Enterprises of a new type

A 180-degree change in the empowerment of business management has introduced a new way of defining the social object of economic entities in Cuba.

Archivo IPS Cuba

The reinterpretation of the concept of social object takes the transformations of the narrowest field of self-employment or the private microenterprises to the most widespread area of the state enterprises.

The economic transformations in Cuba have started to increasingly point to a more intense state-run enterprise. After initial steps more centred on liberalising and expanding the private area of an economy that was almost totally owned by the State, the government’s changes are now moving more toward another sphere, the state-run economy, with a greater weight in the production of goods.

In line with the intentions of structuring a business system of greater autonomy, in May a resolution of the Economy and Planning Ministry (MEP), the No. 134 of 2013, came to light in the Gaceta Oficial, putting into effect a more flexible way of defining the social object of the economic entities.

With the declared purpose – according to Guideline 13 of the Economic and Social Policy Guidelines approved by the Communist Party in 2011 – that they “be able to make the utmost use of their potentials, according to what has been regulated,” the new legislation proposes more freedom when determining the powers for managing an economic entity, considering as such the enterprises, cooperatives and budgeted units with commercial functions.

The meeting of the Council of Ministers in which that measure was announced recognised with this step the purpose of “untangling the knots that hinder the work of the economic entities.” But the press conference summoned to explain the new legislation revealed intentions of a much vaster reach: reinterpreting, in fact, the role of individuals in the economy.

According Rubén Toledo Díaz, one of the members of the Committee for the Implementation and Development of the Economic and Social Policy Guidelines, with Resolution No. 134 the enterprises and other economic entities gain more independence to make decisions, they can exploit to the utmost their potentials and have more freedom to use the productive forces. It will be a door to create conditions that allow for “increasing the efficiency of the country’s productive base.”

Cuban economists and officials of the Committee for the Implementation of the Guidelines agree when pointing to the rigor with which the mission or social object of an enterprise in Cuba was traditionally determined – with trade regulations included – as the cause of great productive capacities not being used.

MEP Juridical Director Johana Odriozola Guitart confirmed at the press conference that the Resolution radically changes the concept of social object, by interpreting it as “the group of the principal productive, commercial and service activities that make up the mercantile transactions through which the mission for which an entity has been created is carried out.”

This reduces the definition of social object to just juridical persons with a productive, commercial or service mission. And it does so in a flexible way. An audacious novelty is that it gives freedom to the management of each economic entity to decide on secondary activities, without being subject to the definition of the famous social object. The principal activity of an economic entity is now included under its umbrella and not of any other.

In the previous concept, any activity that would contribute revenues to the entity, even occasionally or with little importance, had to be defined in the social object. That rigidity boxed or limited the initiative of the Cuban entities to undertake business deals.

With Resolution No. 134, the entities will have their principal mission well defined but will have the freedom, for example, to decide what to do with the waste materials of a production: if they sell them to a third entity or use them in a new production. The faculties of the managers of enterprises will not be included or confined in the social object; that will increase their autonomy and responsibility for decision making.

The ways out or initiatives that before used to border on illegal activities, will allow for using with greater intensity the productive capacities of a workshop, of a machinery or an enterprise, one of the conflicts most regretted in the Cuban economy until now.

The social object of an economic entity will continue being approved by the government agency that authorises its creation. But under new rules, each entity will be able to decide to which clients – be they juridical or natural persons – they will offer the economic activity assigned in its social object. Moreover, the type of currency or market in which the entity can operate is not defined. These flexibilities would make more fluid the commercial relations, between enterprises and budgeted units as well as between the state sector and the emerging cooperative and private sector in the Cuban economy.

According to Odriozola Guitart, Resolution No. 134 introduces a significant change, of 180 degrees, which will give greater business faculties in financial terms as well as in the payments of workers. (2013)

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