Inequality Surges In Cuban Private Sector Expansion

News Americas, NEW YORK, NY, Mon. July 31, 2023: Cuba has been renowned for its social justice for 60 years and has been recognized as one of the equal American countries. However, now the situation has reversed, leading to lesser government employees’ salaries while private businesses make quite a handful.

With the private sector growing at an exponential rate, the Cuban economy may sigh with relief. However, new problems are popping up that need immediate addressing. One of them is inequality in the public and private sector income.

Ever since the Cuban Communist Party allowed the development of private businesses, Cubans have set up small and medium-sized businesses and roared back with higher productivity. With it also comes a solid inequality rift.

Top Private businesses are bringing decent food to the table, which was previously a meticulous task to produce. Unlike government workers, employees at private businesses hold handsome salaries.

A private job holder, Jakcel Conteras, shared, “There is a huge difference in wages. When I used to work for the state, I earned about 800-900 pesos per month, while now my wage has increased 120%, and I make more than 10,000 pesos a month easily.”

The truth is that the state stores have negligible products, and private businesses have all the chief daily-used products. However, the problem is that most state workers cannot afford to buy even the products on sale owing to their low-value pesos. If you convert their average salary into dollars, it is approximately $21.

US: Helping Hand In Flourishing Private Sector

The restrictive policies of the Cuban government have created several challenges for the country’s private sector to rise and shine. However, under the leadership of Biden, the US administration has come up with some measures to strengthen the private sector of the country.

The initiatives focus on aiding the rising Cuban entrepreneurs with new and modern technologies. The package of measures includes the introduction of eCommerce, cloud technologies, and electronic payment gateways in the private sector of Cuba. Moreover, the initiatives will focus on proper training and micro-financing resources.

In case of any unfortunate accidents in the US, entrepreneurs can opt for bail bonds in Dallas, Houston, or other cities and states to avail of necessary help.

After the allowance of the Cuban government for the private sector on the island, entrepreneurs can start new companies, which will be referred to as MIPYMES. Their legal structure, SRLs, is similar to the concept of LLC. The SRL can employ up to 100 employees and operate in several sectors. However, they cannot operate in the excluded activities that are set by the Cuban government.

Delayed Private Sector Expansion

There was a time in 2020 when the state couldn’t provide adequate basic goods supply to the population. Cubans had to stand in queues for hours to get access to simple food. Now with proper reforms in place, private businesses are becoming popular and successful. This year, the private sector has increased supply and is all set to import goods worth a roaring $1bn.

While private sector expansion has been on Cuban’s to-do list for a very long time, the program implementation by the government has been at a snail’s pace affecting the economy adversely.

In the previous decade, Cubans who received money in the form of tips from family overseas, ran small businesses, sold goods in the black market, or worked on secret government missions received ample CUC bonuses, which increased their purchasing power. To resolve the fuming inequality, the former president(2006 – 2018), Raúl Castro, got a lot of opposition from the bureaucracy and leadership whenever he tried to make amends in the policy. When he introduced a new labor code in 2008 that didn’t limit a state worker unless their productivity didn’t get hampered, Cubans became frustrated and showed resistance.

Brain Drain In The Worst Way
The communist party has tied the hands of top professionals such as architects, lawyers, and doctors to open their own private practices. This has led to a peculiar situation since highly-educated people are getting less paid while people with jobs that require hardly any qualifications are earning more.

Believe it or not, this is creating a rift between the state and private sectors. As a development economist, Emily Morris quotes, “The educated state sector people are leaving their jobs to pursue works that require little qualification. This is the result of brain drain.”

The worst part is the timing of this situation since most of the younger population has already chosen to leave the island and move to the US. This grave problem clearly indicates the lack of competent people in key state roles and limited service quality in all likelihood.