The establishment, in an experimental fashion, of non-agricultural cooperatives
(CNA) in 2013 opened a “gradual and expanding” process that has developed more or less successfully, and added dynamism to Cuba’s economic panorama.
This gradual approach, characteristic of all strategies linked to the updating of the country’s socio-economic model, has produced 398 CNA, operating in 10 sectors, with some 18,000 members, and generating income of over six billion pesos, through the end of 2018.
These statistics, which of course don’t tell the whole story, “confirm the validity of this experimental process,” stated Yovana Vega Mato, deputy director of the Policy and Implementation Commission’s Organizational Improvement department.
She noted as well that the presence of CNA, like other non-state forms of management, has relieved the state of responsibility for less complex economic activities, allowing for greater concentration on strategic tasks, in addition to contributing to greater efficiency, generating employment, and mobilizing productive forces, as projected in the Conceptualization of Cuba’s Economic and Social Model, approved by the National Assembly.
This experimental process is in the stage of generalization, Vega reiterated, “with the objective of continuing to advance step by step, consolidating what is done and correcting errors and deviations that may appear, both in the internal functioning of these cooperatives, and in their relations with other economic actors, and, on this basis, work on generalizing the positive experiences.”
Precisely toward this end, norms just published in Official Ordinary Gazette No. 63 will enter into effect in November, to update current legislation governing non-agricultural cooperative, serving as the legal reflection of policies approved in 2017 to improve their functioning:
- Decree Law No. 366, November 2018, on Non-Agricultural Cooperatives.- Decree No. 356, March 2019, Regulation of Non-Agricultural Cooperatives.- Resolution No. 361, August 2019, from the Minister of Finance and Prices, on prices, taxes, financial operations, and accounting of non-agricultural cooperatives.- Resolution No. 362, August 2019, from the Minister of Finance and Prices, regarding the payment of personal income taxes by contracted workers.
BRIGHT SPOTS AND PROBLEMS
Like all experiments, the development of agricultural cooperatives was subjected to an exhaustive evaluation in 2017, several years after their initial emergence, revealing positive accomplishments, as well as mistakes that were limiting progress.
The evaluation, which led to the approval of policies to improve the operation of these cooperatives, showed, according to Yovana Vega, that the most favorable economic impact was seen in the construction and industrial sectors, as well as in personal and technical services.Limited access to wholesale markets and related services was noted as problematic, even though mechanisms are being established to promote the development of cooperatives and facilitate the purchase of supplies.
Along with positive results and specific shortcomings, also identified, in the specialist’s words, were “deviations in the management of some cooperatives, fundamentally associated with non-compliance and violations of legal stipulations that distort the principles of cooperativism.”
Among these:
- Misappropriation of resources and income, and corruption, including in some cases, collusion between cooperatives and state entities.- Performance of a significant portion of activities in some cooperatives by hired workers and the contracting of services from third parties.- Accounting deficiencies.- Marked differences between the income received by members responsible for management and those directly performing the cooperative´s fundamental work.- Use of bank credits for purposes other than those declared.- Irregularities in construction budgets, invoices, and billing.
- Non-compliance with planned improvements in services and conditions in food services cooperatives.
- A tendency toward higher prices.
Taking into account these irregularities, it was decided, as expressed by Yovana Vega, to approve no new cooperatives during this stage of the experiment’s consolidation process, in order to concentrate efforts on strengthening those already constituted.This improvement process is based on several strategic guidelines: Adopt appropriate measures to improve management of cooperatives, on equal footing with other economic actors; promote greater impact of activities carried out at the provincial level; and reinforce mechanisms of monitoring and control.
Thus Vega explained, “As part of this process, the decision was made to officially return to applicants projects that were in the phase of evaluation by the Commission, via the respective Provincial Administrative Council, Central State Administration body, or national entity, until the process of establishing new cooperatives is resumed.”
DECREE LAW NO. 366
Non-agricultural cooperatives in Cuba are collectives in which members offer their personal effort as their main contribution, that is, everyone must work and this is one of the key details that the law stipulates.Additionally, the cooperative's link with the territory where it is located is strengthened, as is explained as part of the principles of cooperativism, that these collectives contribute to the economic and social development of the nation in the environment in which they operate, in order to serve the interests of the community and their members.
Thus activities with a national scope are differentiated from those that function on the local level:
- Activities with national scope include those devoted to the repair and maintenance of garment industry machinery, technological equipment, scales, air conditioning and refrigeration; and aluminum trim and carpentry.- For construction activity, which currently has territorial scope, the Minister of Construction is empowered to exceptionally authorize operations outside the cooperative´s home province.However, Vega clarifies, the provisions do not contradict the possibility of cooperatives to market their productions outside their place of operation. Due to the fact that many irregularities are based on the ignorance by the members of the principles of cooperativism, the regulations weigh the education and training of the members, by defining these activities as a precept of cooperativism and determining the obligation to create a fund for financing.
Nevertheless, Vega added, the legislation does not rule out the possibility that a cooperative may sell its productions outside its area of operation.
Given that many irregularities noted were based on members’ ignorance of the principles of cooperativism, the new regulations provide for the education and training of members, by defining such activities as a fundamental to cooperativism and stipulating the obligation to create a fund for their financing.
Non-Agricultural Cooperatives by sector
398 ÷÷ Cooperatives in all
Food Services: 151
Commerce: 81
Construction59
Industry: 34
Personal & Technical Services: 29
Ornithology: 17
Transportation: 12
Food Processing: 3
Energy: 7
Accounting Services: 5
Likewise, the requirements to be elected president of a cooperative are established, as well as procedures for a recall, aspects that reinforce the principle of collective, democratic decision-making.The legislation also introduces the figure of a provisional member, which allows for the evaluation of an individual´s qualifications before he or she joins the cooperative. Such persons have the same rights and obligations as other members, with the exceptions of occupying administrative positions, determining the duration of the trial period which can be extended up to nine months, and deciding whether to offer the individual permanent membership, or not.Decree Law No. 366 also establishes acceptable levels of growth in the number of cooperative members, according to the number existing at the time the regulation enters into effect.- Cooperatives with fewer than 10 members may double the number of members.- Cooperatives between 11 and 50 members may expand up to 50%.- Cooperatives between 51 and 100 members may expand up to 20%.- Cooperatives of 101 members or more may expand up to 10%.The decree establishes that the member receiving the highest income will earn, as a maximum limit, three times more than the lowest, with the objective of guaranteeing a fair and equitable distribution of the earnings generated, in accordance with the contribution made by each individual’s work.Another benefit that is incorporated is the negotiated time period for tax exemptions and rent reductions, when the cooperative assumes the repair of facilities, which is extended in the new decree from one to three years.Also introduced is the option of suspending the cooperative's operations on a temporary basis, for a maximum period of six months, in the event of management problems, allowing the resumption of activity once the deficiencies are resolved. Until now, the law required the dissolution of the cooperative in such cases.
More details are outlined regarding the dissolution of cooperatives in the new regulations, with steps in the procedure established, and responsibilities and rights of all involved specified, providing more clarity and transparency in this process.
- It is established that debts will be paid according to priorities established in current legislation (Civil Code).- Cooperatives are authorized to sell their automotive equipment to legal persons.- The option of creating a Liquidation Commission by the administrative authority that revoked the cooperative’s charter is added, when circumstances so warrant.- The right to challenge the administrative decision to dissolve is added, first before the body that adopted the decision, and if subsequently necessary, in court.In terms of property owned by members made available to the CNA, provisions were approved allowing personal property to be placed at the service of the cooperative, for a fee or free of charge, as is also the case for monetary and in-kind contributions.The cooperative’s General Assembly has the authority to approve conditions, terms, and remuneration in such cases; as well as the power to provide or deny the reimbursement of monetary contributions made by members who chose to leave the collective.
In line with the country’s emphasis on the computerization of society, the new policies promote the use of currently available payment and credit instruments, such as magnetic cards, bank transfers and checks, to provide more transparency as compared to using cash and facilitate accounting of financial operations.
Based on experience gained during the experiment’s first years of operation, the new legislation supports the participation of members in union locals related to their line of work, and facilitates their creation within cooperatives.
MORE FLEXIBILITY IN SALES OF MATERIALS AND SUPPLIES
Of constant concern is the fact that access for non-agricultural cooperatives to supplies is still inadequate, despite the options created, an issue identified as one of the central limitations faced by these collectives.This is why, Vega emphasizes, the sale of raw materials and inputs has been made more flexible, in accordance with recently approved measures to boost the economy, including:- State enterprises may sell any available products to cooperatives, at established prices, eliminating any subsidies in such cases.- The regulations reaffirm that entities providing inputs or services to cooperatives may continue to do so by contract, in accordance with their plans, budgets, and commercial strategies - at unsubsidized prices.Methodological directives for the preparation of the 2020 Plan specify that:- CNAs participate in the process, on equal terms with other economic actors and, therefore, must have knowledge of all stages, especially related to the determination, presentation, and certification of their needs.- Like state enterprises, they should receive timely responses from suppliers.- Entities, wholesalers, and distribution companies must consider the needs of CNA in their proposed plans, apart from those of the state enterprise system, to satisfy these in accordance with available resources. To be taken into consideration during this process are the type of cooperative, products destined to meet state commitments, imports required, and the productive chains generated, among other aspects.- The participation of CNA in local development projects and access to financing funds is also expectedCONTROL AND TRAINING, OTHER GUIDELINESDecree Law No. 366 also specifies the responsibilities of different bodies and agencies for this stage of the experiment’s consolidation.Authorities in Central State Administration bodies and Provincial Administration Councils (CAP), who authorize cooperatives, are directly responsible, as provided, for their supervision and evaluation.However, it is up to the CAPs to maintain continuous relations with cooperatives established in their territories and systematically review their results, regardless of the body that approved their constitution. A Supervision Guide was also prepared, providing cooperatives a working tool to self-analyze, with the goal of ensuring adequate internal accounting and standardizing the behavior of entities that authorize cooperatives and assess their management. For its part, the National Bureau of Statistics and Information has modified the system by which information on CNA is gathered and the obligation to present financial statements was established. Cooperatives with large production must present records on a monthly basis and others annually.And if anything should distinguish the implementation of these new legal norms, it is the training process. Along with the National Association of Cuban Economists and Accountants, a program is planned in stages, and must reach all cooperative members, Central State Administration bodies, and local assemblies of People’s Power with cooperatives established in their areas.As the preparation process is just beginning, those interested in obtaining more information about the norms and their implementation can access the Policy Implementation and Development Commission’s website (www.cubacrece.gob.cu), which outlines all measures critical to the updating of our economic model and legal norms.
IN FIGURES:
Current status of approval process for non-agricultural cooperatives
• 498 CNA authorized by the Council of Ministers
Of these:
• 10 withdrawn
• 44 dissolved or in the process of dissolution
• 46 did not complete the process
• 398 in operation
• 78% (310 CNA) were authorized by four competent entities: Havana Provincial Administrative Council (163 CNA); the Ministry of Construction (62); Artemisa Provincial Administrative Council (60); and the Ministry of Industry (25).
• 80% (317 CNA) operate in three provinces: La Habana (235 CNA), Artemisa (64), and Matanzas (18).2015
SOURCE: Policy Implementation and Development Commission -Organizational improvement department
