November 24, 2011 / 7:14 PM / 6 years ago

Cuba to offer loans to self-employed in latest reform

HAVANA (Reuters) - Cuba’s growing number of self-employed may get bank loans starting next month as the government tries to inject capital into efforts to reform the island’s communist economy, according to a decree published on Thursday.

A man waits for customers his privately-licensed coffee stall at the entrance of his home in Havana November 21, 2011. REUTERS/Desmond Boylan

The new regulations, put out in Cuba’s Official Gazette, create a loan program that goes into effect on December 20 and also will be available to small farmers and those who want to improve or construct their own homes.

The intent is to “stimulate national production of generators of foreign exchange or import substitutes,” said Communist Party newspaper Granma.

Credits for farmers and home projects have been available previously but are new for the self-employed, a sector the government is trying to stimulate for the first time since the difficult economic times of the 1990s.

A recent media report said there are now 364,000 self-employed in Cuba, more than twice the number two years ago, but most are engaged in low-level street sales of food and items such as toys, pirated DVDs and plumbing supplies.

Lack of capital has been one factor preventing them from improving their business and dissuaded others from getting started.

“I’ve been waiting for this new credit system to have the opportunity to open a small place offering fast foods,” said Eugenio Sanchez, as he read the news in Granma.

The loan program is one of 300 reforms approved by the ruling Communist Party in April with the goal of strengthening Cuban communism to assure its future.

It gives heft to state support of the self-employed, known in Cuba as “cuenta propistas,” who have become critical to President Raul Castro’s campaign to restore the country’s debt-ridden economic modelled on the old Soviet Union.

He wants to cut a million workers from the bloated payrolls of the state, which controls most of the economy and employs most of the workforce.

But he needs jobs for them to go to and therefore is encouraging private job creation.

It remains to be seen how much impact the program will have because it will be administered by Cuba’s state-owned banks, which are widely viewed as inefficient.

The decree requires that the self-employed take out loans of at least 3,000 Cuban pesos, equivalent to $125 (81 pounds), with lower limits for farmers and home projects.

Cuban seeking loans will be evaluated by the banks for how much money they should receive and can be expected to pay back, Granma said.

In recent weeks, the pace of implementing the reforms approved in April has picked up, including recent decrees liberalizing the buying and selling of cars and houses for the first time in five decades.

Brazilian home improvement chain TendTudo plans to open in Cuba because the reforms there that permit the buying and selling of homes for the first time in decades may mean a strong market for its products.

Additional reporting by Nelson Acosta; Editing by Philip Barbara

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