Karin Galvez, Convivencia

Microloans are an economic mechanism widely used throughout the world. In Cuba it could be a balancing tool for the current and future needs of Cubans. Obviously there are difficulties for their efficient operation, and there will be different criteria with regards to their role in Cuba, but just giving them some consideration could be a smart move from the complaint to the solution.

In the area of the economy, Cuba is 50 years behind when compared to any other country. Even when the number of people leaving the country has increased, and the population has become more aware of aspects of the world’s globalization, the way to implement and think about the economy lags behind. And it is not because we don’t know how to do businesses (which we do, and well, considering the circumstances) but due to the mentality of the average Cuban who has lived for years depending financially from the State, and who although considers this control unfair, complains about “what they don’t give him” or what “is not guaranteed to him”, and in reality has no conscience of his personal responsibility for the improvement of the economic situation. This, I think, is obviously justified by decades of economic centralization and of the impossibility (even for the government unconditionals, placed in key positions in important companies) to make important decisions in business matters, or even worse, on their own economic situation, such as savings or investments.

At this time, with the start of “cosmetic changes” in Cuba, and as essential changes are accelerated, the tendency of the majority is to predict that “our situation will remain the same”, with an eagerness to fend off disappointment that is almost annoying. I don’t even know how many people around me, when taking about the changes in Cuba, express their doubts about any improvements. And to avoid dying of disappointment they hide behind statements like: “the ones that have the most will receive all the benefits”, or “those of us at the bottom will remain at the bottom” or “foreigners will take everything” or “we will not get anything”, “how can I open a business?”. This is also the result of the damage caused by totalitarism in Cuba. We have lost our capacity for happiness, even when we risk being disappointed.

It is time for us to start talking and thinking about the economic mechanisms that we need, whether help from Cubans with economic resources abroad, or from others who have offered their help to make Cuba a prosperous country. One of these mechanisms are microloans.

Why microloans?

If, as we hope, Cuba is regarded as a good market based on its social and economic situation, at the time of change towards democracy and towards a market economy, we will enjoy the resulting benefits, but we will have to learn to live with the negative aspects of the market, when opportunities are so different. At that time, we may become disillusioned with the possibility that others will enjoy better economic perspectives due to their higher economic resources, large lucrative businesses and nobody will be able (or even want to) stop the process. Many think (and not without reasons) that Cuba is already “distributed” among those that at this time have been able to prepare themselves abroad, or to learn from real experiences in business management and direction, and today hold in their hands a large portion of the Cuban assets. The expectation is that this sector will be able to combine with the financial resources of those that have made fortunes abroad or in Cuba (although few, but there are some) and decide the direction, the rhythm and the intensity of the economic recovery effort. This may be correct or even possible, but at last it depends of what us Cubans can allow in our island, after 50 years of restraints on initiative and personal creativity and government monopoly over all the economic and natural resources.

One of the mechanisms that would be very useful to Cubans in their effort to stay in the market under fair competition, and without excessive protectionism, are microloans, understood as relative small sums that are loaned for small investments in exchange for the payment of interests.

Microloans are important everywhere in the world. Small and medium size businesses contribute to a better distribution of space and to the national revenue. After all, all major businesses today are the result of some small business in the past. They have better opportunities to reach places where big business can’t and to satisfy more specific needs.

What would be their role in Cuba?

Microloans would have a very important role in Cuba, especially at the time of the implementation of the changes. Among the positive consequences of microloans we can identify the following:

1. Keep average Cubans in the market.

It is expected that Cubans will have to face the attack of the large transnational business without being able to or even desire to fight them. We need mechanisms that will allow us to remain in the market among the competition. If we begin with very large businesses, there will be more possibility of failure at the beginning. In this case, nobody will come to take over the country; we would be giving it up little by little, selling our businesses when they are no longer profitable. Small businesses are the ones that can grow, while we grow in experience and resources. Microloans would help many Cubans to start small businesses, and it is better to have many small businesses that a few large ones. We have lived through many years of speeches about how the property belongs to all, which actually means it belongs to nobody, and in the end it is just the State, acting as the only owner, the only employer and only beneficiary. I cannot imagine that after the fundamental change in Cuba we will be ready to accept one or few owners, employers or beneficiaries. To think about economic mechanisms that prevent the repetition of the current situation in Cuba, with just a change of actors, is something that we can do.

2. Equal opportunities.

This is fairer, and more convenient. It would not be fair for those who had the best opportunities for a half a Century to compete with those who have not had them, regardless of the causes in each case. It is not an issue of capacity or different efforts, but of unfair opportunities. Microloans would contribute to establish a certain balance between Cubans. Obviously laws would be required to protect the equal opportunities, but the law is not sufficient to establish the priority for Cubans for a period, or tax or salary benefits. It would be healthier to increase the possibilities of the less favored, than to curtail the opportunities of the others. In order to balance the opportunities, microloans to the weaker sector of the economy would be more beneficial than taxes or tariffs on the stronger sector.

3. Reduce the state protection quota

It is very difficult to identify the limits of protectionism as an economic evil, both in the necessary intensity and time.

Microloans could help to reduce the protectionism quota to a minimum degree. If we have the opportunity to compete in the free market, we will be able to do it in the best way. We have been able to demonstrate this under very adverse conditions. And if we hold any advantage over the other competitors, is the advantage of having been here during this time of general and absurd centralization. We know our public, we know their needs and how they think, their likes and preferences. Under these conditions with sufficient resources, the state protectionism would be replaced by protection (which must be reduced to a minimum degree and for a short time….if needed)

4. Stimulate the creativity of Cubans

Just as creative activity requires resources, the availability of resources promotes creative activities.

In the future, microloans would complement the legal possibility to invest, with the actual opportunity, by offering access to financial resources. It is very difficult to face the legal possibility without the financial resources, which is the case with the current legislation about hotels, cell phones or DVD’s. The opportunity to participate in the market legally, after a long time, will increase the personal initiative of Cubans, if they have the necessary financial resources. The so called “invento” under normal economic conditions will become a prosperous business.

Main advantage and main difficulty

The first thing that any Cuban would think when talking about microloans is that there are not allowed by law. No bank will make cash loans for investments. But, I believe that this is not the biggest difficulty, first because the Cuban people have assumed the illegality as a way of survival, and second, because that could change at any time. I believe that currently, and at the time of the change, the main difficulty to establish a microloan program would be the lack of financial discipline. There is no culture of financial obligations, except for those with the State, which have the negative effect of becoming a burden impossible to meet, which gives a certain “moral license” to break the obligation. This attitude could apply to the microloans.
On the other hand, (and this is an advantage) a small investment, which could be too small to invest in any other country, may be important in Cuba now and would facilitate the establishment of the financial mechanism of microloans.

An important change in the Cuban economy would be to give Cubans access to cash resources to invest, with the double effect of “empowering” individuals and the economy.

The availability of cash resources would pressure the acceleration of the legal possibilities. At this time, the number of independent workers would multiply if there were microloans available, as evidenced by those who have never stopped “negotiating” in spite of the severe bans imposed during all the years of economic centralization. This would be very beneficial for Cuba.

Cuban history would have been different if we had had access to microloans, even under these economic conditions. Microloans would have been a very important escape from government control over all the resources. It is true that the possibilities to invest are almost none, but it is also true that investments are made. In the few legal spaces currently available, there is an unimaginable number of “Cuban inventions”. These are the same Cubans who fought for a decent life, who rejected to accept disaster, and those who will make of Cuba what it should have been always, an economically strong and safe country for its people.

Karina Galvez (Pinar del Rio, 1968)
Economist, 1994
Professor of Finance, IPE, Pinar del Rio
Responsible for the Group of Economists of the Center for the Civic and Religious Training, Member of the Editorial Board of Convivencia.
Lives and works in Pinar del Rio, Cuba.

Publication: www.ConvivenciaCuba.com