March 22, 2018 / 7:20 PM / in 7 months

Cuba cracks open wholesale food sales for state-linked cooperatives

HAVANA (Reuters) - Cuba’s first wholesale outlet to supply former state-run eateries that are now cooperatives opened for business this week in Havana, a slap in the face to private start-ups that face higher costs.

Tanelvy Borges, 33, works inside a newly opened wholesale outlet in Havana, Cuba March 22, 2018. REUTERS/Alexandre Meneghini

Interior Trade Minister Mary Blanca Ortega Barredo told state-run media at the weekend that the wholesale model would eventually go nationwide and include hundreds of smaller coffee, snack and other former state outlets now rented to the employees or interested individuals.

She did not mention private initiatives that were not originally state-run.

The move puts the private eateries that have emerged under market reforms to the Soviet-style command economy at a further competitive disadvantage, given the government has yet to deliver on its decade-old promise to provide them wholesale outlets.

People wait in line inside a cooperative bakery in Havana, Cuba March 21, 2018. Picture taken on March 21, 2018. REUTERS/Alexandre Meneghini

The first wholesale outlet will sell staples such as rice, beans and sugar, as well as soft drinks, beer, hamburger, chicken and sausage to the state-eateries turned cooperatives at a 20 percent to 30 percent discount.

The government of President Raul Castro, who is due to step down in April, introduced cooperatives five years ago as an experiment, and a few dozen Havana state restaurants were ordered to go co-op in 2015.

The premises were leased to original employees who were given the option of other work if they were not in agreement.

Marino Murillo, head of the ruling Communist Party’s reform commission, said at the time that they would compete on a level playing field with private restaurants, but soon announced they would receive tax breaks as they were “a more socialized form of production.”

Then, the government said in 2016 that “in the interest of protecting consumers,” the co-op restaurants would receive a quota of lower-priced products such as soft drinks, beer and chicken in exchange for guaranteeing relatively low prices. The co-ops as a rule cater to local residents rather than high-end tourists.

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Two people with knowledge of Havana’s restaurant system who requested anonymity said the new move had been taken because the co-ops found their quotas were running out quickly and state-retail markets, where private eateries must purchase supplies, too expensive.

“To avoid bankruptcy and keep prices low they turned to the black market,” one source said.

The other source said the new model was somewhat similar to cooperative bus transportation in the Cuban capital, where in exchange for set fares they receive lower-priced fuel and parts.

The state, which has a monopoly on trade, owns thousands of restaurants, which have access to its wholesale system.

There are also around 100 cooperative restaurants and 2,000 private ones, all deemed to be part of the non-state sector, which, excluding agriculture, now counts nearly 600,000 “self employed” individuals out of 11.2 million residents.

Cuba lumps everyone not directly working for the state as “self-employed,” regardless of whether they are employers or employees, cooperative members or individual tradesmen and kiosk operators.

The government last August declared a pause on licensing new cooperatives and private eateries, among other activities, on the grounds that the non-state sector needed improved regulation.

Reporting by Marc Frank; Editing by Dan Grebler

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