Cuba experiences its first reduction in Mipymes

The Cuban government officially recorded its first decline in the number of micro, small, and medium-sized enterprises (Mipymes) since their establishment.

The Cuban economist Pedro Monreal shared an analysis on his social media that highlights the sectors most affected by this contraction of businesses, which has been gradually occurring since September 2024.

Monreal emphasized that the regime's decision to reduce this type of business occurs in a context of economic crisis exacerbated by recession and inflation in the country.

Sectors most affected by the reduction of MSEs

The decline of Mipymes has focused on six economic activities, with three sectors showing contractions above the national average:

• Hotels and restaurants: "It seems reasonable to assume that the decisive factor would have been the derailment of international tourism, especially towards the end of 2024," explains Monreal.
• Industry: "Multiple factors may have contributed to the reductions in industrial Mipymes (36.5% of the total national contraction). One hypothesis could be the energy crisis, the difficulties in investment/working capital, and the shortage of agricultural inputs."
• Trade: "Scenario of 9.5% reduction in the total number of Mipymes nationally. Although the impact is relatively modest, it could indicate a larger issue, as it is known that private Mipymes accounted for 25% of total retail sales in 2023."

Government restrictions on wholesale trade, the energy crisis, and the decline in consumers’ purchasing power have been key factors in this situation. Additionally, Monreal emphasizes the role of the "growing dollarized state monopolistic competition" as a threat to the survival of these businesses.

How the approval and regulatory framework for Mipymes in Cuba was established

The micro and small enterprises were approved in Cuba through Decree-Law 46, published in August 2021, which established the foundations for their operation as limited liability commercial companies.

At the same time, Decree-Law 44, related to self-employment, defined the scope of private ventures and their regulatory limits.

Since their legalization, Mipymes have experienced rapid growth, rising from representing 4.1% of retail sales in 2022 to 25% in 2023. The figures for 2024 have not yet been released.

Prospects and Criminalization of Small and Medium Enterprises (SMEs)

Despite the recent reduction, Mipymes continue to play a key role in the Cuban economy, particularly in job creation and the distribution of goods and services.

However, its sustainability is threatened not only by the economic and structural crises in the country but also by the government discourse that increasingly labels them as a threat to the socialist model.

In September 2024, an inspection by the Ministry of Domestic Trade (MINCIN) approved the closure of 58 establishments for failing to comply with regulations regarding the use of electronic channels for the payment of goods and services.

From that moment on, the Cuban government, led by Prime Minister Manuel Marrero, has insisted that it will not allow the "concentration of wealth" through these private companies, despite the fact that many of them have emerged as viable alternatives to the inefficiencies of the state sector.

Marrero has reiterated that Mipymes must "respect the socialist model", which, according to experts like Monreal, could translate into stricter regulations and greater restrictions on their operations.

While the state-owned company demonstrates its inefficiency and lack of competitiveness, the government appears to be criminalizing Mipymes, accusing them of excessive enrichment, when in reality, they are the ones that have managed to invigorate the market and provide jobs in a context of ongoing crisis.

In Monreal's view, "the 'burden' on Mipymes is yet another element that demonstrates the existence of structural problems in Cuba's economy."

Frequently Asked Questions About the Reduction of Mipymes in Cuba and Its Implications