The self-employment sector in Cuba

[For more analysis and discussion on the economic changes in Cuba, click HERE.]

By Leticia Martínez Hernández

September 24, 2010 – Granma International – On August 1 Cuba's President Raúl Castro Ruz announced to the National Assembly the decision to extend the self-employment sector and use it as an another option for workers seeking alternative jobs after the necessary reduction of the country’s inflated employment registers in the public sector. Various restrictions will be eliminated to allow the authorisation of new licences and the marketing of certain products, and greater flexibility to hire a workforce for certain activities.

Many people have been waiting a solution that, far from being improvised or ephemeral, makes it possible to increase the availability of goods and services, while assuring an income to those who decide to do this work. It will contribute to the state being relieved of the burden of excessive subsidies, while placing in non-state hands the production of goods and services which it has provided for years in spite of the difficult economic context.

Increasing the opportunities for self-employment is one of the decisions that Cuba is making as part of the restructuring of its economic policy, in order to increase productivity and efficiency. It is also an attempt to offer workers another way of feeling useful in terms of personal effort, and to distance ourselves from those concepts that almost condemned self-employment to extinction and stigmatised those who decided to legally join that sector in the 1990s.

On August 1, the approval of a system of taxation for the self-employed was also made public, in line with the country's new economic scenario. Whoever contributes more, will receive more is the principle of the new tax regime that will help to increase sources of income to the state budget, and achieve an adequate redistribution of that income to society.

But, how is the self-employment sector to be extended? What activities are included? What restrictions are being eliminated? How is it to be organised and regulated? What taxes are to be paid? Granma sought answers to these and other questions by consulting specialists from the ministries of economy and planning, finance and prices; and labour and social security, which are preparing the regulations for self-employment, to be implemented from this October.

Admi Valhuerdi Cepero, first deputy minister at the Ministry of Labour and Social Security, explained that there will be 178 categories of self-employment, within which 83 may hire additional employees who do not have to be members of the same household or relatives of the business owner. "Authorisations are to be given for 29 new activities that, while they are currently exercised, were not given re-authorisation a number of years back", she explained. Among them she mentioned food vendors of various categories, winemakers, saw operators, stone masons, engine and ignition coilers, wreath and flower sellers, panel beaters, sports trainers (except martial arts), refuse recyclers and masseurs.

Seven activities have been added to existing categories, which include bookkeeping, with the exception of accountants and bookkeeping working in that specialty; park and public place rest-room attendants; school subject revisers [tutors], excluding active teachers; casual agricultural workers; roadside stand or cart vendors of agricultural produce; and travel assistants, referring to those people who organise passengers with private taxis at the terminals.

Valhuerdi also explained that the granting of new authorisations for self-employed work would remain limited for now to nine kinds of work, because there is no legal market for raw materials, although viable alternatives are being studied. They are auto body workers, marble and granite carvers and vendors; sellers of soap, shoe polish, dyes, ropes and similar items; smelters and blacksmiths; flame cutters; vendors of aluminium items; floor waxers; and vendors of non-iron cast metal items.

Concerning the market for these activities, Marino Murillo Jorge, minister of the economy and planning, explained, "We are designing within the economic plan for the coming year, what we have to incorporate bearing in mind the new changes which will demand hardware stores and kitchen equipment which is not currently on sale. We have to manage the plan to fit in with what has been done. The ideal is a wholesale market with different prices for the self-employed. But we are not going to be able to do that in the next few years. Right now we have to find a market where they can buy what is necessary although without differentiating retail prices."

Valhuerdi commented that, when the resolution comes into force, it will allow up to 20 seats in "paladares" (independently owned house restaurants) where places were previously limited to 12; it will allow the sale of food products made from potatoes, seafood and beef. It will also abolish the requisite of being retired or having some workplace link in order to have access to this form of employment.

With these regulations university professionals and technicians who graduated before 1964 may continue to work for themselves. In this way the work undertaken for more than 40 years by a small number of people registered in the taxpayers registry has been respected.

In creating greater flexibility in the self-employment sector an extension in rental housing has been borne in mind, which eliminates old restrictions. Those prohibitions, which at one point fulfilled a function, now constitute an obstacle to addressing the difficult problem of housing. Therefore new regulations allow people who have authorisation to live abroad or those who, while living in Cuba, leave the country for more than three months, to rent out their residences. Similarly, and to support self-work, they provide the possibility of renting homes, rooms and spaces for exercising their work.

Overseas homeowners can appoint a representative to request a license to rent, to facilitate renting their homes. The approval will be, in all cases, up to the municipal director of housing. The same situation will apply to transportation providers who decide to work in a self-employed capacity. Those who have authorisation to live abroad or travel for more than three months may also name a representative to rent their vehicles.

When these new regulations come into effect, those linked to the self-employment sector, and those who join it, will be obligated to pay taxes on personal income, on sales, on public services and for utilising a workforce. They will also have to make social security contributions.

A special mention should be made about self-employed workers’ social security contributions, because in order to offer them protection for old age, total disability, maternity or, in the case of their death, payments to their families, a special scheme has been organised that these workers are required to join – with the exception of those also working in the state sector, who are retirees, receiving a pension or who are beneficiaries of another social security program.

All of these measures related to self-employed work will make it possible for this form of employment to provide an alternative, under the vigilant eye of the state which, as the representative of the people, is mandated to seek solutions to improve the standard of living of Cubans, while always respecting the socialist principles that govern our constitution. As the president told parliament on August 1, the objective is to defend, maintain and continue improving socialism, not to destroy it. That is the road along which Cuba continues to travel.

The Ministry of Labour and Social Security regulation on the extension of self-employment lays down that those in this sector can engage in more than one activity, within their municipality of origin or in any part of the country, as long as they meet the regulations established by the administration councils. Thus they will have the possibility of undertaking work at home or in any other rented premises or space. The document lays down that workers can market their goods and services to state agencies within the financial limits that these have.

At the present time discussions are underway with the Central Bank of Cuba on how to facilitate bank credits for people deciding to become self-employed.

Officials at the National Institute of Housing have announced, from October 2010, the abolition of the prohibition on renting out entire houses; time-limited renting; and renting out buildings assigned by the state after 2001, and in those in which construction work has been carried out in recent years. These measures have been approved without exception in all of the national territory. The new regulation permits owners who rent to hire a workforce and undertake other self-employed activities.

[Granma International is the newspaper of the Communist Party of Cuba.]