833. Cuba Lauds Subcontracting to Private Sector

Main street in town of Artemisa

By Marc Frank, Reuters, June 21, 2012

HAVANA - Cuba praised state contracting of landscaping, construction and other services to the private sector on Thursday, in another sign a recent opening to small business is gaining momentum.

A long article in the communist party daily, Granma, focused on the recently created western province of Artemisa, a pilot project for reform of local government and state business administration under President Raul Castro.

"One of the most important benefits of this mechanism (subcontracting) is the rapidity and quality with which jobs are done," “Miguel Angel Quijano, economic director of Artemisa, told Granma.

The newspaper said subcontractors were being used in public landscaping, housing construction and state office renovation with “"impressive" results.

“Small businesses have been part and parcel of the birth of Artemisa, spurring the strengthening of food and other services in which the self-employed have been key, Granma said.

Havana province was divided into the rural provinces of Artemisa and Mayabeque in 2010 and both were declared experiments for downsizing government, moving local businesses out of local government and other reforms.

There has been little official coverage until now of the reforms underway in Artemisa, with a population of 500,000. The province has some minor industry located on its eastern border with Havana, and to the west bordering Pinar del Rio, accounts for up to 50 percent of the wrapper leaf for the country's famous cigars.

Castro is encouraging private sector growth to create jobs for the one million employees he hopes to slash from bloated government payrolls over the next few years. His goal is to strengthen Cuban communism to assure its future.

More than 370,000 Cubans are now self-employed, more than double the number of two years ago, although most are small operations based in homes and 30 percent of the figure represents private sector employees.

But the ability of small businesses to grow has been hindered partly by a lack of capital and access to government business, which is significant because the state controls most of the economy.

That changed in December when new credit and banking regulations took effect, allowing small businesses for the first time to obtain loans and, along with private farmers, to open commercial accounts, a prerequisite for doing business with the state.

The measures also lifted a 100 peso (roughly $4) cap on business between state enterprises and private individuals.

The Granma report was just the latest to appear in the official media in recent months praising subcontracting.

"“This kind of positive coverage was unimaginable and these transactions would have been illegal just a few years ago," Phil Peters, a Cuba expert at the Virginia-based Lexington Institute said.

"“This is one more sign that the government wants the private sector to grow to boost productivity and to give laid-off government workers a place to go," he said.