In a bid to revive and transform its COVID-stricken economy, Cuba will significantly expand its private sector, authorities have announced. The long-awaited change in economic policy was approved by the government’s Council of Ministers last week, according to the Communist Party newspaper, Grandmotherand made public by the Minister of Labor and Social Security, Marta Elena Feitó, on February 6.
“That private labor continues to grow is the goal of this reform,” she said, announcing that the government would lift most restrictions on small businesses in Cuba to help “unleash the productive forces” of the private sector. The reform is “an important step to increase employment”, added Economy Minister Alejandro Gil on Twitter.
Since 2010, when the government of then-President Raúl Castro launched a series of limited economic reforms, including the legalization of self-employment, the communist state has restricted private entrepreneurs, known in Cuba as cuentapropistas—to just 127 authorized zones, many of which revolve around tourism, catering and transport. With the Obama administration’s decision to pursue normalized relations with Cuba in 2014, the private sector has grown significantly to respond to the influx of American visitors. An estimated 600,000 Cubans are now officially self-employed, representing 13% of the workforce. The government hopes to increase these numbers by lifting restrictions on the types of small businesses that can be set up.
According to Minister Feitó’s announcement, more than 2,000 economic work areas would now be authorized for private sector activity. “The previous list of 127 (permitted) activities has been removed,” she said, to be replaced by a list identifying 124 areas that would be reserved, partially or totally, for the state – presumably in areas such as security, media, and health. The Cuban Communist Party is due to hold official meetings in April where the final details of the reforms can be ratified and made public.
The decision to essentially open up the predominantly state-owned economy to private sector expansion, analysts say, marks a turning point for Cuba’s economic and political future.
“Moving towards a much more liberal regime of permitted private sector activities, if faithfully implemented, could significantly increase employment opportunities and signal an official acceptance of a more pluralistic society,” according to Richard Feinberg, former national security adviser for Latin America. under the Clinton administration which wrote a series of studies on the Cuban economy for the Brookings Institution. “The long-awaited reforms also suggest that the bureaucracy is willing to relax, at least in some important areas, its micro-management of Cuban economic life.
Cuba’s economy has been hit by the COVID pandemic, which forced the island nation to close its borders to tourism between March and November 2020, and by US sanctions imposed by the former Trump administration, including restrictions on travel and remittances. The economy contracted by 11% in 2020, the FinancialTimes reported, and imports fell by more than 30%, creating severe shortages of goods across the island. Since reopening its airports in November, reported COVID cases have more than quadrupled in Cuba, threatening to stall economic recovery efforts.