By Tanner Howard
WASHINGTON – Just a few years ago, the idea of an American business group entering Cuba and fostering economic activity with its people would have been unthinkable. But economic liberalization in the country, coupled with thawing tensions between the U.S. and Cuba, could dramatically change the way business gets done in Cuba.
These were the findings from a recent trip led by the National Cooperative Business Association, which announced the start of the U.S.-Cuba Cooperative Working Group at a panel discussion Tuesday.
The NCBA, which represents employee-owned businesses in retail, housing, energy and other businesses, advocates for the interests of worker-owned businesses in the U.S. and abroad.
In the U.S., more than 4,000 employee-owned businesses account for $652 billion in sales every year. More than two million Americans work at cooperative businesses, which include well-known brands such as REI, Ace Hardware and Nationwide Insurance.
According to Eric Leenson, president of Sol2 Economics, Cuba already has 5,000 employee-owned businesses, most of which are agricultural and existed prior to the loosening of restrictions in 2010. Given the nature of communism, several panelists also emphasized the natural development of cooperative businesses under the new regulatory environment.
“If you think about going from a communist society to the other extreme, a capitalist society, I think the happy medium is through that cooperative model,” said Patrick La Pine, president of the Florida Credit Union Association.
Michael Beall, CEO of the co-op business association, said that the laws governing Cuba’s growing employee-owned business sector are in line with NCBA’s cooperative business principles. The association hopes to assist Cuban businesses looking at the cooperative model for development. Cuba’s transition to a freer economy gives employee-owned businesses a special position in the country, Beall said.
“Because the Cuban economy is so made up of cooperatives, there is learning to do by us,” Beall said. “Cooperatives impact the U.S. economy daily, but to see it on this level, at the Cuban starting point, is really exciting.”
Economic reform began in Cuba in late 2010, when Cuban president Raul Castro announced his intention to move millions of Cuban government employees into the private sector. To achieve this, the Cuban government approved reforms encouraging private sector development, including a late 2012 law that enabled the development of transportation cooperatives.
These economic reforms cleared the way for the United States to begin normalizing relations with the island nation, which culminated in an announcement last December that the two countries would move toward restoring diplomatic ties. In exchange for the U.S. lifting portions of the economic sanctions in place since 1962, the Cuban government agreed to allow greater freedom for its people, including expanding Internet access.
Even though the Obama administration has begun the process of diplomatic negotiations with the Cuban government, Congress would have to pass legislation to lift the embargo and restore diplomatic relations fully.
Twelve bills have been introduced already in the 114th Congress addressing relations with Cuba. In addition to legislation lifting the embargo, other measuress target specific issues, such as travel, broadcast and telecommunications.
However, others are skeptical of the cooperative business model being used in Cuba as it seeks to ramp up its economy. Fred Smith, director of the Competitive Enterprise Institute’s center for advancing capitalism, says that cooperative businesses won’t scale to allow strong economic growth. Instead, Smith said Cuba should look to examples set by countries like Taiwan and South Korea as it liberalizes its economy.
“Cooperative businesses don’t work as well when you move to the broader global economy,” he said. “If Cuba is going to take a place in the global marketplace, it’s going to have to create institutions that are very competitive, in a modern corporation form.”
The NCBA panelists raised several areas of concern for their goal of advancing cooperative development. Most notably, they cited worries about the inability of producers to buy products such as seed and fertilizer for agricultural groups on the open market.
Other challenges included a lack of ownership culture in the country, as well as insufficient technical education for coop members.
Despite the concerns, and the challenges posed by ongoing Cuba-U.S. diplomatic negotiations, the panelists expressed optimism about the future of employee-owned businesses.
“There is genuinely an interest for the cooperatives and the government in seeing them succeed as independent entities,” said Beall. “The government plans on having the cooperatives play a key role in the economy.”