Cuba looks to cooperatives to slow rise of capitalism

Cuba looks to cooperatives to slow rise of capitalism

Sun Apr 13, 2014 9:48am EDT



(Reuters) - Cuba's slow, cautious reforms to revive its state-run

economy suddenly burst into life at businesses like Karabali, a Havana

nightclub owned by a 21-member cooperative.



The communist government began leasing Karabali to its employees just

six months ago and now the once sleepy club is regularly packed with

more than 100 customers from midnight until dawn despite competition

from dozens of private and state-run night spots in the city.



Out on bustling 23rd Street in the Vedado district, bright multicolored

lights beckon a young, almost entirely Cuban crowd into Karabali to see

live music on weekends.



Even on Wednesdays, when only recorded music plays, the place is jumping

as hip-swiveling patrons dance on stage to rumba.



A feeling of ownership has replaced the apathy that afflicts many state

enterprises, and the cooperative's members are optimistic. There is a

buzz about the place, their salaries have been tripled, and they get a

cut of the profits.



"We have more of a sense that this belongs to us," said Heydell Alom,

who has spent 11 of his 38 years tending bar at the club. "Here no one

steals. This place belongs to everyone. We earn depending on what we can

accomplish without any problems from the government."



Cuban authorities are turning more and more state businesses into

cooperatives and providing incentives for small private companies to do

the same. Some 450 have been created over the past year, and there are

plans for thousands more.



The initiative is one of the market-oriented reforms ordered by

President Raul Castro since he took over from his ailing brother Fidel

in 2008.



While Raul Castro says his reforms are about strengthening Cuban

socialism, they have led to the emergence of thousands of private

businesses since 2010, ranging from restaurants to electronics repair

shops to mom and pop retail outlets.



Less well known and less common are the cooperatives but they are part

of a political balancing act for the government, which needs to move

hundreds of thousands of workers off the state payroll but also wants to

slow the rise of capitalism.



In many ways it prefers cooperatives, where each worker has a stake in

the business, to private businesses where owners make profits based on

the work of their employees.



As is typical with Cuban reforms, the push to establish more

cooperatives has started as an experiment that will be expanded if it is

deemed to be successful.



Its supporters see it as a way of allowing free enterprise, like other

communist governments have done, while limiting an inevitable surge of

income disparities.



"The model is different from China and Vietnam," said a Cuban economist

who specializes in cooperatives. "We have the advantage of learning from

their experience."



No other county has tried to convert state companies into cooperatives

on such a large scale, said the economist, who requested anonymity due

to a ban on speaking to journalists without permission.



The cooperatives include restaurants, cafes, wholesale and retail

produce markets, construction firms, manufacturers of clothing and

furniture, bus companies and car washes, recycling operations, body

shops, computing and accounting services, beauty salons, night clubs and

even dealers of exotic birds.



They operate independently of state entities and businesses and set

prices according to the market in most cases.



Some have thrived. Others have yet to grasp what it means to compete in

the marketplace.



LESS THAN DIVINE



The Divina Pastora restaurant enjoys prime real estate beneath the

historic Moro Castle, a tourist attraction with a spectacular view of

the capital across Havana Bay.



Though the place fills up at lunchtime with busloads of tourists

visiting the castle, evenings are another matter. On one recent Saturday

night, it was nearly empty despite perfect weather.



No one from the cooperative had suggested a plan to attract a dinner or

late night crowd in order to improve profits, according to one member, a

young woman waiting tables.



The restaurant is a former state enterprise that closed last year and

reopened as a cooperative, yet the new staff was never given a chance to

select its leader



"How can we elect the administrator when he was the one who hired us?"

said the woman, who declined to give her name and didn't seem to know if

he was also new or the only remaining staff member of the place from

when it was run by the state.



Karabali, which lies across Havana Bay, is a clear success.



The club is in a prime location on a strip where thousands of young

people go out to have fun from evening to dawn, strolling 23rd Street

from the famous Copelia ice cream parlor and former Hilton hotel down to

the seaside drive.



The 21 cooperative members plan to remodel Karabali, starting with the

cafeteria, which was left in shambles by the state.



"After finishing the cafeteria we plan to invest our money to make other

improvements," said Alom, the bartender.



Each member of the cooperative earns 750 pesos ($31) a month, three

times the 250 pesos they received when it was state-run. They also

divide up the profits every three months.



"We are free from the regulations of state businesses," said the

cooperative's accountant, Ariel Rodriguez. "We all feel this place is

ours. No extraterrestrial tells us what is good and bad, when and how to

pay wages, what artist we can hire or who will do our repairs and

remodeling."



MIXED BAG



Most of the cooperatives visited by Reuters fell between the extremes of

the Divina Pastora and Karabali.



The Bella Bella 2 de Belleza Cooperative, once a well known state-run

beauty parlor in Vedado, has been reborn as a cooperative and competes

with private businesses by appealing to a less affluent clientele.



"We have set prices higher than when we were a state company, but less

than prices on the street (at private businesses)," said hair stylist

Sandra Menendez, who now makes 7,000 pesos ($292) per month as a

cooperative member, compared with 400 pesos ($17) plus tips when she

worked for the state.



But others at the 27-member cooperative grumbled about a domineering

former administrator turned president, or about their pay.



"We have some benefits, but my salary is more or less the same as when

this wasn't a cooperative," said Danisley Napoles, a manicurist whose

job is less specialized than that of a stylist and brings in less revenue.



The law governing cooperatives allows for an unlimited number of members

and the use of contracted employees on a three-month basis. Members

elect their officers and also participate in decisions ranging from pay

scales to investment.



"Cooperatives have priority over small private businesses because they

are a more social form of production and distribution," Marino Murillo,

who heads the Communist Party's commission to revamp the Soviet-style

economy, told the National Assembly in December.



Murillo said they paid less taxes and had some access to the state's

wholesale system while private businesses have to buy their supplies at

retail markets and outlets.



Still, it is the government that makes the decision on whether a state

business is turned into a cooperative and the existing employees are

given no say. They either accept it or are laid off.



That top-heavy approach, a lack of adequate training and Cuba's poor

business environment all weigh on cooperatives and their success or

failure depend largely on how well prepared their leaders and members are.



A state television program called the Culture of Cooperatives runs on

Sundays, focusing on their history, the law and management. The Cuban

economist said the show is a good start to giving cooperatives training

but that the government needs to do more to help them succeed rather

than rush to create them without proper support.



"They should put on the brakes a bit, move slowly and put more emphasis

on quality over quantity," he said. "And most of all, improve training."



(Reporting by Marc Frank and Rosa Tania Valdés; Editing by Daniel Trotta

and Kieran Murray)



Source: Cuba looks to cooperatives to slow rise of capitalism | Reuters

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http://www.reuters.com/article/2014/04/13/us-cuba-reform-cooperatives-idUSBREA3C0CD20140413