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