Constitutional regulation of private property in Cuba

Constitutional regulation of private property in Cuba

HAVANA, Sept. 28th The new Cuban Constitution (NCC), promulgated in 2019, recognizes for the first time since 1976 the existence of private property.

The new regulation enables individuals or legal entities, Cuban or foreign, to be owners of private property and allows the creation of micro, small and medium-sized enterprises (MSMEs) with this type of property, as well as for the state one.

It is a process that finds firm ground: more than 600,000 Cubans are currently self-employed and there is a package of progressive approval of measures in this regard, such as the one that eliminated the list of 127 activities approved to authorize in its time close to 2,000, and a package of decree-laws on MSMEs has already been approved.1

Normative order, cultural narrative and unwritten rules

The constitutionalist Hugo Azcuy identified an important change in the property regimen with the 1992 reform. From then on, not “all,” but only the “fundamental” means of production would be state-owned. For Azcuy, this fact implicitly enabled private property for goods that were outside the scope defined by the term “fundamental.”2

However, the absence of formal recognition of private property originated, with the economic transformations experienced after the 1990s, several legislative developments without constitutional foundation or even contrary to the spirit of the text than in force.

One of them was the deployment of self-employment, which did not have a regulation on the private means of their investment, while constitutional article no. 21 (1976), prohibitive of “the exploitation of man by man,” which should have prevented the private hiring of wage labour.3

The current constitutional regulation of “forms of ownership” leaves without support, or at least without clarification, the distinction between “personal” and “private” property.4 The fact is that, for example, housing, a good considered after 1976 as personal property, in turn, is private property if it is subject to rent.

In this case, housing can be part of a business investment, but it cannot be pledged or mortgaged as a guarantee of the investment made.5 It is a (poorly) regulated asset, located “halfway” between personal property and private property, without the provision of clear rules on when it can be considered one or the other.

Another regulatory problem in this field is the term “certain” contained in article no. 22 of the NCC. So far, there is no regulatory clarity on which and how these “certain” assets would be defined.

This problem is similar to that experienced by the expression “fundamental means of production” — whose ownership is inalienable, but whose definition of “fundamental” is variable, which is why some means may no longer be considered as fundamental.

The concept of “fundamental,” however, has received greater attention after its introduction by the 1992 reform, in search of greater protection for what can be considered as “public domain assets.”

It is to be expected that the term “certain,” now applied to private property, will produce increasing legislative development and doctrinal argumentation.

Equality and difference in the treatment of forms of ownership

Another problem to be solved by future legislation on forms of property is the equal treatment between its different holders.

It is a problem similar to that experienced by the expression “fundamental means of production” — whose ownership is inalienable, but whose definition of “fundamental” is variable, which is why some means may no longer be considered as fundamental.

On the one hand, it has been “reaffirmed” “that the self-employed workers have the same social security benefits as those in the state sector.” According to Minister of Economy Alejandro Gil: “We start from a base: the economy is one. We do not have one that is state-run and one that is non-state. We are taking steps so that the Economy Plan recognizes all economic actors. There is no them and no us. We are all one.…”

However, and to the contrary, there are differences in the current Labor Code in the treatment of those employed in both sectors according to their forms of ownership.

A study on the Labor Code concluded that “it has not been able to establish the legal equality of labour rights and duties between salaried workers in the state sector and workers hired in the non-state sector,” since while for the “state sector labour rights and broad social benefits are valid, minimum standards are imposed for contracted private workers.”6

Then, the lack of proper legislation for MSMEs until August of this year has had negative consequences, and not only for productive relationships. Although it limited the commercial relations between the associative forms that really existed among them, and with other national and foreign economic actors, to the detriment of their dynamism and productive results, it also prevented the State from developing effective mechanisms to guarantee labour rights for self-employment.

There are also differences in the ability to organize. Certainly, the effectiveness of labour representation by the Cuban trade union organization presents very serious questions, but at this point, there is a differentiating fact: in the state sector, the administration is recognized as a subject other than the worker, while in the private sector, the employer and the workers hired by him are integrated under equal conditions as members of the same union.7

As part of this process, a cultural narrative has insisted on purely associating any openness to private work to “neoliberalism.”

Granma, the main newspaper in the country, has helped spread that narrative. Despite contradicting principles enunciated by the Party and the Government, and the great theoretical poverty of this position, its impact on the reproduction of differences in the treatment of this sector and on the exclusion of alternatives for it should not be underestimated.

For its part, civil society had made proposals on possible contents of future legislation, such as those of the economists’ Oscar Fernández and Pedro Monreal. Interest is not “unwarranted.” Monreal has estimated that the establishment of SMEs could increase Cuba’s Gross Domestic Product between 1.5 and 1.7%.

However, there is government awareness of several of the problems mentioned here. Official positions have emphasized that “validating that the initiatives conform to what is established is a responsibility that must be based on well-defined rules so that misinterpretations or personal judgments do not arise.”

It is a “call” to avoid the persistence of unwritten rules and negative cultural habits on self-employment from hindering the reform process. The good news is the appearance of the legislative package on MSMEs, already mentioned, which seems to have been driven by the July 11 protests.

Private property, market and competition

The new constitutional regulation on private property regulates its “complementary role” in the economy. Even so, the range of action of the spaces of concurrence in the national economy will thereby increase.

As part of this process, a cultural narrative has insisted on purely associating any openness to private work to “neoliberalism.”

Since 2004, Johana Odriozola — then a professor at the University of Havana, currently deputy minister of economy and planning — demanded the regulation of competition law based on the existence of spaces such as agricultural, industrial and artisan products markets, of the products and services of self-employed workers and of goods, and services supplied in convertible currency.8

The professor also substantiated the existence of competition within the state sector itself, in the area of ​​foreign trade, which in several cases had more than one entity to develop its activity or, where, as happened in the area of the ​​import of paints and varnishes, and new tires, there was competition with the national industry. For all this, “competition is (was) established even within the same system.”

The NCC recognizes the existence of the market but left essential institutional configurations on them unregulated. For example: the right of all economic actors to have access in equal conditions to the markets of their productions and inputs, the regulation of competition, the prohibition of monopolistic practices (by any type of property), the principles of protection of consumers and public policies of economic contracting.

Competition has existed, in practice, without recognition of the principle of freedom of enterprise, but also without recognition of the nature of the private entrepreneur of the so-called “self-employed worker,” if it is taken into account that he may in turn hire workers, who would then be “employed.”

With this, its activity has been withdrawn from the commercial sphere and it has been denied protections that such coverage would provide, under the protection of institutions provided by the current, although in disuse, Commercial Code,9 including registration in the Mercantile Registry.

There is a consensus in that the status of a legal entity, in the business sphere, grants protections in the areas of contracting, access to financing, patrimonial liability and limitation of liability, and of resources in the event of bankruptcy. In contrast, up to now, as a consequence of the type of Law that regulates self-employment, it is unlimitedly liable for its own acts and there are no guarantees such as those mentioned.

For all these reasons, there has been an urgent need for the approval of regulations in the field of commercial companies for quite some time. In this way, the recently approved DL 46/2021 constitutes MSMEs as (art. 11) “mercantile companies, which adopt the form of a limited liability company, hereinafter Ltd, by means of a public deed, which is registered in the Mercantile Registry and with their registration, they acquire legal personality.”

The Limited Liability Company (Ltd) is regulated in the Commercial Code and has a history in Cuba, such as, for example, the regulations on the matter promulgated in 1929, which modified the Fourteenth Section of the Commercial Code.

According to that regulation, in the Ltd none of the associates was obliged beyond their contribution, which is why they were not liable for social debts, they could have any legal object of commerce (with the exception of the activities listed in article 123 of that Code), they would bear a company name in which the names of one or more of the partners plus the word “Ltd” should appear and they could be constituted with two partners, without exceeding ten.

The Limited Liability Company (Ltd) is regulated in the Commercial Code and has a history in Cuba, such as the regulations on the matter promulgated in 1929.

The book Las empresas de Cuba, by Guillermo Jiménez Soler, documents the existence of the Ltd in Cuba, but the number of public limited companies was always much higher in the country due to the facilities granted to this form by the Commercial Code.

At the international level, it is generally recognized as useful in small and medium-scale trade. Among its problems, one opinion indicates that it leaves less room for the autonomy of the will of the associates, for example, with respect to statutory regulation, since in the Ltd “everything is imposed by law [and] very little is left to the will of the associates. “

The cultural narrative on private property and the market in Cuban socialism

This idea, formulated by Marta Moreno, has been at the bottom of the debate on the relationship between property and socialism in Cuba: “the dominant form of property conditions the relations of production, distribution, exchange and consumption in society.”

Based on this, the “socialist property of all the people” has been considered as the main form of property in socialism and, as a derivation, the state enterprise has been taken as the basis of that regimen.

On the same horizon, the Communist Party document “Ideas, concepts y directrices del VIII Congreso del PCC“ (2021) assures: “It can never be forgotten that the ownership of all the people over the fundamental means of production constitutes the basis of the real power of the workers.”

A “fundamental principle, according to official statements, is that the state enterprise — the basis of socialism — which should and can be efficient, cannot be harmed or relegated to the background.”

The constitutional regulation on state property codifies that idea about the need for its primacy as a support for socialism. Thus, it is regulated as part of the more general map of the “Economic Foundations” of the Cuban State.

In this map, Article 18 adds to “the property of all the people” the principle of the planned direction of the economy; Article 19 grants the State the ability to direct, regulate and control economic activity; and Article 20 regulates the concentration of property in non-state individuals or legal entities by the State in order to guarantee the “fairer redistribution of wealth” and the preservation of “limits compatible with the socialist values ​​of equity and social justice.”

An in-depth analysis of the theoretical and ideological bases of these ideas, and of that regulation, shows problems little addressed by the official Cuban discourse and public debate, which are part of the cultural framework in which the new regulation on private property in Cuba should operate.

These problems include the lack of differentiation between the nationalization of property with respect to the social property, a classic dilemma of the historical experiences of socialist construction, with a sustained presence in the Cuban process.

This lack of distinction creates structural problems in vindicating property rights. The universal owner is the State itself and not, for example, workers’ associations. The “people” is, theoretically, the owner of the resource, but does not have the resources of an owner over the asset that is the object of property.

In a very traditional way, the market has been thought of by the bulk of the Cuban state discourse through the contradiction “plan against the market,” but this antagonism is a false opposition: the plan can be as capitalist as the market.

In this way, private property has been challenged and state property defended as the only “socialist” one, but no progress has been made in the democratic consequences of a distributed property regimen under the real control of its social owners.

It is a political as well as a technical problem. First, the private property vs. state property dichotomy has served to make invisible the citizen disempowerment that is implied by the lack of access to property rights. Second, the “people” invoked as the owner of the social property is a concept of complex translation in the legal sphere of the subjects of Law.

The market has functioned for almost the entire discursive history of Cuban socialism as a straight-out synonym for “capitalism,” which justified its virtual closure. The 1976 Constitution did not even mention the word “market.”

However, in critical Marxism, abolishing the market or prohibiting private property by law, without having created the conditions of possibility to overcome it, leads to what Marx called “political communism” or “despotic communism.”

In a very traditional way, the market has been thought of by the bulk of the Cuban state discourse through the contradiction “plan against the market,” but this antagonism is a false opposition: the plan can be as capitalist as the market.

Socialism is not reduced to the existence of a central plan, nor to mere opposition against the market: it supposes both the existence of the market and the program of its challenge as the articulating centre of social life.

Private property and concentration of wealth

Within Cuba, the discussion on private property has focused on avoiding its concentration and the inequality it generates. This narrative well identifies one of the most problematic fields of contemporary political life at the international level.

The presence of this concern in the Cuban Constitution is consistent, then, with global criticisms about the concentration of income and in favour of the need for distributive justice.

This international reaction to the enormous concentration and polarization of property — for example, inland and patents on natural heritage — has led to a revival of “communist” ideas in various parts of the globe, in their original sense of “defence of the common.”

Reflection on common goods is relevant for Cuba. It seeks to avoid conflicts generated by private property but also by the proven inefficiency of its sole state management. For the latter, it offers solutions to the bureaucratic expropriation of social property, a persistent evil, as I said before, of the Cuban experience.

However, Cuban regulation is not very “creative.” The NCC regulates the state enterprise, not the public enterprise. The problem is bigger when the Cuban system presents a trajectory of confusion between what is public and what is state-run, and between the state and the government.

In contrast, with the notion of “public”, it is ensured that the State is not the only actor in solving public problems, it insists on the need to seek solutions together with other social actors and the need for social control over the social property.

The NCC raises other issues on the issue of property. It prohibits, consistently from a socialist perspective, the concentration of private property, but not its concentration in an exclusive state actor (monopolist). And it omits to regulate, as the socialist perspective would also demand, guarantees of self-supervision (self-management, co-management, savings banks, community enterprises, communes and other associative forms guided by the values ​​of cooperation and solidarity).

Nor does it mention issues of home economics, self-employed individual jobs (not to be confused with self-employment), micro-enterprises, or popular networks of producers or supplies. Therefore, it does not explore the principles of the so-called “Social and Solidarity Economy,” a trend that has been spreading in several countries due to its possibilities to face peremptory issues such as employment and the provision of services and to promote inclusion and social cohesion.

On the other hand, in Cuba there has been less deliberation on how to expand the democratic defence of property: that is, on the establishment of rights to property, in the face of property and access to the property.

The central principle collected by the NCC is that all forms of property have a social purpose: they grant rights, but they also require duties, which are bound to a social function. It is the inalienable starting point for a democratic conception of property — contrary to the exclusive and excluding meaning of typically capitalist private property — but the text does not commit to other necessary items of that approach.

A right historically defended by popular sectors, that of access to the property, is not mentioned. Other constitutional texts, which are part of the latest wave of constitutionalism at a global level, such as the Ecuadorian Constitution, establish it.

That understanding would open the doors in Cuba to promote public policies for access to the property in favour of those dispossessed of it, in a scenario that shows significant inequality gaps with respect to, for example, women and racialized subjects.

The idea would also open the door to a renewed understanding of socialism:

You are not more socialist because you have fewer but more owners. For making each citizen owner of the conditions to reproduce their life. If a property is power and power is property, much more needs to be done in this regard in favour of the social majority.

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Notes:

1 This text was written before the approval of these MSMEs regulations. As his interest is the constitutional analysis of the regulation on private ownership, I will not elaborate here on them. On those regulations, see Omar Everleny Villanueva and Aldo Álvarez.

2 For details of ownership transformations after the economic reform, see Carmelo Mesa Lago: los cambios en la propiedad en las reformas económicas estructurales de Cuba.

3 That content was removed from the NCC.

4 Personal property was understood to be that which falls “on the income and savings from one’s own work on the house that is owned with just title of ownership, other goods and objects that serve to satisfy the material and cultural needs of the person, and ownership over means and instruments of personal or family work that are not used to exploit the work of others.” Armando Torres Santrayll: “Antecedentes históricos y principios que informan… ob. cit.

5 Real press and mortgage guarantees can only be constituted in favour of financial institutions, and on real estate, which can be houses located in areas destined for rest and summer vacations and barren lots. See Jennifer García Capote, La prenda y la hipoteca, garantías reales. Una mirada jurídica a su nueva regulación en Cuba. If the legislator’s interest was to protect housing as a right in its own right, it would entail a special regulation, aimed at de-commodifying that right, that is, to place the conditions of access to housing outside the market.

6 These differences can be seen in: type of contract (definite/indefinite time), the number of paid vacation days, the right to return to one’s job at the end of maternity leave, benefits for certified sickness payments for short-term medical care (less than six months), and the stipulated legal path for workers to defend themselves from labour law violations by private employers (private business owners).

7 For an in-depth investigation on this topic, see Fernando Luis Rojas: Cuba: el legado revolucionario y los dilemas de la izquierda y las fuerzas progresistas en América Latina. For an example of the political debate around current unionism in Cuba, see Alina B. López: Confirmación

8 Johana Odriozola Guitart: “Derecho de la competencia strictu sensu. ¿Mito o realidad para Cuba?” Revista Cubana de Derecho, no. 23 and 24, January-December 2004, pp. 108-111.

9 This is the Spanish Commercial Code, in force since 1886 in Cuba, with subsequent modifications.

 (Oncubanews)