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Cuban Government Approves Expansion of Private Business

Feb 9, 2021 | By Peter Kornbluh
Cuban Government Approves Expansion of Private Business

In an attempt to revive and transform its COVID-stricken economy, Cuba will significantly expand its private sector, authorities announced. The long-awaited change in economic policy was approved by the government Council of Ministers last week, according to the Communist Party newspaper, Granma, and made public by the Minister of Labor and Social Security, Marta Elena Feitó, on February 6.

“That private work continues to develop is the objective of this reform,” she stated, announcing that the government would lift most restrictions on small businesses in Cuba to help “free the productive forces” of the private sector. The reform is “an important step to increase employment,” Minister of the Economy Alejandro Gil added on Twitter.

Since 2010 when the government of then-President Raúl Castro initiated a series of limited economic reforms that included legalizing self-employment, the Communist state has restricted private entrepreneurs—known in Cuba as cuentapropistas—to only 127 authorized areas, many of them revolving around tourism, the restaurant industry and transportation. With the Obama administration’s decision to pursue normalized relations with Cuba in 2014, the private sector expanded significantly to cater to the influx of U.S. visitors.  An estimated 600,000 Cubans are now officially self-employed, making up 13 percent of the workforce. The government hopes to increase those numbers by lifting the restrictions on what kinds of small businesses can be created.

According to Minister Feitó’s announcement, more than 2,000 economic areas of work would now be authorized for private sector activity. “The previous list of 127 (authorized) activities has been eliminated,” she said, to be replaced by a list identifying 124 areas that would be reserved, partially or totally, for the state—presumably in the areas such as security, media, and health. Cuba’s Communist Party is due to hold official meetings in April at which time finalized details of the reforms may be ratified and made public.

The decision to essentially open the predominantly state-driven economy to private sector expansion, analysts suggested, marks a turning point for Cuba’s economic and political future.

“Moving toward a much more liberal regime of permissible private sector activities, if faithfully implemented, could dramatically increase employment opportunities as well as signal an official acceptance of a more pluralistic society,” according to Richard Feinberg, the former national security advisor on Latin America during the Clinton administration who has written a series of studies on the Cuban economy for the Brookings Institution. “The long-awaited reforms would also suggest the bureaucracy is willing to relax, at least in some important areas, its micro-management of Cuban economic life.”

The Cuban economy has been pummeled by the COVID pandemic, which forced the island nation to close its borders to tourism between March and November 2020, and by U.S. sanctions imposed by the former Trump administration, among them restrictions on travel and remittances. The economy shrank by 11 percent in 2020, the Financial Times reported, and imports have dropped by more than 30 percent, creating severe shortages of goods across the island.  Since re-opening its airports in November, reported COVID cases have more than quadrupled in Cuba, threatening to stall efforts at economic recovery.

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