New restrictions put the future of Cuba’s private sector in jeopardy

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New restrictions on private enterprise in Cuba will “severely hinder” the growth of the sector – and could worsen a shortage in key items like chicken on the island, an expert told WLRN.

The pullback is rooted on the Cuban regime's "ultimate fear" of losing economic and political control over the island, explained Ric Herrero, the director of Cuba Study Group, a nonprofit based in Washington D.C. that promotes engagement between the U.S. and Cuba.

“They all see the case of the Soviet Union and the fear of that ever happening is what puts the brakes on so many things and also spears so many of these kinds of reform waves that we see in Cuba,” he said, on the latest episode of The South Florida Roundup.

Last month, the Cuban government published the reform outlining the new measures. Herrero said the regime called them an attempt to correct economic “distortions” and “tax evasion" in a “wartime economy.”

“They basically change the rules of the game for this private sector,” Herrero said.

The new rules particularly target the almost 10,000 private businesses known as pymes , a Spanish acronym for small- and medium-sized enterprises. This change comes just three years after the regime legalized them in an attempt to escape the island's economic collapse.

Among the new regulations are new taxes and strict limits on who can import and sell in the wholesale market. Pymes and cooperatives who want to sell to other businesses will be required to be wholesalers as their primary function, Herrero told WLRN.

“There is no telling how many entrepreneurs will be authorized by the government to work that function,” he said.

READ MORE: Cuban capitalism is getting real. Cuban capitalists hope U.S. help will be just as real

The private sector in the country could experience disruption in their supply chains as many entrepreneurs would often find it more cost-efficient importing goods to supply not only their businesses but also to sell to other businesses.

“This is also coming in the heels of new price controls on some staple items, such as chicken, that were already causing entrepreneurs to reduce their orders or flat out stop them, until they had a better sense of where this new framework was going,” Herrero said. “The fear is that the chicken that is there will just spike in value.”

The new regulations increase the number of activities prohibited to the private sector from 112 to 125.

“If broadly interpreted and enforced, the new framework could constitute a dramatic step backwards for the Cuban economy,” Herrero wrote in a Cuba Study Group press release .

You can listen to the full conversation above or wherever you get your podcasts by searching: The South Florida Roundup.

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New restrictions put the future of Cuba’s private sector in jeopardy

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