000 activities in which freelance workers can work in Cuba’s controlled economy. The government indicated in June that some activities authorized for independent workers would not be included in the SME list, such as “computer programmers, bookkeepers, translators and interpreters, pet or pet vets, designers and certain types of consultancy”. pointed out. Although that will be determined in the regulations which should be published soon.
Prime Minister Manuel Marrero Cruz said last June that the expansion of activities by private actors “does not lead to a privatization process, as there are limits that cannot be crossed.”
For O’Neill Diaz, this is “a very important moment in which many entrepreneurs from the private sector have spent years striving, working and trying to contribute to the national debate.” The government has recognized that small businesses are already operating on the island in a “disguised” fashion, but the legal framework can generate greater interest in these businesses.
For the US business community, the Díaz-Canel government has made an “important decision that may re-evaluate business interests” on the island, the Cuban-US Economic and Trade Council said last June when the Cuban government announced it would regulate small and medium-sized businesses.
Cuba is accelerating its reforms, while facing a deep economic crisis due to the coronavirus pandemic that has hit the tourism sector, the engine of its economy, and in the midst of an economic embargo imposed by the United States that has tightened under the governments of Donald Trump and Joe. Biden.
Prensa Latina News Agency
Havana, Republic of Cuba
7 August 2021
La Habana, 7 ago (Prensa Latina) El Consejo de Estado de Cuba, en su más reciente reunión ordinaria, aprobó ocho decretos-leyes vinculados al cumplimiento de la estrategia económico-social del país, informaron hoy medios locales.
De acuerdo con Esteban Lazo, presidente de ese órgano, las normas relativas al desarrollo de distintos actores económicos y el ordenamiento de otras actividades, fortalecen la institucionalidad y permiten avanzar en la actualización del modelo cubano, publicó el diario Granma.
Entre las disposiciones se encuentra el decreto-ley que regula la creación y funcionamiento de las micro, pequeñas y medianas empresas (Mipymes), aprobadas por el Consejo de Ministros en mayo y que pueden ser de propiedad estatal, privada o mixta.
La nación caribeña aspira a que el impulso de estas formas de producción dinamice aspectos como la diversificación de los renglones productivos, los encadenamientos con distintas industrias y el fomento del empleo.
El Consejo de Estado también emitió una disposición para las cooperativas no agropecuarias, donde regula elementos como su constitución, funcionamiento y extinción, con lo cual se elimina el carácter experimental con el que surgieron.
El ejercicio del trabajo por cuenta propia (sector privado) también estuvo entre los beneficiados con el paquete de normas aprobadas, al dar salida a dos relacionadas con dicha actividad.
Un decreto-ley específico actualiza las disposiciones generales para su desarrollo y define otros aspectos como el procedimiento para tramitar las autorizaciones, las relaciones con otras entidades e instituciones, además de ajustar el sistema de organización y control.
La segunda normativa está referida a las contravenciones personales en el ejercicio del trabajo por cuenta propia y establece las infracciones concernientes a ello, las sanciones y medidas aplicables, así como las autoridades facultadas para imponerlas y las vías para resolver inconformidades.
El desarrollo de estos actores económicos motivó también la aprobación de un decreto-ley Del Régimen Especial de Seguridad Social para los Trabajadores por Cuenta Propia, los Socios de las Cooperativas no Agropecuarias y de las Micro, Pequeñas y Medianas Empresas Privadas.
Asimismo, fue necesaria la modificación de varios elementos de la Ley Tributaria de 2012, asunto igualmente previsto en uno de los cuerpos legales adoptados.
Completan el paquete de disposiciones del Consejo de Estado las normas Sobre la Conservación, Mejoramiento y Manejo Sostenible de los Suelos y el Uso de los Fertilizantes; y de los Registros Públicos de Bienes Inmuebles, el cual estipula la organización y funcionamiento de estos.
English Translation (Google)
According to Esteban Lazo, president of that body, the norms related to the development of different economic actors and the ordering of other activities, strengthen the institutional framework and allow progress in updating the Cuban model, published the newspaper Granma. Among the provisions is the decree-law that regulates the creation and operation of micro, small and medium-sized enterprises (MSMEs), approved by the Council of Ministers in May and which can be state, private or mixed property.
The Caribbean nation aspires that the impulse of these forms of production stimulate aspects such as the diversification of the productive lines, the linkages with different industries and the promotion of employment.
The State Council also issued a provision for non-agricultural cooperatives, where it regulates elements such as their constitution, operation and extinction, thereby eliminating the experimental character with which they arose. The exercise of self-employment (private sector) was also among the beneficiaries of the package of approved regulations, when two related to said activity were released.
A specific decree-law updates the general provisions for its development and defines other aspects such as the procedure for processing authorizations, relationships with other entities and institutions, as well as adjusting the organization and control system. The second regulation refers to personal violations in the exercise of self-employment and establishes the infractions concerning this, the applicable sanctions and measures, as well as the authorities empowered to impose them and the ways to resolve non-conformities.
The development of these economic actors also motivated the approval of a decree-law of the Special Social Security Regime for Self-Employed Workers, Members of Non-Agricultural Cooperatives and Micro, Small and Medium Private Companies. Likewise, it was necessary to modify several elements of the Tax Law of 2012, a matter also provided for in one of the adopted legal bodies. The regulations on the Conservation, Improvement and Sustainable Management of Soils and the Use of Fertilizers complete the package of provisions of the State Council; and the Public Registries of Real Estate, which stipulates the organization and operation of these.
Granma
Havana, Republic of Cuba
5 August 2021
Micro, small and medium-sized businesses in Cuba: A smooth start
Minister of Economy and Planning Alejandro Gil Fernández explains new legal norms recently approved by the Council of Ministers, which will guide the functioning of these important economic actors
The first small private companies will emerge from currently operating groups of self-employed workers, like the successful Pinturas Coronas. Photo: Ricardo López Hevia
The creation in Cuba of micro, small and medium-size businesses (MSMEs), as part of the overhauling of the economic actors has risen an intensive debate and a lot of expectations, especially in the non-state sector. As it has was recently reported by Deputy Prime Minister and Minister of Economy and Planning (MEP) Alejandro Gil Fernández on Cuban television’s Mesa Redonda program, they are currently working at an accelerated pace in the norms that will rule the organization and functioning of these companies dedicated to the production of goods and services, conceived with legal personality, both for the state and private sector.
Regarding private MSMEs, he says “the first MSMEs will be created from the current businesses run by self-employed workers, a sector that hires a lot of workers”. In the case of state-run businesses, he explains, “we are conducting a study to see which organizations could join this experience, always with the priorities of the country as their main focus.”
“The first step is to organize what we already have,” the Economy Minister said referring to the undergoing restructuring, in a gradual manner and under the leadership of the Government, in order to “release the productive forces, lift hurdles and boost social responsibility among these economic actors.”
Meanwhile, Economy and Planning Deputy Minister Johana Odriozola Guitart, provided more details on the process of creation of the norms, in which the academy has been actively involved and they have considered the preparation of several legal provisions raging from the highest to the lowest levels of legislation hierarchy. “Right now, we are agreeing on the basic principles of the legislation,” she says and stresses how the creation of these new actors will bring benefits in the financial and hiring order to the businesses currently in operation.
MSMEs, which will have the same management model regardless of the type of property, will take the legal form of Private Limited Company, Odriozola Guitart continues. “It means that, unlike other countries, our norms will have a larger scope because we must regularize the characteristics of economic subjects that does not exist so far,” she underlines. The Deputy Minister explains that the norms are directed to both state and private property, although it does not rule out the existence of joint SMEs in the future.
The purpose of these norms are to provide a smooth start without bumps or legal vacuums. Subsequently, public policies will be evaluated in order to allow a bigger contribution and integration to put talent at the service of the country’s development, the deputy minister adds. Given the novelty of this topic in the Cuban economic landscape, the Minister of Economy and Planning noted that the ministry’s website has provided responses to some of the most frequently asked questions raised recently. The population can submit questions on the new legal framework for these economic actors to the email address: actoreseconomicos@mep.gob.cu.
Presented below are several examples:
How are businesses in Cuba classified as micro, small and medium-sized? MSMEs in Cuba are classified according to the number of workers involved: Micro: from 1 to 10. Small: from 11 to 35. Medium: from 36 to 100.
Is the classification by number of workers used worldwide? No, it is not. The number of workers is the most widespread criterion, but MSMEs can be classified based on other elements. The most commonly used are the volume of annual sales and the assets value. Monetary restructuring makes it more complex to adopt billing indicators for the MSMEs in Cuba for two main reasons: the new monetary order establishes only one type of exchange rate for all economy actors and it makes impossible to compare historical records with the current conditions.
What is understood as ‘occupied’? In the MSMEs, it includes all natural persons who take part in the activity of the business, both as members and as employees.
How many members can there be in an MSME? An MSME can be formed with as many members as the company deems necessary as long as they comply with the number of occupied people established by law.
What are the advantages of being a legal person? It grants access to financing and more favorable financing conditions, it increases credibility and trust among the clients and increases the chances of positioning a brand in the market and makes contract relationships easier. In the case of debts, the company can use the business equity to pay it off without affecting the personal equity of the partners and it allows to expand equity and bring in new members. Likewise, partners and employees can have access to the same social security benefits as state employees.
What is a Private Limited Company? It’s a business with equity divided in social shares and composed of the contributions from the members’ personal equity. The organization of this company means there is a separation between the personal equity of the members and the social equity of the company, since the members do not have to comply with the obligations acquired by the company with their own equity, but with the equity of the Private Limited Company.
Is social equity a must for the organization of a MSME? The MSME should be organized with social equity that should be reflected on the organization documents. A minimum social equity is not required. The contributions of all members makes the social equity of the MSME. Social equity has three main functions: Productivity: this function basically has an economic content, by which equity serves as capital funds to obtain profit, through the execution of the corporate purpose. It determines the position of the member in the company as it numerically provides the percentage of its engagement. Guarantee to creditors: as long as it is not possible to distribute profits because the company's net worth does not exceed that amount and allows creditors to know the company's net worth situation in order to meet their obligations.
What is the MSME liable for its obligations and what is the scope of its liability? The MSME is liable for its obligations to third parties with all the assets that make up its patrimony.
What will be the bodies of the MSME? The MSME will have the following bodies: Board: an assembly body in which agreements related to the operation of the company are adopted. Administrative body: responsible for the management and representation of the MSME. Supervisory and control body: oversees compliance with the provisions of the legislation in force. It will have its attributions determined in the legal norm, without prejudice that the partners may incorporate others. In the case of MSMEs with a single owner, it will obviously not be possible to create an assembly body. This body will include the sole partner. (Translated by ESTI)
Relevant Analyses
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The first small private companies will emerge from currently operating groups of self-employed workers, like the successful Pinturas Coronas. Photo: Ricardo López Hevia