Wednesday, November 30, 2011

609. Cuban Government to Contract With Private Sector

A private market in Havana 

By Marc Frank, Reuters, November 28, 2011 
The Cuban government will begin contracting out some services to the private sector next year in a break from the state-dominated past aimed at helping small business develop, government insiders said on Monday.
They said food and cleaning, construction and some transportation services, all of which are currently done by government workers, were among those that would be contracted out in the future as Cuban leaders push ahead with more than 300 reforms to modernize the island's Soviet-style economy.
President Raul 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 350,000 people are now self-employed, more than double the number of two years ago, although most are small operations based in homes.
Their ability 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.
But new credit and banking regulations that take effect December 20 will allow 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 lift a 100 peso- (roughly $4-) cap on business between state enterprises and private individuals.
"It is very positive for the development of the non-state sector that it now has at its disposal new financial instruments that before were available only to state companies and joint ventures with foreign companies," said a local economist, requesting anonymity due to a ban on talking with foreign journalists.
"It paves the way for business between the new non-state sector and the state."
Cuba expert Phil Peters at the Lexington Institute think tank in Arlington, Virginia, said the measures, in addition to helping the private sector, should make the government more efficient and were indicative of a larger change.
"It is another sign that the socialist state is shedding longstanding prejudice against private enterprise," he said.

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