Cooperatives in Cuba

Introduction
In January of this year, NCBA CLUSA and SOL2 Economics jointly assembled a working group of U.S. cooperators to research and learn from the co-op movement in Cuba today. The Cuban Cooperative Working Group was formed with an initial membership of 13 cooperative leaders from many sectors of the U.S. movement (see end of article for a list of names).

After several discussions, a lot of advance reading, and a few miles of red tape, we set out last July for a weeklong exploratory trip to Cuba. The goal of this “first phase” was to meet with local partners and perform an initial needs assessment. While we certainly were able to meet that goal, the highlight of the trip was getting to visit cooperatives and hearing their stories. We found an amazing openness and willingness to discuss difficult political and economic issues. Travel restrictions for U.S. citizens continue to make it difficult to maintain personal connections with Cuban cooperators, but we are looking at opportunities to engage Cubans with the international co-op community.

Beyond agricultural cooperatives
Two years ago, only agricultural co-ops existed in Cuba. Today nonagricultural cooperatives are the fastest growing part of the Cuban economy and already have a significant presence and impact. However, the growth of the cooperative sector in Cuba is not the result of a grassroots cooperative movement; it is an initiative of the Cuban government as it seeks to increase productivity and reduce state responsibility for noncritical production and services. Successful cooperatives have been able to provide their members with more responsibility and autonomy, and usually a significantly higher standard of living than state-run enterprises. Cooperatives are also seen as positive business models for small, privately owned enterprises.

The new endorsement of cooperatives is not a move toward capitalism or an abandonment of socialist principles. It is part of a broader effort to “upgrade” or reform the Cuban economy. To enable this economic reform, the state has let go of top-down controls in order to achieve higher productivity and innovation. Cuban citizens benefit from a broad social support system that includes universal health care and education, subsidized food, and housing. For the Cuban population overall, by world standards, average life expectancy is very high and infant mortality very low. Nonetheless, the standard of living is low, and consumer goods are often out of reach and unavailable to most Cubans.1

Cooperatives have the potential to help meet both ideological as well as economic needs of the country. Cooperatives are now seen as key to overall economic reforms. They are given preference as a more “socialized” form of private enterprise.

According to Camila Piñeiro Harnecker, professor at the Center for the Study of the Cuban Economy, University of Havana, the state’s objectives for nonagricultural co-ops are:
•To transfer non fundamental economic activities away from the state to the non-state sector (defined as private businesses, cooperatives, foreign firms, and joint ventures) in the most socialized way possible;
•    To allow state enterprises to concentrate on core activities, while contracting secondary and support activities to co-ops;
•    To generate more stable and decent employment
•    To increase and diversify production of consumer goods and services in a more socially responsible way;
•    To serve as an example of good business practices for private enterprises.
The earliest Cuban cooperatives were agricultural, dating back to 1879.2 After the 1959 revolution, the Cuban government increasingly encouraged these, particularly after the dissolution of the Soviet Union in 1991. Cooperative farms have consistently higher yields than state-run farms, and their success has led to an increasing percentage of farmland being managed cooperatively. “Experimental” legislation3 was passed in December 2012, and the first nonagricultural co-ops started in July 2013. Worker cooperatives have been formed in factory and service industries such as construction, clothing production, restaurants, and taxi services. Although there are exceptions, these worker cooperatives have generally done well, and their numbers are growing.

State approval required
The Cuban government approves all new co-op enterprises. People who want to start a cooperative must first submit a proposal for state approval. These represent a small portion of the new co-ops, and the approval process can be long and uncertain. Through July 17 of this year, 498 non agricultural co-ops had been approved.
The majority of co-ops (currently about 77 present) arise when the state no longer wishes to oversee “noncritical” businesses. The new co-op is imposed whether or not the supervisors and workers want it, and education about cooperative systems and philosophy is not provided at the outset. Workers may opt out of joining the new co-op, but they have no guarantee of comparable re-employment. The existing, state-owned business assets are leased to the new cooperative at favorable rates, and tax breaks and bank loans may be made available. Over time, democratic workplace systems take hold, and the co-ops that are successful become favored employers.
Not all cooperatives succeed, often faltering due to insufficient access to supplies and materials, debt and high overhead costs, and lack of understanding about cooperative business models. However, many new cooperatives have been very successful, providing goods or services both to the state and open market. A portion of their production may be reserved for state-run distribution at predetermined prices, but the co-op can set its own prices on what is sold on the open market.
Higher efficiency and improvements in production have enabled co-ops to triple workers’ pay (compared to comparable state-run enterprises) often without major increases in the prices charged.4 Co-ops have better working conditions, motivation, and professional growth opportunities than other enterprises, and they produce better
quality products.

It is important to understand that Cuba’s nonagricultural cooperatives do not have a long history or depth of experience from which to learn. Workers are drawn to cooperatives for the working conditions and pay and rarely because of their commitment to co-op principles. Education and resources about cooperation are usually an afterthought rather than an expectation, although many of the workers we spoke with recognized that cooperatives brought more than higher pay.
Social responsibility is not promoted. There is no national cooperative organization to provide guidance and services. Regional governments are not always fully supportive of the new co-ops, and although the state provides significant financial advantages, there is little or no organizational support. As the sector grows and matures, a better understanding and application of cooperative principles will help to ensure its continued success.

Amidst all of this exciting emphasis on co-ops, consumer cooperatives are completely missing. There is no option under current regulations to form consumer-owned co-ops, which reflects the realities of the socialist economy. Even if consumer cooperatives were endorsed, there is no significant wholesale market or non-state suppliers for most consumer products. Food is heavily subsidized by the government and often in short supply.

The availability of fresh produce, eggs, meat, and similar products is increasing as a result of successful cooperative farms and their ability to sell products on the open market. A high percentage of their output is sold to restaurants and other food service enterprises. The nearest thing to a food co-op in the U.S. is the producer co-op farmers markets. Prices are often higher at these markets because they are not controlled (or subsidized) by the state. Cubans on limited incomes resent the higher costs, but those who can afford to shop at the markets find higher quality and more variety than in state stores.

As the Cuban economy evolves, the role of cooperatives is likely to continue to grow. Shortages of raw materials, parts, and technology will continue to be the norm as long as the U.S. trade embargo is in place. If and when those restrictions are lifted, it is possible that there will be sudden and dramatic change in many areas of Cuban life. If cooperatives have become an integrated part of the economy, they have the potential to grow with the changes and act as a buffer against disruptive impacts.

Footnotes:

[1] The U.S. embargo has been a major factor in Cuba’s economic woes. Cuba’s state-run economy has never existed without extreme external constraints, and any attempt to evaluate its inherit merits is guaranteed to generate debate.

[2] Bread Or Bullets: Urban Labor and Spanish Colonialism in Cuba, 1850–1898, by Joan Casanovas, page 130.

[3] Cuban law is often introduced through temporary “experimental” regulations. These may be instituted within a limited region or sector and the impacts monitored before possible revisions and final implementation.

[4] Increases in pay range from minimal to as much as quadruple. Retail food sales are a notable exception where prices are higher than in state-run (subsidized) outlets.

Participants in the July 2014 trip to Cuba:

• Stanley Kuehn, NCBA CLUSA
• Adam Schwartz, The Cooperative Way, CDS Consulting Co-op
• Barry Silver, National Cooperative Bank
• Amy Coughenour, NCBA CLUSA
• Eric Leenson, SOL2 Economics
• Rebecca Kemble, US Federation of Worker Cooperatives
• Martin Lowery, National Rural Electric Cooperatives Assn.
• Michael Beall, NCBA CLUSA
• Steve Dubb, Democracy Collaborative
• Thaleon Tremain, Pachamama Coffee
• Therese Tuttle, Legal and Organizational Council
• Stuart Reid, Food Co-op Initiative
• Jonathan Rosenthal, Cooperative Coffees

[Editor's note:  Find the Cuban Cooperative Working Group full report (pdf) at the following address: https://eleenson.files.wordpress.com/2014/12/cuba-trip-report.pdf.]