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The Cuban government published on Wednesday in the Official Gazette Decree 127 "On Budgeted Institutions", a regulatory package that expands the management powers of state entities and paves the way for self-financing schemes and salary incentives, but conditions access to the most significant benefits on compliance with tax obligations and performance targets.
The regulation, jointly issued by the ministries of Finance and Prices, Labor and Social Security, and Economy and Planning, affects approximately 2,443 budgeted units across the entire national territory, which encompass more than 50% of the active workforce in the state sector.
Berta Iris Rojas Gatorno, director of financial policies at the Ministry of Finance and Prices, described the measure as having a "high impact" and specified that it applies to all bodies of the Central State Administration, budgeted national entities, and local administrations of the People's Power.
The decree introduces, for the first time, a legal definition for the budgeted sector and grants legal personality to its financial management. "Before this decree, there was no legal definition for this budgeted sector," emphasized Rojas Gatorno, which highlights the improvised nature of much of the institutional architecture of the Cuban state over the decades.
One of the most significant changes is the decentralization: heads of organizations are granted greater authority to approve self-financed activities, a power that was previously concentrated in the Ministry of Finance and Prices. However, these activities must comply with their tax obligations and plan contributions to the state budget, which initially limits the actual autonomy that is being announced.
Units with "special treatment" will be able to generate profits, create reserves at the end of the fiscal year, and establish their own salary system. Those that are fully self-financed may even request their conversion into a socialist state enterprise. However, here lies the central contradiction of the decree: this special treatment is explicitly excluded from the sectors of health and education, which precisely employ the most workers and record the lowest wages.
Cuban teachers earn the equivalent of about ten dollars a month, and doctors barely make 16 dollars, while the cost of living to cover basic needs ranges from 25,000 to 50,000 Cuban pesos monthly, compared to an average salary in the state sector of about 5,900 pesos in 2025.
In labor matters, the decree establishes that positions not directly related to the specific activity of each entity may not exceed 30% of the total workforce. Guillermo Sarmiento Cabaras, director of Labor Organization at the Ministry of Labor and Social Security, pointed out that "when designing the structure and workforce of a budgeted unit, it must be done with rationality."
Units that do not fully self-finance will be able to implement payment systems for all their workers, removing a previous restriction that limited these incentives only to those who participated directly in production. "This limit is broken and encompasses all workers," stated Sarmiento Cabaras.
The regulatory package will come into effect 30 days after its publication and sets a deadline of up to one year for its full implementation. During this period, entities must reorganize their structures and propose to the Ministry of Finance and Prices those units that may be subject to special treatment.
The decree arrives at the worst economic moment for Cuba since the Special Period: the GDP has accumulated a decline of over 15% since 2020, with a contraction of 5% just in 2025, and independent projections estimate an additional decline of 7.2% in 2026. The sectors with the most workers and the worst wage conditions once again remain excluded from the more substantial benefits of the reform.
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