Sunday, December 23, 2012

Non-Agricultural Cooperatives: Progress in the Updating of Cuba's Economic Model

Havana. December 20, 2012

Non-agricultural cooperatives

Progress in the updating of Cuba's economic model

• New laws create legal framework for non-agricultural cooperatives

O. Fonticoba Gener

As part of the updating of Cuba's socio-economic model, and the implementation of Policy Guidelines approved at the 6th Party Congress - in particular numbers 25-29 - five new laws went into effect December 11, creating a legal framework for the gradual establishment of cooperatives for non-agricultural purposes, and providing provisional regulations which will govern the process.

The new laws allow for the initial establsihment of cooperative associations to undertake more than 200 different activities throughout the country, including transportation, restaurant services, fishing, personal and domestic services, recycling, production of construction materials, as well as construction services.

This new non-state management format offers promise given its more social nature and its development can benefit from the positive, a well as negative, experience of agricultural cooperatives.

The option of renting state facilities to these associations is also included in the newly enacted laws.


Two Decree-Laws from the Council of State (No. 305 and 306, from November 15 and 17, 2012, respectively), a Decree from the Council of Ministers (No. 309, November 28, 2012), a Ministry of Finances and Prices Resolution (No. 427/2012) and another from Economy and Planning (No. 570/2012), provide the legal framework which will initially guide the experimental creation and functioning of non-agricultural cooperatives.

According to the statutes, the new entities will have corporate status and are to be voluntarily constituted by individuals for the purpose of achieving economic or social ends through a collective effort.

Noteworthy is emphasis on the stipulation that these cooperatives are not subordinate to any state entity whatsoever, although they must abide by the laws and standards established by government bodies regulating the sectors in which they function.

For example, cooperatives involved in the production of construction materials must respect the quality norms established by the Ministry of Construction for such products.

The highest authority directing a cooperative is its General Assembly which will include of all individual associates. Each of these will exercise one vote when decisions are made about the cooperative's functioning. This assembly will elect a president and any other administrative bodies deemed necessary.

Cooperatives may freely make use of property they own, manage rented facilities, and cover expenses with the income generated from their work.

The laws additionally stipulate that prices of products and services offered will be determined by the cooperatives themselves, in accordance with market conditions, except in the case of those prices subject to State regulation.


According to Decree-Law No.305, a non-agricultural cooperative may be of a first degree nature - that is, composed of at least three persons who will work together - or as a second degree cooperative, based on the association of two or more first degree cooperatives.

First degree cooperatives may be created on the basis of four configurations. Collective property may be constituted with contributions from the associates; or associates may maintain ownership of their property, working together for the purpose of acquiring supplies or services.

Another option would be the renting of needed facilities or means of production from the state, while any combination of the above would constitute a fourth possibility.

All of these alternatives imply the voluntary association of those interested and collective management of the cooperative’s resources.

Council of Ministers Decree No. 309/2012 stipulates that when associates contribute property to the cooperative, they may be remunerated by the entity, on terms established by the entire group of associates.

This measure is meant to ensure that all cooperative members have the same rights to the property and goods they administer collectively, each with one decision-making vote, and that the distribution of earnings is based the work done by each member.

Individuals who wish to form a non-agricultural cooperative must present an application to their municipal People’s Power bodies. It will be processed at different levels and then submitted by the governing bodies of the relevant sector to the Permanent Commission for Implementation and Development. This body will evaluate the application and convey it to the Council of Ministers. Once it has been approved, or denied, the decision will be communicated to the interested parties by municipal authorities.

At this stage, only applications for first degree cooperatives will be considered, although Decree-Law No. 305 stipulates that implementation of its provisions concerning second degree cooperatives must be completed within a one year period.

The new regulations state that when selected state establishments are transferred to cooperative management, current employees will be given preferential consideration if they voluntarily decide to form a cooperative and rent the facilities.

Ministry of Economy and Planning Resolution No. 507/2012 also establishes procedures for the renting of vacant state properties which could be used by new cooperatives. It stipulates that the availability of a property must be announced in local media, to ensure that all those interested may apply and that the cooperative with the most appropriate proposal for the use of the locale is granted the lease.

One of the fundamental principles guiding the establishment of new cooperatives is that the associates are those who do the work, thus the new laws place limits on the contracting of temporary employees.

Tax Law No. 113 – which will go into effect in January, 2013 – offers new cooperatives special tax relief and benefits, including a tax rate which is lower than that levied on the earnings of individuals who are self-employed.

The new laws on non-agricultural cooperatives were published in the country’s official legal publication, the Gaceta Oficial Extraordinaria No. 53.

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