Analysis: Just ahead — Cuba’s cooperative groundswell

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Leenson coop head
By Eric Leenson

Many changes are afoot in Cuba. One shift of major impact will arise from the soon-to-happen upsurge of Non Agricultural Cooperatives (NAC), non-state businesses now poised to take off, as a vast array of government enterprises are transformed into private, worker-owned and -controlled enterprises.

Earlier this year, Minister of Domestic Commerce Mary Blanca Ortega Barredo told Granma that more than 10,000 coops will be established in the period 2015- 2017, by converting state enterprises into this new type of business ownership structure. Nothing less than all currently existing state restaurants will become democratically managed cooperatives in a new system seeking to restore equilibrium between state and private sectors. If fully carried out, this will underscore the state’s commitment to reformulate Cuba’s economy as outlined by the 2011 reform guidelines.

Since 1961, Cuba has promoted agricultural cooperatives. As of the end of 2014, 5,200 of them were in operation, providing a livelihood for some 600,000 people , and producing at least 60% of the fruits and vegetables available at retail markets. Not until the enabling legislation at the end of 2012 did urban coops come into existence. As of today, close to 500 have been approved by the government through what many think is an unnecessarily cumbersome process. Three hundred and fifty are in operation, of which nearly 80% are former state enterprises and the remainder grassroots initiatives. Chief among them are shops for sales and repair of personal goods, along with restaurants, followed to a lesser degree by construction, manufacturing services, transport, supplier of water and gas, and real estate services cooperatives.

Such a massive launch of urban coops, as Cuban officials now project, will reinforce the state’s decision to abandon “non strategic economic sectors”, and emphasize government preference for cooperative development as a socialist alternative to small business ownership. Additionally, this cooperative upsurge will lay bare the often-heard criticism that the “actualization” is taking place at too slow a pace to significantly impact the economy and move employees off state payrolls.

In many instances, conversion of state enterprises is centered primarily on the management function while ownership of equipment and plant will remain in the hands of the state. These assets will be leased to the new cooperative owners, presumably at reasonable terms, until they can be purchased by the cooperative in the future. As provided in State Decree 305 published in December 2013, NACs will operate under rules compatible with those of international cooperativism. These include voluntary and democratic participation, equality of ownership, and community responsibility.

As is true for all small businesses, viability is by no means guaranteed and is frequently difficult to achieve. In the case of coops success is measured by multiple standards — in the marketplace, the enterprise must achieve financial sustainability/profitability, but more subjectively, it should also fulfill its cooperative mandate of worker participation in decision-making.

In the economic arena, the state will grant NACs preferential treatment with regard to taxation and in terms of accessing supplies as compared to individual business owners. In the realm of democratic management, many questions exist concerning capacity to accomplish this goal, given Cuba’s history of centralization, and by the fact that these enterprises are largely created by government policy rather than worker initiative. For the most part, capacity building in the newly needed skills set has been minimal.

Among the NACs, the “ grassroots coops” are a different breed of endeavor in that they arise from the entrepreneurial energies of a group wishing to create a new enterprise. In the coming upsurge of coops, they are likely to remain a small percentage, because the mechanism for their approval remains too bureaucratic.

To date, although the time frame is too short and the sample too small to evaluate properly, many NACs are showing promising results. In numerous cases, in both types of NACs, wages have gone up and working conditions and morale appear to have improved. Democratic, though not always secret, elections of management take place.

Currently not many Cubans can accurately describe what a cooperative is, and how it functions, because this new type of enterprise has not yet directly impacted most citizens. One exception is the Taxi Rutero, a cooperative bus service that operates well-kept, bright yellow vehicles that travel the key traffic corridors of Havana. They compete with large, often dilapidated 1950’s gas-guzzlers, and appear to be more than holding their own. The cooperative does so by providing passengers with a more comfortable service at a lower price. In this case, the system of worker owners leasing equipment from the government seems to work well, perhaps a winning recipe for a new breed of public-private partnerships.

If plans become actions, by this time next year, the nuts and bolts of how cooperatives work may well have become household knowledge throughout Cuba. Since the great recession that started in 2008, the cooperative model has attracted attention worldwide, thereby producing an accidental, but potentially important convergence between capitalist and socialist economics. Nowhere in the world is the cooperative experiment being carried out more boldly than in Cuba. Many eyes will be turned to Cuba to observe outcomes of this “cooperative laboratory”. Starting soon, this “research” may only require a visit to a local, formerly state-run restaurant to evaluate how the process is advancing. For not only will the “proof of the pudding be in the eating” but in the serving as well.

Eric Leenson is a co-founder of the U.S.-Cuba Cooperative Working Group of the National Cooperative Business Alliance (NCBA). He can be reached at eleenson@soleconomics.com.

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