Cuba Food Industry Cooperatives Feel Betrayed

Cuba Food Industry Cooperatives Feel Betrayed
June 6, 2014
Vicente Morin Aguado

HAVANA TIMES — Why the feeling of having been betrayed? Today, I have a
chat with Jaime Olano (aka "Lefty"), a company manager that does not
quite fit our preconceived notions about such positions: he is a tall,
slender, soft-spoken man with greying hair. Jaime was once a high school
principal, a job he quit back in the tough nineties because it wasn't
putting food on his table (education is all about chalk and notebooks of
scant market value, and he wasn't willing to sell exam answers to students).

Jaime Olano: I've been working in the food sector for 20 years. Now, I'm
not sure I want to continue here. I'm afraid I'll end up in jail,
accused of tax evasion. This whole business of running a cooperative is
like living under the sword of Damocles. The decisions are made at the
top. Then they hold a meeting with us, simply to say to us: "take it or
leave it."

HT: The idea that this is something done of one's own free will has
always been upheld. Are we acting like Stalinists, applying a kind of
forced collectivization?

JO: The difference is that, here, they save face by holding a meeting
that is supposedly democratic. If you decide not to accept their
conditions, they won't sanction you – you're simply placed at the mercy
of the Ministry of Labor, waiting for a position outside your sector.
Can you imagine that? What option does a cook, a barman or a waitress
have, when they've been doing those jobs for more years than I have mine?

HT: The government has unleashed a crusade against superfluous jobs.
This socialist model had created the dream of total employment, now it
is looking to find jobs for a million people. The expression of Lefty's
face is rather eloquent. I continue with my questions, bearing in mind
he's told me he could end up in the nick.

JO: The pressure is real. I say this because there are many tax obligations.

HT: It would be good if you could tell us what they are.

JO: Every month, you have to pay the rent for your locale – we'll never
be the owners of the place. You also have to rent some equipment (the
best units, incidentally), and to buy others with years of use
practically at store prices.

HT: They do not apply a depreciation rate?

JO: They apply it by mixing Cuban socialism with a kind of "loan shark"
capitalism. They apply a depreciation rate from 5 to 10 percent to an
industrial toaster with 15 years of use, a unit that was perhaps
repaired by the employees themselves during the tough times of the
Special Period. They charge you 12 Cuban pesos for every square meter of
the locale, counting warehouses and offices, every centimeter of the
place, that is. This is an average cafeteria for Havana. It was built
well before the revolution. The right thing to do would be to loan it
for commercial purposes free of charge.

HT: Are there other taxes?

JO: The list is endless. You should write this all down, because I may
not remember them all, even though I have a good memory.

HT: Right, I'll copy it from your notebook:
- Locale and equipment rental.
– Electricity, water and sewage, fuel.
"One thing," he says to me, "We pay rates similar to the regular ones
applied to the general population." Good to know, I think, and continue
jotting down the information.
– Transportation of goods.
– Cleaning products and utensils.
– 10 percent of monthly sales.
– Quarterly social security payments for each member of the cooperative,
equivalent to 262 Cuban pesos.
– Monthly salary as an advance on profits, calculated on the statistical
average calculated for the province. In Havana, it is around 450 pesos.
– At year's end, a per capita income tax calculated on the basis of the
controversial percentage scale.
Of course, I ask him to explain this last item.

JO: They apply a cumulative scale to calculate year-end payments. It
starts out at 10 percent, applicable to the first 10,000 pesos of income
for each partner and goes up to 45 % if the income for each partner
exceeds 50,000. As you can see, it doesn't really help if you're trying
to promote competition as a means of increasing profits. The ideal thing
for everyone (and I include us, because we are part of the population),
is for prices to go down, to be able to sell more, without having to cut
into anyone's benefits.

HT: I end up agreeing with Jaime's "suggestion" about the real
possibility of evading taxes. I would never, of course, incite anyone to
break the law, not even one as controversial as the law that applies to
cooperatives in the food industry. Now, can't you negotiate with State
companies?

JO: Negotiate? (He laughs sarcastically). That's the other half of the
story. The company serves you the food, as is established, and you have
to eat it. For instance, wholesale supplies are now sold at market
prices, with a discount averaging only 10 percent. If rice is sold at
the market at 5 pesos the pound, they sell it to us at 4 pesos. Is that
a real advantage? It's a fixed rate that can't be negotiated.

HT: The main issue is making profits. How do you tackle this problem?

JO: I think you've gotten to the crux of the problem. Our units, which
make up the "base" network, sell light snacks: sandwiches, soft drinks,
ice cream, milkshakes and pizzas, all at relatively low prices. All
other incomes are made from the sale of cigarettes, cigars and alcoholic
beverages.

HT: What is the income ratio?

JO: The most important thing here is this second source of income.
Cigarettes and alcohol represent more than 85 percent of our incomes.
However, the prices of these products are considered strategic by the
State, they cannot be altered. We get ludicrous percentages from their
sale: 2 percent for cigarettes, 5 percent for rum and 14 % for beer. If
you do the math, we get very little out of selling food, what with so
many taxes and restrictions. What's more, wholesale supplies are always
unstable and not enough.

HT: What does this lead to, assuming one doesn't decide to evade taxes?

JO: Where? The answer is in plain sight. Go and see what happened to
some of the establishments that became cooperatives. The prices go up.
Perhaps services will improve because of it.

HT: Even though you're the manager, you're working at the bottom, next
to your employees. What atmosphere exists in the workplace?

JO: We set our hopes on the cooperatives, but we've been let down.
There's just too much meddling by the State. I feel like they're handing
us a corpse to see if we can bring it back to life. Now, we in the food
industry are expected to solve the problems they couldn't fix in over 50
years, when they nationalized these small businesses. They should show
us some respect, we've already taken a beating during the hardest years,
keeping socialism standing.

If it's a question of being optimistic, I would like to quote Decree Law
305, which states: "To establish, on an experimental basis, the norms
that shall regulate the creation, operation and liquidation of
cooperatives in sectors outside the country's agricultural and livestock
industries."
—–
Vicente Morin Aguado: morfamily@correodecuba.cu

Source: Cuba Food Industry Cooperatives Feel Betrayed - Havana Times.org
- http://www.havanatimes.org/?p=104119