The Cuban government is proposing to implement bankruptcy, liquidation, and restructuring procedures for state enterprises experiencing ongoing losses. This proposal is part of a significant overhaul of the state-run business sector, which also includes the removal of subsidies, increased managerial autonomy, the transformation of enterprises into commercial corporations, and a gradual opening to private and individual shareholders.
These measures are included in a package of 176 economic and social reforms presented by Prime Minister Manuel Marrero Cruz to the National Assembly of People's Power.
Redefining State Enterprise Management
The potential for liquidating loss-making state companies is outlined under Axis 1: Transformations in the Management Model of Economic Actors. Here, the government aims to redesign how socialist state enterprises operate, aligning them more closely with other economic actors.
One of the key proposals is to establish specific procedures for the bankruptcy, liquidation, and restructuring of persistently unprofitable assets within the state sector. This is coupled with the removal of subsidies for deficit-ridden companies and a reevaluation of the financial relationship between the state budget and the business system.
Granting Greater Autonomy
The reform plan seeks to grant considerably more autonomy to state enterprises. These companies will be able to engage in any lawful activity while maintaining their primary social purpose, access the foreign exchange market under new conditions, set wholesale and retail prices independently, and negotiate wages based on their economic capabilities.
Furthermore, the current salary scale in the state business system will be abolished, and a minimum wage adjusted for inflation will be introduced.
Streamlining and Empowering Organizations
The government also plans to resize the Superior Organizations for Business Management (OSDEs), removing state or enterprise-specific functions and empowering them to create state-owned companies and small and medium-sized enterprises (SMEs).
Both OSDEs and companies will be authorized to carry out the creation, merger, dissolution, and liquidation of entities, as well as internal reorganization and service outsourcing.
Encouraging Financial Independence and Investment
Another transformation aims to make the use of post-tax profits more flexible and minimize the indicators used to measure business efficiency. Meanwhile, financial instruments will be developed to capitalize companies without relying on the state budget, and financial investment from both state and private enterprises will be encouraged.
The package also includes a National Program for the Valuation and Titling of State Business Assets. This program will conduct a national inventory of tangible and intangible assets with market valuation, issue property certificates usable as collateral for bank loans, and allow companies to monetize underutilized assets through long-term leases to other economic actors and foreign investors.
Transforming State Enterprises
One of the most significant changes is the transformation of socialist state enterprises into joint-stock or limited liability companies. According to the proposal, the state will define the level of shareholding it retains in each sector, ensuring a majority position in strategic areas.
In this new framework, state enterprises will have the ability to acquire shares in other companies, and gradually, non-state management forms and individuals will also be able to do so.
The government also proposes allowing legal entities, both state and non-state, national and foreign, as well as individuals, to purchase shares and properties of state enterprises, provided the legality of the funds can be proven.
Building a Competitive and Efficient Business System
The business reform also aims to establish a more competitive and efficient enterprise system capable of generating revenue to fund social services. Additionally, it decentralizes powers to provincial and municipal governments to create, merge, dissolve, and liquidate local state enterprises.
Marrero Cruz presented these measures as part of a strategy to restructure the Cuban economic model and correct accumulated distortions, amidst an economic crisis, foreign currency shortages, and the need to enhance the efficiency of the state productive apparatus.
Frequently Asked Questions about Cuba's Economic Reforms
What are the key changes proposed for Cuban state enterprises?
The proposed changes include implementing bankruptcy, liquidation, and restructuring procedures, removing subsidies, granting more managerial autonomy, and transforming enterprises into commercial corporations.
How will the new reforms affect the autonomy of state enterprises?
State enterprises will gain increased autonomy to engage in lawful activities, set prices, negotiate wages, and operate independently from the state budget.
What is the National Program for the Valuation and Titling of State Business Assets?
This program will inventory state assets, issue property certificates for bank loans, and allow monetization of underutilized assets through long-term leases to other economic actors and foreign investors.