COOPERATIVES WITHIN CUBA'S CURRENT ECONOMIC MODEL
by Beatriz Diaz
FLACSO, University of Havana
Cooperatives within the “Lineamientos de la política económica y social del Partido y la Revolución (Economic and social political guidelines of the Party and the Revolution)”
The sixth Congress of the Communist Party in Cuba which took place in April 2011, approved the document “Economic and social political guidelines of the Party and the Revolution”, which includes 313 guidelines whose objective is revision of the Cuban model for economics and societal development. It's approval was preceded by a national dialogue procedure, whose results were carefully collected and analyzed, which are reflected in changes to a number of guidelines and in the wording of many others.
One of the principal objectives in the revision of the Cuban economic model is the reduction of the participation of the state sector in the economy, which is currently completely predominant and the consequential amplification of the participation of the non-state sector, composed of two components: private labor (“self-employment”) and the cooperative sector. Cooperatives are mentioned directly or indirectly in a total of 25 guidelines. The most important being:
2. The management model recognizes and promotes, in addition to socialist state enterprises, which are the main mode of the national economy, the foreign investment modalities foreseen in the law (Mixed enterprises, international economic association contracts, etc), cooperatives, small farmers, usufructuaries, tenants, self-employed and other types of workers, all of which, when combined, contribute to an elevation of the market's efficiency.
First level cooperatives will be created, as a socialist form of collective property, in different sectors, that constitute an economic organization that is a legal entity and has its own equity, formed by people who become associates, offering goods or services, with the aim of producing and offering useful services to society, assuming all costs along with income.
The legal norms of the cooperative must guarantee that they, as community property, are not sold, nor their ownership transferred to other cooperatives, to non-state management or to individual persons.
Cooperatives maintain contractual relationships with other cooperatives, business, public administration service units and other non-state units, and once they have completed their commitments to the State, may carry out sales freely without intermediaries in accordance with the economic activity which they have been authorized to perform.
28. Cooperatives, based on the corresponding legal norms, after paying established taxes and contributions, shall decide the income of their workers and the distribution of profit.
29. A second level of cooperatives will be created, whose members are cooperatives of the first level, that will form a legal entity and have their own equity with the objective of organizing similar complementary activities or adding value to the products and services of their members (of production, services and marketing) or to sell or make purchases as a group with the aim of greater efficiency. (PCC, 2011: 10 y 12-13).
In this document, a true program of long term economic and social development, cooperatives take on a significant role that can be seen immediately, much broader than their current role. The two substantial changes in the place and role of cooperativism in Cuba are:
- Cooperativism will be extended to other sectors of production and services, in addition to agriculture, the only sector where it has existed up until now and,
- Cooperatives of a second level will be created, in addition to those of a first level which exist currently.
Background and the current situation
In agricultural production and the Cuban rural environment, agricultural cooperatives are fundamental actors according to their numbers, the agricultural land area that they manage and their contribution to production. The emergence and development of the agricultural cooperative sector in Cuba was the result of the successive processes of land distribution: the agrarian reforms of 1959 and 1963 followed by the usufruct land distribution in 1993 (emergence of the UBPC) and that of 2008 (Decree Law 259). While the initial agrarian reforms (1959 and 1963) were an expression of redistribution policies aimed at creating social justice and the two final processes (1993 and 2008) were determined by interim situations, the implemented policies have, in all cases, an evident component of democratization and confidence in the participation of citizens in the joint solution along with the needs of the nation and its population. From these processes have derived three types of agricultural cooperatives that exist today:
- Credit and Services Cooperatives (CCS), originated in the agrarian reform laws of 1959 and 1963. These laws radically modified the property structure in Cuba, characterized until that moment by its great concentration: according to the agricultural census of 1946, 71% of land belonged to 8.1% of landowners. (Acosta, 1972). The agrarian reform laws awarded ownership of land to more than 100,000 rural families that worked the land in the form of tenants, sharecroppers, etc. From 1961 on these new landowners began to organize themselves into rural associations and ultimately CCSs, which remain in existence today. Their members maintain individual properties, which they work individually and they associate with one another in order to acquire machinery and other inputs, such as credit and technical services.
- Agricultural Production Cooperatives (CPA), were created after 1976, when some of the CCS members decided to unify and combine their land and produce jointly with an aim at increasing the use of mechanization and other agricultural modernization procedures. The members of the CPAs were in this way the collective owners of the land, equipment, and production.
- Basic Units of Cooperative Production (UBPC), emerged in 1993, when Cuba´s economic crisis, caused by the disappearance of the socialist countries of Eastern Europe, saw the collapse of the ¨modern” production model which was extremely dependent on imported inputs utilized by state owned agribusiness, which at that time occupied almost 82% of the land. From these businesses were organized cooperatives formed from their workers, from field hands to technicians, who received the land in the form of usufruct without time limitations. The members of the UBPCs own all the agricultural, transportation and other equipment possessed by the cooperative, as well as its production.
The creation of UBPCs considerably increased the participation of the non-state sector in land ownership. According the most recent data available, in December 2007, this sector managed 44.6% of total land and 64% of agriculture (37% UBPCs, 9% CPAs and 18% CCSs and private sector) (The National Office of Statistics and Information, 2010: table 9.1)
Correspondent to this was the contribution of the non-state sector in food production for internal consumption. At this same time, at the end of 2007, the non-state sector produced 86% of rice, 97% of the beans and 85% of cow´s milk (National Office for Statistics and Information, 2010: tables 9.9, 9.10, 9.11 and 9.17). This aspect is of particular relevance, because 16% of the country's annual imports are food. Reducing external dependence is considered of vital importance not only from a economic and financial standpoint, but also from a national security and food sovereignty standpoint (Díaz, 2010).
In June of 2008, the National Office of Statistics published a document called ¨Land Use Panorama in Cuba, 2007¨. The figures revealed in this document caused a commotion within Cuban society: less than half of the available agricultural land was being cultivated (a little less that 3 million hectares of the total 6.6 million hectares of agricultural land, 45% of them); between 2002 and 2007 cultivated agricultural land dropped to more than 600,000 hectares.
The total amount of uncultivated land, 70% in 2002 and 66% in 2007, was dedicated to pasture and forage, but approximately a third was classified as idle: 9,333,000 hectares in 2002 and 1,232,800 hectares in 2007. There was then, 1.2 million hectares of idle land (National Office of Statistics and Information, 2008). In the distribution of idle land by ownership, and calculated by the ¨idleness index¨ (idle surface/agricultural surface x 100), the greatest level of idleness was in state-owned land (26.5%) while the non-state sector had 14.2% idleness: UBPCs 19%, CPAs 12.5% and CCSs 5.6%.
These numbers influenced the decisions made in respect to giving idle land in usufruct with the approval of, in the middle of 2008, Decree Law 259 and its regulation, Decree Law 282, by which idle state land was distributed in usufruct to individuals and corporations. To begin with 13.42 hectares was given for a period of 10 years extendible for another 10. Those who receive land in usufruct with the promise of forming a CCS.
As expected (Díaz, 2009), the application of these decrees has had great influence in the development of the cooperative sector in Cuba, particularly in the formation of CCSs. According to the most recent figures, in February 2012, 163,709 applications have been approved to individuals that had received, through usufruct, 1,307,177 hectares. The CCSs today manage 1,898,388 hectares of total agricultural surface and produce 68% of tubers and roots, 69% of vegetables, 63% of wet rice, 86% of corn, 80% of beans, 78% of fruits and 68% of cow´s milk (Monzón, 2012). Other sources report a substantial increase in the amount of CCS members and of special importance a large number of young people and women.
According to the most recent data of the National Office of Statistics and Information (ONEI), in the trimester of April to June 2012 a total of 5,769 cooperatives existed, distributed by type in 1,006 CPAs, 2,651 CCSs and 2,112 UBPCs. Of these, 1,033 are principally dedicated to the production of sugar cane and are linked through the Grupo Empresarial AZCUBA (273 CPAs, 143 CCSs and 617 UBPCs), while 4,736 are linked through the Agricultural Ministry and are dedicated to producing various crops (grains, tubers, fruits and vegetables), livestock, tobacco and other areas (National Office of Statistics and Information, 2012: table 1)
The agricultural cooperatives of Cuba and the beginnings of the international cooperative movement
In order to characterize the functioning of agricultural cooperatives in Cuba, we must look at to what measure they are complying with the seven principals of the international cooperative movement, adopted in 1995 in Manchester, Great Britain, by the General Assemble of the International Cooperative Alliance:
Open and voluntary membership: all Cuban cooperatives are in compliance; admission as well as termination of membership are approved by the cooperative´s general assembly
Democratic Member control: they are also in compliance; all major decisions must be submitted to and approved by the cooperative´s general assembly, where they utilize the principal of “one member, one vote”. The small size of cooperative membership also contributes to maintaining democratic control, allowing for more direct interpersonal relationships.
Economic Participation of Members: even though there exist differences amongst the three types of cooperatives, within each there exist procedures for equitable distribution of economic benefits.
Autonomy and Independence: this is very limited, as a result of the links between cooperatives and state agribusiness, as we will see further on. Even though UBPCs have had since their creation more restrictions in their autonomy, these limitations also affect CCSs and CPAs.
Education, training and information: they comply in different ways (general, technical, etc) but integrated cooperative education is thus far not developed in Cuba.
Cooperation amongst cooperatives: currently this is practice is almost non-existent, since all are first level cooperatives; among cooperatives there are no economic ties or cooperative integration.
Commitment to the community: the majority of cooperatives carry out this principle very well. At times the relationships between cooperatives and communities have a synergistic character of mutual benefit in cases where cooperative members live in the neighbouring communities. These links can be very strong and the cooperatives use their resources for different services for their members and the communities.
The evaluation of the compliance of cooperative principles can be summed up as the following: Cuban agricultural cooperatives are democratic from the perspective of participation in decision-making and in economic benefits and they have good relationships with their communities; above all they lack autonomy, integration and integrated cooperative education.
An excellent analysis and assessment of the legal determinants of the limitations that characterize Cuban agricultural cooperatives was done by Professor Avelino Fernandez Peiso, of the Universidad de Cienfuegos, who notes the diversity of the rules: Law 95 (2002) applies to CPAs and CCSs, while Decree Law 142 is for UBPCs. After referring to these and other different sources of national cooperative legislative framework, Fernandez points out 7 key principles of the Cuban cooperative environment, among which he highlights their ¨constitution, operation, previous authorized administration management and their internal democracy and formal autonomy, even though Cuban cooperatives are subject to the external will of the state administration authority through the regency program of the state¨(Fernández, 2011: 372-73).
The basic conditions of cooperatives' legality have been determined up until now by the cooperatives relationships with state agribusiness, which simultaneously represents the entrance and departure of their economic activity. Through agribusinesses they receive their main production inputs (seeds, fertilizers, pesticides, fuel) and they market their products. These restrictions are most noticeable in UBPCs, which even though they operate their own bank accounts, they exercise this right in a very limited way, since almost all their economic transactions are carried out through state owned enterprises. In a lesser measure, CPAs and CCSs have also been restricted in their ability to autonomously manage their finances due to diverse administrative regulations.
These facts have been brought to light through different investigations and studies of Cuban cooperativism, with greater strength and clarity since the creation of the UBPCs. Despite this, many cooperatives have had success in their democratic management and in their economic results. Among the studies carried out by us, it is worth highlighting that they allowed us to identify the factors through which the cooperatives (UBPCs) of the west of the country could build pathways of social inclusion for migrants from the east of the country during the economic crisis of the 90s. These factors were:
- The successful economic results of cooperative and their equitable distribution amongst members in strict accordance to their participation.
- The construction of homes, with a democratic system for their distribution among cooperative members and credit facilities in order to acquire them
- Family incorporation, with various generations of the same family participating in the cooperative and the important role of women (Díaz, 2005).
- Other success factors we identified in our visits carried out in June of 2012 to the agricultural cooperatives in the Las Tunas (2 UBPCs) and Granma (1UBPC and 1 CPA) provinces are:
- The existence of strategies and development plans in the short, medium and long term
- Systematic control (including weekly) of the execution of said plans
- Clear distribution of individual member commitments and contributions and systematic control of their completion.
- The development of many diverse and creative forms of distributing individual responsibilities and their evaluation;
- Transparency in the analysis of those results, which takes place in the general assembly that approves the distribution of income among members according to their individual contribution;
- Monthly general assembly meetings;
- Diversification of production and the incorporation of scientific findings- techniques, in particular to those of an agroecological focus;
- High levels of member stability;
- Close links to their communities and as was noticed in previous studies, significant integration of the families that make up their membership
Despite this, the UBPCs in general present an unfavorable situation. According to a diagnostic performed by the Ministry of Agriculture, in accordance with their economic and productive results UBPCs are divided into three categories, for each there is a corresponding percentage that is indicated in the brackets following their descriptions:
- Group 1: Present good productive, economic and financial standing; are managed correctly and the administrative structure does not present any difficulties (27%)
- Group 2: Present productive, financial, economic and organizational problems, as well as workforce, but prioritize placing attention on solving their problems (57%)
- Group 3: Have problems of various types that they consider irreversible, and propose dissolution or fusion with another entity. (16%)
(Ministry of Agricultura, 2012)
Evidently, if less than a third of the of UBPCs diagnosed could be classified in group 1 and the ¨Guidelines¨ explicitly propose the strengthening and amplification of the cooperative sector in the economy of the country, it will require political decisions and programs that will permit the improvement of the management of UBPCs or as some employees have expressed ¨saving them¨.
Processes of Change
The 6th Congress of the Communist Party in Cuba also agreed to the creation of a Guidelines Implementation Committee, which is directed by the Vice-president of the Ministry Council, Marino Murillo Jorge, who in his report in the 9th period of sessions on the 23 of July 2012, provided important policy changes whose objective is the implementation of the Guidelines. In regards to cooperatives, the fundamental aspects were:
- Legal norms are being created which will allow the creation of cooperatives in other sectors of production and services, for the later development of a General Law of Cooperatives.
- A group of 222 experiments has been prepared, to create cooperatives which will perform activities in different sectors of economy and services.
- Many of these cooperatives emerged from what are currently state institutions. In these cases, the assets will be transferred for a period of 10 years to usufruct, loan and other forms. The property will be exercised through the administration and the distribution of profits will be according to the individual contribution of each member.
- The cooperatives will enjoy a preferential tax code, they will pay less in taxes than self-employed workers.
- It is necessary to respect the legal status of cooperatives, and not make them subordinate to state enterprises. In the case of current agricultural cooperatives, and in particular UBPCs, they must have equal rights and independence.
Some of the change processes already have a legal form, principally:
Agreement No. 7271 of the Ministry Council, dated July 19, 2012 which already notes that there will be a new General Regulation for UBPCs, emphasizing that both in this, as in other provisions,¨they will grant UBPCs the authority and necessary powers to manage their resources and make themselves self-sufficient in production, economics and finances¨(Ministry of Agriculture:2)
The document ¨Plan of immediate steps to address the constraints that limit the operation and management of the Basic Units of Cooperative Production¨ summarizes 17 decisions that are based on the concept of the UBPC as a cooperative and set out measures that will modify previous regulations, referring primarily to the the relationships between UBPCs and state-owned agribusinesses and other entities, the powers and internal governance of these cooperatives (extending the decision making of the general assembly to deciding the amount of profit that will be distributed among its members), as well as conditions for the acquisition of goods and services (fuel for example), financial questions and new regulations that will facilitate the acquisition of new homes for the cooperative members. (Ministry of Agriculture, 2012: 9’12).
The General Regulations of Basic Units of Cooperative Production was approved in Resolution No. 574/2012 by the Ministry of Agriculture and published in the Extraordinary Official Gazette No. 037 on the 11th of September 2012. It states that in accordance with the policy set forth, the law must be modified in accordance with the changes in the productive base and achieve management autonomy of the distinct forms of cooperatives, for which the new General Regulations of Basic Units of Cooperative Production is necessary. (Official Gazette, 2012)
Although there still exists a large centralization of fundamental decisions, such as the Ministry of Agricultural's necessary approval for the creation, dissolution, and possible mergers of UBPCs along with their social mission and its modifications (the social mission is understood as the fundamental line of production, other agricultural production and other productive activities, of services and marketing), other aspects of the General Regulation in effect constitute changes that offer a greater autonomy for UBPCs, among them are:
- It defines a UBPC as an economic organization and social cooperative, formed by its associated members voluntarily with autonomy in management and administration of resources.
- The relationships between UBPCs and businesses will be governed by contractual relations, and not as before, based on administrative subordination.
- UBPCs receive legal status from the moment of the inscription in the Statistical Registry of Cooperative Units (REUCO)
- Every UBPC must layout internal regulations, based on the General Regulations, but in accordance to their specific conditions, which must be approved by a favorable vote of 75% of the members
- The powers and authority of the General Assembly, who must meet monthly, are amplified. To validly adopt agreements requires attendance of at the very least 75% of the members and approved by more than 50% of the members.
- Among these powers are the election and dismissal of the manager and the board of directors, the approval of all major decisions, such as development programs, the amount of advances received by members, the distribution of profits and the creation and utilization of reserves; along with the acceptance of new members and fines that may occur if the cooperative reaches a decision to dissolve.
- The manager, as a representative of the UBPC, has the power to sign contracts and to open and close bank accounts, managing them alongside the member of the executive board who handles financial matters.
Moreover, in regard to the financial and tax system and to accumulated debt, recently respective resolutions had been issued by the Ministries of Agriculture, of Finances and Prices and the Central Bank of Cuba. They exempt these cooperatives from the declaration and payment of taxes on profit for a period of five years; they will pay a 5% tax on gross income and proceeds from this will be used to finance subsidies for losses and working capital, debt payments and other items. 116 million pesos are also allocated in the budget of the Ministry of Argiculture in the year 2012, to capitalize the UBPCs, cover accumulated losses from previous years and repay debts. (Ministry of Agriculture; 2012: 117-141).
What we have referred to up until now allows us to see that, regarding the agricultural cooperatives that exist currently, in particular UBPCs, there is already a process of change directed at ratifying their cooperative identity and character, and to increase their operational autonomy. It should be noted, however, that the emphasis in establishing contractual relationships will not automatically eliminate the asymmetrical power structure that exists between first level cooperatives and the diverse institutions with which it establishes these relationships. The asymmetry is based on both the size (membership) of these cooperatives as in the abilities that they have to understand and put in practice complicated specialized regulations. It follows that the principle of inter-cooperation, the possibility of creating cooperatives of a second level, becomes more and more an evident necessity.
Furthermore, although there has been progress with regard to agricultural cooperatives, more than a year after the approval of the Guidelines still we find no evidence of similar progress within non-agricultural cooperatives. A Non-Agricultural Cooperatives law is under study that will be the legal framework for their emergence and operation, but is has not yet been approved. According to some specialists' criteria, what we need is a General Law of Cooperatives and do away with the coexistence of different legal norms for different types of cooperatives (Law 95 for CPAs and CCSs, Decree Law 142 and General Regulations for UBPCs and the law mentioned above for non-agricultural cooperatives). Still its completion and approval will allow for the start of the more than 200 experiments announced during the celebration of the National Assembly of Popular Power in July of this year.
In conclusion we are optimistic, we hope that a renewed confidence in cooperatives will continue to push its way into Cuban society and also develop cooperative values and principles. In practical terms, we expect the legal framework that covers the creation of non-agricultural cooperatives to be approved soon, allowing the commencement of experiments to take place before the end of this year, 2012 or the beginning of the next. In our view, Cuban society is increasingly more prepared for these changes and they will have positive influences on the quality of life and the economic and social participation of our citizens.
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