LDN - Business

Cuba unveils tighter rules on cooperatives in clampdown on non-state sector

[August 31, 2019] By Sarah Marsh

HAVANA (Reuters) - Communist-run Cuba unveiled tighter regulations on non-agricultural cooperatives on Friday, including curbs on their prices, in keeping with a broader push to increase control of the growing non-state sector.

The new regulations aim to tackle "irregularities" detected in the cooperatives, state-run media reported.

The cooperatives - where each worker has a stake in the business - were legalized in 2012 as part of the government's plan to cut a bloated state payroll and boost the Soviet-style command economy.

But a wary Cuban government froze the creation of new cooperatives two years ago. That freeze will be maintained during this "experimental phase" while the existing ones are consolidated, a senior official was cited as saying on website Cubadebate.

There are an estimated 18,000 Cubans - some 0.4 percent of the total workforce of 4.4 million - working for non-agricultural cooperatives, in sectors deemed "non-strategic" like construction, transport, gastronomy and accountancy.

Some economists said the new regulations, which enter into force in November, suggest the Communist Party is still nervous about allowing the non-state sector to grow. Without such growth, Havana may struggle to boost an ailing economy battling less Venezuelan aid and tighter U.S. sanctions, they said.

"I'm struck by the fact that the non-agricultural cooperatives are still seen as an experiment," said Pavel Vidal, a former Cuban central bank economist, who teaches at Colombia's Universidad Javeriana Cali.

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A member of a non-agricultural cooperative dedicated to construction works at an apartment complex in Havana, Cuba August 30, 2019. REUTERS/Stringer

"This confirms the lack of confidence the Cuban government has in relation to everything that is non-state."

State-run media on Friday detailed the "irregularities" that authorities said they had found at cooperatives. Some had been hiking prices too much and cooking their books, they cited Yovana Vega Matos of Cuba's economic reform commission as saying.

Others were hiring too many contractors, or paying their directors disproportionately high wages, as if they were private companies and not cooperatives, they said.

The new regulations stipulate cooperatives cannot pay directors more than three times the lowest-earning member nor hire more contractors than 10 percent of their total members - measures previously announced and now made official.

They cap the amount cooperatives in some sectors can charge for their services by limiting their profits relative to expenses, and allow local authorities to implement price caps if necessary.

The new rules also put limits on cooperatives' potential growth. Cooperatives of 101 members or more may not grow by more than 10 percent, for example.

To be sure, the new regulations do respond to some of the cooperatives' demands, such as granting them the right to appeal if authorities shut them down via the courts.

They also row back slightly on a previous decision to forbid cooperatives from operating nationwide, limiting them to the province where they are headquartered.

(Reporting by Sarah Marsh, Editing by Matthew Lewis and Rosalba O'Brien)

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