Cuba to legally recognize private firms in move bolstering market reforms

HAVANA - Reuters

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Cuba will recognize small and medium-sized private firms as legal entities, a Communist Party document published on May 24 showed, a move that could remove obstacles for businesses and foster the emerging private sector.

Cuba's government has relaxed restrictions on self-employment in recent years in an attempt to slash the state payroll and battle economic stagnation, leading to the creation of many independent businesses from hairdressers to restaurants. 

President Raul Castro recognized however at the Communist Party Congress last month that such businesses were working "without the necessary legal recognition," under rules designed for small, family firms only. 

The 32-page document published on Tuesday detailed the party's plan for Cuba's economic development, approved in the Congress, stating Cubans could create "private businesses of medium, small and micro size" that would be recognized as "legal entities." 

Economists said this recognition might confer on businesses additional rights such as the ability to import wholesale supplies or export products. The document did not specify what the new status would entail. 

"It remains to be seen whether these activities will be allowed," said Paolo Spadoni, a Cuba expert in the department of political science at Augusta University in the U.S. state of Georgia. 

"But it is another sign of Cuba's recognition that private enterprises will have a significant role in the future economic model even though the fundamental means of production will remain in state hands." 

Cuba's Communist Party holds a closed-door Congress every five years to evaluate progress and set the economic and political guidelines for the next half-decade. 

"Private property in certain means of production contributes to employment, economic efficiency and well-being, in a context in which socialist property relationships predominate," the party acknowledged in the published document. 

The new guidelines will not become law until approved by Cuba's National Assembly, which meets only twice a year and is due to hold its next session in July. 

Market-style reforms introduced by Castro in Cuba in an attempt to modernize the economy have faced significant resistance from conservative party stalwarts. 

Many are concerned a strong private sector could generate opposition to the single-party system. 

Since Cuba and the United States restored diplomatic relations last year, Washington has focused much of its efforts in the island on fostering private businesses.