Financing, beyond solidarity

Financing, beyond solidarity
YAXYS CIRES DIB | Ciudad de Panamá | 7 Jun 2016 - 10:36 am.

With the traditional remittances - in dollars and euros - many Cubans
have helped their family and friends to start up small businesses on the
island, which is witnessing a rare struggle between the transgressive
efforts of entrepreneurs and the Communist elite, fearful that even
minor reform measures will end up unseating them.

Remittances are a form of funding provided by family members and/or
friends, seldom recovered, but which have effectively promoted the
foundation of new businesses, though within the confines of the limited
plan to sanction self-employment.

Except for restaurants and holiday accommodations, most of the new
businesses require limited initial investments, always calculated based
on real world fees.

But this gesture of solidarity has also revealed the absence of a legal
body and domestic financial support capable of establishing a scenario
of economic reform more dynamic than that today.

Going from an economy of slapdash roadside stands and medieval licenses
to the possibility of establishing, for example, a hotel, a pharmacy, a
cinema, a distributor of imported products, or a sausage factory, poses
the entrepreneur with a pressing question: How do I finance my business?

In free economies there is a broad spectrum of financing channels,
ranging from the traditional to the most modern, from banks loans to
crowdfunding. However, the implementation of these methods in Cuba will
require at least three classes of reform: first, reform of the property
system, allowing citizens to own, use and dispose of both their movable
and immovable property, and other economic rights acquired in the
context of civil and commercial relations, entailing, among other
consequences, the capacity to establish contractual guarantees affecting
them.

Second, reform of all the legislation governing companies and commercial
contracts, updating it with new contractual instruments, such as
leasing, renting, factoring, franchising and joint accounts, allowing
citizens to benefit from fair, modern and flexible trade legislation.
And laws that enables citizens to operate through trading companies.

Finally, reform of the financial system, to allow state and private
financial institutions and banks to freely back entrepreneurs, without
bureaucratic red tape.

These are three kinds of reform that will boost the Cuban economy.

Decree Law 289 (2011) and the Banco Central de Cuba's Resolutions 99 and
88 (2013) address important aspects of loans to individuals, including
the self-employed; and Resolution 100 (2011) allows for the opening of
current accounts, authorizing the flows of said accounts to be used as
backing for loans. However, even the most fervent supporters of Raúl's
economic measures recognize that these regulations are paltry (limited
to the banking sector) and devoid of stimuli.

As the Cuban government has enacted some measures, and Obama has made
Cuba an "in" topic, a misperception has been generated that everything
is going swimmingly. In reality, however, the lack of political freedom
and comprehensive, structural reform torpedo any serious attempt to
establish free economic initiative, which is precisely how the Communist
Party of Cuba wants it; at its recent congress the PCC condemned the
accumulation of property and wealth.

Source: Financing, beyond solidarity | Diario de Cuba -
http://www.diariodecuba.com/cuba/1465288566_22899.html