U.S.–CUBA COOPERATIVE WORKING GROUP 2017 REPORT

UNDERSTANDING WORKING COOPERATIVES IN CUBA COOPERATIVELY AND OPPORTUNITIES FOR U.S.– CUBAN ENGAGEMENT Amy Coughenour Betancourt Keith Harrington

Thanks to Jessica Allen and members of the USCCWG delegation for contributing notes.

© 2017 NCBA CLUSA

NCBA CLUSA 1775 Eye Street, N.W. Suite 800 Washington, D.C. 20006 U.S.–CUBA COOPERATIVE WORKING GROUP 2017 REPORT

UNDERSTANDING WORKING COOPERATIVES IN CUBA COOPERATIVELY AND OPPORTUNITIES FOR U.S.– CUBAN ENGAGEMENT

March 2017

Table of Contents

2 Introduction 5 Background and Overview of the Cuban Cooperative Movement 9 Cooperative Creation: Profiles of Manufacturing and Professional Services Co-ops 12 Growing Cooperatively: Profiles of Cuban Cooperative Farms 14 Dining Cooperatively: Profiles of Cuban Cooperative Restaurants 16 Comparing Co-ops: Insights from U.S.–Cuba Cooperatives’ Sharing Session 19 Further Engagement and Conclusions 25 Who We Are: About NCBA CLUSA 26 Appendix A: List of U.S. Delegates

28 Appendix B: Glossary of Common Terms 2 INTRODUCTION

CONTEXT OF TWO NATIONS December 2016 catalogued the progress made and limitations that still remain around U.S. support to the fter experiencing the most dramatic shift in 55 private sector in Cuba, and recommended a more Ayears in the bilateral relationship between thorough and deliberate review and data collection the United States and Cuba two years ago, the two effort by U.S. government agencies.1 countries are poised for new challenges and yet another pivot under the new U.S. Administration of The death of Fidel Castro in November 2016 marked President Donald J. Trump. The roll-out of actions yet another major event in the history of the two following President Barack Obama’s and President nations. Though Fidel had officially handed power to Raúl Castro’s announcement on December 17, his younger brother Raúl Castro over a decade ago, 2014 to normalize ties was intended to set the his passing at age 90 marked the end of an era. That, relationship on a new path, ending an era defined along with Raúl’s announcement four years ago of by the Cold War and a climate of long-held enmity. his plans to step down from the presidency in 2018 at age 86, has reshaped the leadership dynamic and The Obama Administration quickly moved to underscores a level of uncertainty both within Cuba’s implement six sets of regulatory changes, easing internal political landscape, and with the relationship restrictions on travel, remittances, financial services, with its largest northern neighbor. and trade, thereby opening diplomatic channels and loosening the economic embargo against Cuba In his last days as president, on January 12, 2017, that requires congressional action to lift. A series of Obama took some final actions to advance his Cuba technical exchanges between U.S. and Cuban officials were also held to set the course for future bilateral dealings. A GAO report released in 1 Cuba: US Policy Changes Increased Engagement with Private Sector, but Agency Information Collection is Limited, Government Accounting Office (GAO), December 15, 2016.

Prehistoric Mural in the Viñales Valley, Cuba 3 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA Under 5 2016.

15,

Group ooperative Working December

business sector. (GAO),

Office

Over the last several years, last several Over the and exciting experiment in the and exciting experiment Cuba has embarked on a new embarked Cuba has development of its cooperative development Cuba: US Policy Changes Increased Engagement with Private Cuba: US Policy Changes Increased ooperatives to Cuba’s economic updates, and the ooperatives to Cuba’s economic updates,

Sector, but Agency Information Collection is Limited, Government Sector, 5 Accounting the number of workers on the governmentthe number of workers by payroll sector contributions private 1.8 million and increase by 2017. 5% in 2011 to 40-45% to GDP from economic “updates” package of a broad-ranging now have the opportunity instituted in 2011, Cubans -managed to establish private worker-owned and industries cooperative enterprises in non-agricultural and accounting services, such as professional and construction. manufacturing, gastronomy, policy The implementation of this new cooperative for a little over a starting in 2013 had been underway was made year when the December 2014 decision rapprochement to pursue diplomatic and economic island nation. between the United States and the the U.S.–Cuba C In creating (USCCWG), NCBA CLUSA assumed a leadership the Florida role in the forging of stronger ties across straits through cooperatives. Given the centrality of c sector U.S. government’s desire to support private that the expansion in Cuba, the USCCWG believes 100 years of U.S. cooperative community, with over cooperatives experience in creating and operating businesses that serve over 100 million members, has a unique and important role to play in efforts to build bridges between the two nations. The purpose of the U.S.-Cuba Cooperative Working Group (USCCWG) is to promote mutually beneficial collaboration between the U.S. and Cuba’s cooperative sectors. It is a national- level, multi-sectoral cooperative leadership group and representing U.S. purchasing, worker, producer cooperatives from a broad range of sectors, including agriculture, energy, finance, grocery and consumer goods, transportation, insurance, and housing. It also includes a group of Cuban cooperatives and support organizations

the

years

of again.

No

five

yet

formally

months

last

flux

government. first

in

the suspension

a in be to Cuba in July policy

4

their

(Cooperativas Castro

in

Reversing this 22-year Reversing this 22-year (USCCWG),

was 3

now

4

the

will were bilateral

by

Group embarked

that

January has

official cooperatives

on rules

Working

the

Cuba first

the

confiscated

Obama also ended the “wet foot dry foot” Obama also ended 2 The

part,

before

re-set were

its

http://www.economist.com/news/americas/21714600- U.S.– on this trip may be found in an NCBA CLUSA report: More http://www.miamiherald.com/news/nation-world/world/

immigration policy that gave Cubans preferential that gave Cubans preferential immigration policy and citizenship residency for pursuing U.S. treatment shores. if they made it to U.S. outgoing-american-president-makes-it-harder-donald-trump-undo- rapprochement Report, Trip Cuba Research Group Cuba Cooperative Working 2015. Revised March americas/cuba/article131092324.html 2014 with 12 U.S. cooperative leaders to learn2014 with 12 U.S. cooperative leaders about being legislated how cooperatives in Cuba were and formed changes as part of a set of economic the country’s in the country. At that time, many of law, which itself was an update of the earlier Cuban law, which itself was an update of the Cubans entering Adjustment Act of 1966 that granted residency, U.S. waters the right to enter and pursue the dynamic between the two nations further altered 4 2 3 For its economy of in the opening a new “experiment” on expansion of certain private sector the through businesses, including cooperatives. This was driven by the stated goal of the Cuban government to reduce Cooperative 2015. launched in March Agropecuarias—CNAs) of operation following the implementation of the government’s new legislation. Following that the U.S.–Cuba initial visit, NCBA CLUSA created non-agricultural Even NCBA CLUSA announcement in December 2014, trip organized an initial research THE U.S.–CUBA COOPERATIVE THE U.S.–CUBA COOPERATIVE WORKING GROUP and that this suspended has routinely Every U.S. President every six months to avoid alienating lawsuit provision governments companies and their foreign for and a wave of legal battles investing in Cuba, effortsthat could hamper to push for economic reforms. policy. lawsuits Act allowing the Helms-Burton under provision holdings using private companies against foreign 4

and other exchanges, the U.S. delegates and their Cuban counterparts shared insights into the challenges and experiences of conducting business in their respective environments and contexts.

The encounter provided the U.S. delegation with unique opportunities to learn from their Cuban counterparts and discover avenues to engage with these emerging cooperative enterprises. Moreover, the visit also allowed delegates to hear from local experts and academics about the political-economic context surrounding the Cuban The president of DecorArte, a newer CNA, addresses cooperative movement, with particular reference to members of the U.S. Co-op Delegation. changing U.S.-Cuban relations.

Today, the climate around these policies, in agriculture, services, gastronomy, tourism, and regulatory changes, and bilateral exchanges at light manufacturing. The antecedent for this group the governmental and civil society levels are set is NCBA CLUSA’s 63-year history of supporting for a thorough review by the Trump Administration. cooperative and international development in more Both before and after taking office, Trump’s and than 85 countries around the world. his advisors’ comments on Cuba have indicated his intention to roll back many of Obama’s Since its formation, the USCCWG has engaged rapprochement policies and regulations unless with a range of institutions in the U.S. and Cuban Cuba makes significant concessions on human governments, non-governmental organizations, rights and other political and economic freedoms. and cooperative entities in both countries around Despite his pro-business stance overall, Trump’s the role of cooperatives in economic growth Administration has telegraphed its plans to focus on and diversification, promoting a robust sector human rights, reinstate some of the travel restrictions, and a range of activities to foster cooperative and negotiate “a better deal” for the Cuban and strengthening. Activities include panel discussions, American people. forums, high-level meetings, and exchange visits of 6 both Cuban and U.S. cooperative leaders. In this context, the U.S.–Cuba Cooperative Working Group will face a number of changes to In order to learn about the progress the new Cuban the operating environment that will need to be co-ops had achieved since 2013, and to facilitate evaluated to determine their impact on the Group’s a forum with Cuban cooperative colleagues and core objectives. Though the foundational objectives institutions, NCBA CLUSA sent a second delegation will remain the same, there will likely be a need to to Havana from June 27 to July 2, 2016. With 24 U.S. adjust the strategies and tactics for supporting the delegates in attendance, the 2016 trip doubled Cuban cooperative movement. the size of the 2014 delegation, and included representatives of such well-known cooperative This report discusses the reality of the Cuban brands as Organic Valley and True Value Hardware. cooperative sector, highlights key information (See Appendix A for a full list of U.S. delegates). gathered during the July 2016 U.S. cooperative delegation to Cuba, synthesizes the delegation’s Over the five-day visit, the U.S. delegation met with a observations, and presents ideas and challenges for dozen agricultural and non-agricultural cooperatives future engagement with the Cuban cooperative around Havana and the surrounding provinces of movement in the current political environment. Matanzas and Pinar del Rio. Through these meetings

6 For more on the USCCWG, visit http://ncba.coop/us-cuba-about 5 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

the –

allowed in after

which at the time occupied more than 80% of land, and began leasing out parcels to Organic compost produced by the Vivero Alamar Cooperative - Agriculture cooperatives were the first Cuba (see p. 12). formed

cooperatives

of

wave

– The 1970s saw the emergence of this – The 1970s saw the emergence of this first

– This later form of agricultural co-op is (UBPC) – This later form of agricultural co-op the country’s so-called “special of a product commercial period” of the 1990s when the loss of farming the collapsed Soviet Union inputs from To its agricultural sector. Cuba to restructure forced up many of the State broke productivity, increase its large state-owned agribusinesses, conventional This agrarian reform 1963. The reforms laws of 1959 and than 100,000 of land to more ownership awarded the land as tenants, rural families who worked land users. After 1961, and other sharecroppers, themselves the new landowners began to organize formedinto rural associations and voluntarily CCSs. CCS members own their own farms and associate and inputs, for the purpose of accessing machinery the CCS. and other services from such as credit Cooperativas de Producción Agropecuaria (CPA) second cooperative model which permitted farmers sales of their land to make irreversible and to a cooperative to combine their land mechanization jointly to increase produce and modernization their collective farms. of Each farmer in the has a voting membership management of the CPA. Unidades Básicas de Producción Cooperativa n n in 1959 and 1963. Today, cooperative farms are 1963. Today, in 1959 and in Cuba, vegetable production for 84% of responsible active farmland. 70% of the country’s and manage these co-ops have gone through Over the decades, in their resulting various phases of development, different categories: organization into several y Servicios (CCS) nnCooperativas de Créditos n n ), or Typically, 7 2016.

, or CNAs. 15,

r, the Cuban economy December

(GAO),

Office

Cuba: US Policy Changes Increased Engagement with Private Cuba: US Policy Changes Increased

Sector, but Agency Information Collection is Limited, Government Sector, 7 Accounting currently boasts some 5,200 cooperatives, some of currently which formed as early as the 1930s in the form of reformsassociations, but primarily after agrarian In the agriculture secto In the agriculture simply, the ”lineamientos,” for the nation’s economic simply, the ”lineamientos,” new policies development. These guidelines included of for a national experiment in the development non-agricultural, cooperatively run businesses— Cooperativas No Agropecuaria in 2013, the Since this new experiment took effect government the formation has approved of some approximately 500 non-agricultural co-ops, of which operating by the end of 2015. 367 were 30 worker-owners, these cooperatives include around and operate in industries although some have more, dining and including construction, manufacturing, professional culinary services, transportation, and services, such as accounting and design. Although Cuba has a long history of experience Although Cuba has enterprises, the latest with agricultural cooperative of the sector began stage in the development in 2011 with the government’s passage of 313 Guidelines of the Party “Economic and Social and the Revolution”(Lineamientos de la política del Partido y la Revolución económica y social AGRICULTURAL AND NON- AGRICULTURAL COOPERATIVES AGRICULTURAL CUBAN LAW UNDER 2011 BACKGROUND OVERVIEW OVERVIEW BACKGROUND 6 BACKGROUND OVERVIEW

farmer co-ops. Due to their need to manage typically consists of a president, vice president, without synthetic petro-chemical inputs and heavy secretary, and treasurer, though the particular machinery, UBPC cooperatives are also notable positions may vary. These officials are answerable to for their pioneering use of organic, agro-ecological a general assembly or council of the workers which farming techniques. meets monthly to vote upon (and approve by simple majority) measures regarding profit distribution, The 2011 cooperative law expanded some benefits hiring and firing of personnel, changes to bylaws, to agricultural co-ops, such as better access to membership, and other matters. New employees are finance, more favorable pricing schemes, and the typically brought on as contract workers for a period ability to sell certain commodities to non-state buyers. not to exceed 90 days, according to the law. After those 90 days, the existing members vote on whether The new “non-agricultural” cooperatives (CNAs) to induct the new employees as full members. have two ways to form under the law. The first method is known as “induction” and refers to Cooperatives Favored Within Cuban businesses that are converted into cooperatives Private Sector out of extant state enterprises. In most cases, induction occurs when the government informs the It is important to note that cooperatives are not state-owned enterprise (SOE) that it will no longer be the only sanctioned form of private enterprise in owned and run by the State. This leaves the workers Cuba. Individual entrepreneurs/sole proprietors or two choices: to convert to a worker-owned “cuentapropistas” have also become a notable cooperative themselves or to allow the enterprise feature of the country’s economic landscape. It is to be put up for open bid to be converted to a estimated that 500,000 Cubans are in the private cooperative by others. sector—self-employed in individual or cooperative businesses—representing an estimated 29% of all In other cases, workers of an SOE may apply to Cuban workers.8 From small privately owned and convert to worker ownership and need approval operated cafes and restaurants known as paladares, to do so. “Induced” cooperatives still maintain a to taxi services, to cooperative restaurants and the relationship with the State–for instance, they rent nearly ubiquitous casas particulares—the Cuban existing facilities, equipment, and other assets from equivalent of a bed-and-breakfast—there are the State and are required to pay taxes. However, many ways in which individual Cubans have found any equipment or goods acquired through a direct opportunities to earn legal private income. investment by a co-op become private property of the business and the State does not assess fees for Yet another form of private sector development is the them. joint venture between SOEs and foreign businesses. With this model, the public-private ownership The second option for co-op formation is the proportion can vary substantially, and in some cases “spontaneous” method. Under this approach, (as with conventional energy production) the foreign workers may apply to form an entirely new enterprise companies can come to own a majority of the of their own initiative, with at least three worker- business. Several foreign hotel chains, for example, members. As in the case of induced cooperatives, have struck management agreements to create joint these newly created co-ops also pay taxes, sell ventures in which hiring Cuban workers is part of the goods or services to the State (and others), and may deal, along with a number of other stipulations, even rent facilities from the State. In some cases, there if the top manager is a foreigner. The required is an initial financial investment made by the initial involvement of the Cuban government in these members, and new worker-members may also pay ventures, however, has caused some to question the cooperative to become a full member. whether or not they should be considered a part of the private sector landscape. The general form of governance of the cooperatives is also prescribed under the 2011 law. All

cooperatives have an executive committee which 8 GAO Report, December 15, 2016. 7 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

staffing/

forth.

so

overarching

and

governance,

official

for

an

of

management,

standards

fiscal

economy under the law. establishment industry

enterprise within the Cuban enterprise within the Cuban

most favored formmost favored of private policies, Cooperatives are currently the the currently Cooperatives are

the

general observers about why this is the case. Some this is the case. about why general observers the slowing indicates experts believe economic that the government out and working is analyzing that the to ensure in order the kinks in the system have the right support legitimate, cooperatives are properly. operating in place, and are structures Some government in fact encouraging advisors are within the cooperatives, of best practices a review and this body If created, the sector. supervisory body for co-ops meet that and ensure training would provide specific hiring Perhapsthe to biggest issues related one of the the fact that of cooperative expansion is prospect a different each cooperative sector falls under set of state a different ministry, and therefore, For example, agencies with which they do business. fall under Gaviota, a in tourist areas restaurants that does state agency under the Ministry of Tourism car rentals, a range of tourism services, including of food and supplies transportation, and purchasing establishments. Other restaurants for gastronomic Professional under the Ministry of Domestic Trade. are services, like accounting, fall under the Ministry of Finance and Prices, and textile manufacturing falls under the Ministry of Industry. Construction under the Ministry of Construction, cooperatives are and automotive services and transportation are under the Ministry of Transportation. to the U.S. cooperative This is similar in some respects which also does not have a single U.S. sector, government agency that oversees all cooperatives, unlike many other countries that have a Ministry or Department of Cooperatives. Cooperatives in the to governmentU.S. also relate agencies in their sectors, such as energy, agriculture, respective housing, etc. and have their own sectoral treasury, In addition, 9 of being a recognized being a recognized of Over the last year, 10 status the same ion Ibid, pp. 20. GAO Report, December 15, 2016, pp. 20.

xpans

10 9 in October 2016, Cuban news outlets reported in October 2016, Cuban news outlets reported governmentthat Havana’s provincial announced of licenses for it was temporarily halting approval conversion. SOE restaurant slowing of the has been a demonstrable there There pace of expansion in the cooperative sector. is a fair amount of speculation by analysts and In 2012, the Cuban government announced plans and personal to privatize 13,000 SOE restaurants As of 2015, only 108 of these have service providers. operational. been converted and are Current Challenges to Cooperative E Still, despite their favored status, cooperatives status, cooperatives Still, despite their favored not permitted currently are in so-called infrastructure, “strategic” sectors such as energy, While telecommunications, and sugar production. the State this may be simply due to the fact that intended to confine experimentation to non-strategic these high industries, it is unclear whether any of to cooperative value-added sectors will be opened business formation in the future. legal entity or “persona jurídica,” although this is future. to change sometime in the near set reportedly the other hand, do have this legal Cooperatives, on ability to greater them with status, which provides of operational issues, such as manage a number contracts, issuing and receiving securing loans and this legal payments, and so forth. Most importantly, contracts with the status also allows co-ops to secure in the country. State—the largest economic player tax Additionally, cooperatives receive preferential benefits and, in some cases, get discounted rates on the State, of materials and inputs from the purchase lack of a wholesale although unlike cuentapropistas, SOEs, is a or import market outside of buying from major barrier for many cooperatives. Despite these other options for pursuing business for pursuing business other options Despite these the fact sector, the traditional state outside of the most currently are that cooperatives remains formfavored of private enterprise within the Cuban law. For example, while economy under the legally licensed, they do not are cuentapropistas enjoy currently 8

regulatory and legal frameworks, both at the a sectoral national association for small farmers national and state levels. However, in the case of (ANAP) that plays a lead role for the agricultural Cuba, where State approval and supply chains are sector, and a national association for economists and required to conduct so much day-to-day business, it accountants (ANEC), which has played a role with has created a patchwork of varying approaches and the CNAs, but in general, the cooperative sectors do is a source of inconsistency and confusion in terms not have similar national associations to represent of rules, processes, and procedures for consolidating their interests, bring together practitioners, and the cooperative sector. This set-up complicates provide education and training. decision-making about how to manage a whole range of issues, such as access to inputs, importation, Following the close of the 7th Congress of access to markets, pricing, and terms of conditions the Cuban Communist Party in April 2016, the of the relationship with the State, such as costs of government began to publicly unveil segments of facility and equipment rental, and approvals for any its new five-year economic plan. Experts expect number of actions required to do business. that the forthcoming segments will include revisions and additions to the 2011 cooperative law, and Where some ministries have been eager to shed it is hoped that these will address some of the inefficient business operations, and the related aforementioned issues including the establishment costs of those businesses by turning them over to of a supervisory body and industry standards. cooperative control, others in the government may see the cooperatives as a potential threat to Besides such changes, there is a need to provide the system and those running it. There are certainly training to ministry bureaucrats to help them better competing views within Cuba about which way understand and foster the cooperatives, and to to go regarding the future of cooperatives and provide the proper technical assistance to workers other private sector entities, and this plays out at whose businesses are scheduled for conversion the ministry level. For example, based on several or who are interested in establishing spontaneous interviews, where one ministry might be more cooperatives. proactive in facilitating cooperative growth and success, others may impede progress. There Some experts in Cuba are less optimistic about were numerous examples of how cooperatives the slow-down in approvals of cooperatives, and had varying avenues and rules about access to are concerned about continued government credit, taxation, and licenses for importing crucial support to move forward with these changes. equipment and supplies. In all cases, cooperatives However, although there is currently some struggled to understand and deal with how to get uncertainty regarding the particular path the things done, and what needed and did not need cooperative reforms will take, most experts believe State approval. the government has no choice but to proceed with the reforms. To reverse the privatization trends Another important point is that with state agencies would be a major step backward for the country’s and ministries conducting centralized annual and economic development, and would be unlikely, 5-year economic planning activities, it is unclear particularly given the relative success achieved in as to whether each ministry is accounting for the the shedding of SOEs, retaining the related jobs, cooperatives’ and other businesses’ needs for hard and increasing private sector worker salaries. The currency, equipment, supplies, and other financial question then becomes, in what form, and when, will and material needs in the plans. If this is the case, it the government begin to pick up the pace, refine, leaves cooperatives outside of the economic and consolidate what it has already begun in planning model, and therefore subject to lack of cooperative and small business development? clarity as to how they can move forward. The following sections will shed more light on the It is important to note that Cuba does not have realities currently facing Cuban co-ops, with a series a national-level non-governmental association of short summaries of the U.S. delegation’s visits to the for cooperatives similar to NCBA CLUSA. There is co-ops in Havana and the surrounding regions. 9 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

by

see

or NCBA

first a

access

first

revenue posed looking into must

hand, increased

is

of

payroll The

needs international,

currencies

CUC one

the worker

the

the in a makes

and

difficulties

napkins. on doubling SCENIUS

on

not significantly This a

the

government CUP

and to

period,

more

and

the the

(CUC). inflation business,

through

(For

year—or

thanks (CUP)

merge their

tablecloths fiscal

to of Currently,

currency as domestic probationary

members market

B).

side currencies. way

the a

such

current

of

dual 90-day global

find the

in over their inaugural year. the co-op has changed the to its president, According lives an when they were from incomes—a 10-fold increase the Appendix to such as major hurdles are but there one currency, preventing losing international competitiveness on the other. Cooptex Location: Havana manufacturing, CNA, converted from Type: Textile SOE into a cooperative Cooptex is an “induced” or converted co-op of uniforms;specializing in the manufacture garments tops, and pants; and other fabric such as dresses, items, CLUSA delegation visited this cooperative in July that 2014 and noted considerable improvements took place over the two years. Launched in October 2013 with 50 members, Cooptex now consists of 57 monthly income of members and takes in a gross $5,000 CUC/month. With volume roughly a growing $250,000 CUC of contracts, the coop expects to gross the by to the company their value have demonstrated generating new business. new clients and bringing in they face, the lack of access Among the challenges particularly notable. banking services is to proper authorized to set up a bank SCENIUS has not been having the legal status to do so. account, despite be paid in cash and in All workers must therefore Pesos Nacionales convertible the streamline To process. cumbersome, manual financial the permissionto better banking services, including to open up international accounts. to entering Beyond this, SCENIUS also faces hurdles the ay 2015. accounting cooperative ooperative financial as organized and hosted

to over 200 in two years.

and its opportunities and challenges; clarity around what co-ops can and cannot do clarity around in terms in both of trade and service provision countries; between How diplomatic and economic relations the two countries impact the sector. The high cost of importing/exporting and lack of The emerging cooperative movement in Cuba, n n n SCENIUS has grown significantly in a short period— with revenue increasing from $500 in the first month level of $130,000. monthly of operation to a current the company does not need Thanks to this increase, its reinvestment to rely on government loans to satisfy from goals, and member–owners have increased three SCENIUS uses internationally recognized SCENIUS has the distinction of being the first Cuba, in 2013, and specializes in CNA approved in the provision of accounting and management services. Most of their work (approximately 90%) centers on providing these they have also services to state enterprises, though found a market in supporting other cooperatives. SCENIUS Location: Havana Services, Non- Type: Accounting and Financial Agricultural Cooperative (CNA), formed out of their own initiative COOPERATIVE CREATION: PROFILES CREATION: COOPERATIVE AND OF MANUFACTURING CO-OPS SERVICES PROFESSIONAL n standards and is well-known as a leading non-state standards and is well-known as a leading and other business, meeting frequently with U.S. The enterprise visitors interested in their experience. in the has been an early and eager participant USCCWG, starting with the first Cuban delegation visit to Washington D.C. in M n During that visit, which w by NCBA CLUSA, SCENIUS participated in a broad range of conversations with key U.S. c organizations, foundations, universities, members, and others concerning:congressional Quality control and productivity are key to SCENIUS’ are and productivity Quality control become a full member of SCENIUS after success. To n COOPERATIVE CREATION COOPERATIVE 10 COOPERATIVE CREATION

Financing remains a persistent challenge, but they have collectively contributed to business upgrades. Thus far, investment dollars have come entirely out of company income without reliance on government loans. The cooperative also received valuable support after its launch in the form of free accounting services from SCENIUS. Early on, workers decided that their reinvestment priority should be given to making repairs and improvements to the factory itself. During the first year, this work consisted of repairing the kitchen and eating area. They are now advancing with recent renovations, including a floor retiling which was underway during the visit. However, to continue to grow, it will be important for Cooptex to find new sources of working capital and to upgrade the sewing machines, which are mostly 1970s Japanese and East German models that don’t allow for more modern designs and more efficient production technologies. A Cooptex member owner sews fabric

SOE—with base salaries typically starting around $100 DecorArte CUC/month. All earnings are taxed at 10%. Location: Varadero, Matanzas Type: Graphic and decorative arts cooperative, In accordance with the law, salaries may vary CNA, formed out of their own initiative somewhat based on a member’s particular job–a scale which takes into account the quality, quantity, Launched spontaneously by its members in 2014, and complexity of tasks. While some overseas co-ops, DecorArte specializes in graphic and decorative art such as Mondragon, are known to rotate workers and claims to be the number one (and one of the between various jobs or tasks, workers at Cooptex few) non-state graphic design businesses in Cuba. remain in whatever position that they start and The firm executes projects for private clients across specialize in. the country and also serves state ministries and SOEs.

Workers stated that thanks to their new organizational Their initial cohort of seven members has since and compensation model, they are able to avoid the expanded to 51 worker-owners who possess diverse problems that they faced in state-owned factories, skill sets from design to the manufacture of such as those pertaining to work ethic, discipline, decorative products including furniture, bricks, productivity, and so forth. Moreover, the creation of masonry work, pavers, and more. A majority (nearly the cooperative has fostered a familial atmosphere, 90%) of the members are university educated. with all of the members working well together and sharing everything. Their sense of pride and personal The DecorArte print shop is equipped with state-of- investment in the company may be seen in their the-art printing and embroidery equipment, which decision to reinvest some of the profits to upgrade they were able to import through state import the factory facilities. agencies. They gained access to this equipment by 11 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

to

them

expansion.

return

to

promote

or

to

profits business

the

their

in

of

profits most

The U.S. trade embargo, but also homegrown but also homegrown embargo, The U.S. trade limits on import such as regulations, obstacles and so forth. access to goods, licenses and n n of the team take care and executive The president management and decisionsday-to-day business prior consultation with thewithout the need for the membership However, assembly of members. such as whether tovotes on major decisions, reinvest to the members have voted far, the members. Thus reinvest the State, these loans from In addition to accessing to dollars have allowed the enterprise reinvestment to produce required the latest equipment purchase high quality products. to other provide When asked what advice they would success, thecooperatives wishing to emulate their “complain less was simple: DecorArte team’s response and look for ways to get the job done.”

of at

significant

stands models

required

clear

this

revenue no

had

annual although

have

firm’s

and

the

fly

companies,

the

success to reference; success to reference; or culture The general lack of entrepreneurial like mentality among workers in Cuba. Co-ops and DecorArte must instill a sense of ownership independent initiative among workers; on The experimental nature of the CNA cooperative The experimental nature Members have had to learnproject. practices best n n n n Currently, cite several major $100,000 CUC. Employees encountered that they have obstacles to growth years: over the past several import paperwork burdensome effort in pushing through This shop is staffed almost entirely and procedures. with created decorative items are by women. Many in an adjoining studio. traditional hand techniques attending internationalattending and meeting business fairs were equipment, and the who provided with vendors the SOE Cuba through able to get it into ultimately Members of DecorArte with the U.S. Co-op Delegation 12 GROWING COOPERATIVELY

on seniority, and working shorter days, particularly in the summer heat. GROWING COOPERATIVELY: PROFILES OF CUBAN Yet, there are limits to such inventiveness. As an COOPERATIVE FARMS example, the president pointed to a greenhouse which was intended to last only 10 years, but has Organopónico Vivero Alamar been in service 16 years to date. “There’s no Home Location: Alamar, Greater Havana Depot here,” he joked with the group. To make Type: Agricultural cooperative, formed as a UBPC matters more challenging, even donations of funds or materials from abroad are hard to come by. The Tucked away on the edge of a large apartment lack of proper equipment has even constrained by building complex in the Havana suburb of Alamar, the size of the farm, in that they were required by the Organopónico Vivero Alamar organic farm has law to return land back to the state that they were become one of the brightest stars in the constellation unable to cultivate. of agricultural co-ops that dot the Cuban landscape. The president, a former state agronomist, founded Yet despite such challenges, they are well positioned the farm in 1996 in response to the privations of the to grow the business thanks to their fame and their Special Period. Since then, it has become a successful location in a large community with thousands of example in the use of ecologically sustainable farming homes. Already, 90% of their produce goes directly to techniques and has been featured in documentaries the community, and they have become suppliers to and the international press. popular restaurants such as the iconic Bodeguita del Medio in downtown Havana. As a product of land and management reforms of the 1990s, Vivero Alamar is categorized as a UBPC cooperative and its leadership consists Finca Las Marianas, member of Sabino of an executive committee answerable to the Pupo Cooperative membership. Location: Havana (Eastern outskirts) Type: Agricultural cooperative, formed as a CCS Like other farms around the world that specialize in agro-ecological techniques, Vivero Alamar operates Finca Las Marianas belongs to a larger producers’ according to principles of biodiversity and counts coop consisting of 74 farms. The farm’s owner, a nearly 300 species of plants and animals within its woman who serves as the president of Sabino Pupo agro-ecosystem. Such biodiversity ensures resilience cooperative, started the farm in 2008 thanks to a in the face of blights that attack particular crops new law permitting any Cuban citizen to apply for and animals and even enables chemical-free pest land for productive agricultural use. As a condition management in the form of crops such as sunflowers, of this arrangement, the family may only use the which border fields of other crops. land as a cooperative farm; if they stop farming it altogether or stop farming it cooperatively, the law Another principle of agro-ecological farming, self- requires that they return it to the State. Formed only provisioning, helps Vivero Alamar cope with one of eight years ago, the farm was once part of a larger the key challenges facing Cuban cooperative farms: estate that was nationalized and parceled in the a lack of equipment and other essential material years following the revolution. inputs. With limited access to some essential supplies, co-op workers must rely on their own ingenuity All of the farm’s facilities, including the horticulture and local ecology to stay in business, for example, plots, livestock stalls, and pools for raising tilapia creating nutrient-rich vermicompost or humus were constructed in the short 8-year existence of the from plant and animal waste products digested operation. The president described the formation and excreted by Red Wiggler earthworms. Run of the farm as an adventure, in which she left her primarily by older worker-owners, the cooperative pre-school teaching job and had to learn how to accommodates their needs, such as paying based farm and raise animals, along with the other women 13 CUBA COOPERATIVE RESEARCH REPORT ilk ts for distribution to alternative markets. alternative markets. ent contracts meant that ent contracts meant sell products like pork to like pork sell products Despite its ability to now Despite its the farm communities, surrounding all m still sells and the elderly. like children vulnerable groups to private markets, the State Indeed, despite access main buyer overall, due to a ready the remains years, For many produced. market for the quantities on governmsuch reliance farms prices for their often had to accept lower lack of products given the r, State prices for such In recent years, howeve have been on the rise and have agricultural goods lucrative levels. attained more and beef to the State, given that these are classified produc as essential nutritional

for

products

animal

Fields at Sabino Pupo Cooperative process

to

able

being

of

U.S. Co-op Delegates visit the pig pens at Finca Las Marianas, a member of the Sabino Pupo Cooperative direct sale to local markets—something that only the only the sale to local markets—something that direct years. State could do until recent benefit The farm is largelysmall ruminant a livestock and in pigs, cattle, chickens, and operation specializing rabbits. The farm environmental seeks to promote sells its organicsustainability and and fertilizer seedlings to other farmsdifferent the area. in partner farms with the 73 of the Sabino Together as a collective their products Pupo CCS, they sell achievable of scale that are unit. The economies them the model afford this collective through family members running the farm. running the family members The farm employs during board and room provided who are 12 workers to its operation. integral week and who are the work 14 DINING COOPERATIVELY

DINING COOPERATIVELY: PROFILES questions from the U.S. delegation. He explained OF CUBAN COOPERATIVE that Bienmesabe (roughly translated as “tastes good RESTAURANTS to me”) was a converted restaurant transferred from government ownership to the workers in 2014. Casona 17 Before their relaunch, state officials provided them Location: Havana, Vedado District with an orientation and monitored the progress Type: Gastronomy cooperative, CNA, converted of their transition over a 60-day period. After that, from an SOE they received their certification and became one of the first gastronomy co-ops in the country. From Located a stone’s throw from Havana’s iconic Hotel early on, SCENIUS has been an invaluable source Nacional, Casona 17 is an induced cooperative of operations advice and of support for their restaurant that launched in March 2014. In a district bookkeeping. that is home to major hotels and numerous cultural attractions, Casona 17 is well-positioned for growth. Prior to the conversion, the state had been losing In fact, since its conversion from an SOE several money on this restaurant because it did not invest in years ago, the restaurant has nearly tripled its staff any improvements. However, since then, the co-op from 13 to 36 worker owners. has turned things around and moved into profitability by offering an entirely new menu and by building In addition to now having the authority to design a skilled staff. They’ve also expanded the business its own menu, the cooperative also does catering to encompass services such as event catering and for conferences and parties, and rents out the space rental. upper level for special events. Before becoming a cooperative, State Tourism Ministry rules did not allow The manager cited the greater autonomy the for such diversification of services. restaurant now enjoys as the key to their turnaround. Besides having the ability to set their own menu, Member-owners cited a significant increase in their choose and purchase their own ingredients, salaries compared to what they earned previously and expand their services, as a co-op they are as state employees, which in some cases was five also empowered to determine their own staffing times more. As elsewhere, the increase in income, needs. Under state management, new hires were along with the fact that personal earnings are tied assigned to restaurants by the Ministry of Tourism to sales (as opposed to fixed by the State), Casona whose official approval was also required before an 17 employees are highly motivated to enhance the employee could be let go. This could be particularly quality of their menu offerings, their service, and troublesome if it was necessary to fire someone due the condition of the property. The members have to lack of performance or discipline issues. In such a self-funded all restoration to the property except case, it might be some time before the Ministry would for the grill, which was paid for by the government. send someone new, causing the restaurant to go The restaurant building is rented from the Ministry of shorthanded in the interim. Tourism at a rate of $10 CUC/square meter for the interior space, and $1 CUC/sq. meter for the exterior. During its time as a SOE, the restaurant had 35 They also pay a tax rate of 10% on all sales. workers on staff. Now, according to the manager, they have the number they require to run efficiently: 22. Of those current worker-owners, 9 made the Bienmesabe transition from the staff of the previous state-run restaurant. Due to the greater autonomy and Location: Playa, Havana increased income, it’s an attractive employment Type: Gastronomy cooperative, CNA, converted opportunity, and people are known to contact the from an SOE restaurant in search of work virtually every day. To join the co-op, each new worker-member must After a performance by Palmas y Cañas—one of contribute a $40 CUC equity payment. the oldest traditional bands in Cuba—the restaurant manager and president of the cooperative fielded 15 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA such , with many Cubans now coming back from back from Cubans now coming r, with many Moreove is essential it own restaurants, to set up their abroad achieve this, they To stay competitive. to to reinvest with the bank for a line of negotiating currently are working and are restaurant the to renovate credit to buy certain materials and to convince an SOE equipment they require. the and improve, to grow As they look for ways soon have the opportunity manager hopes to other co-ops on things to collaborate with option which purchases—an as wholesale bulk purchase not available. The ability to is currently and abroad needed equipment and materials from import/export of the the bureaucracy circumvent agency would also be beneficial. staff for ise, , another co-op restaurant times more. Member-owners cited a cited Member-owners which in some cases was five previously as state employees, as state employees, previously compared to what they earned to what compared significant increase of their salaries assemblies, the member-owners At monthly general to point out problems with have the opportunity vote on new members, and discipline and service, terminations. Otherw even weigh in on Dining at Divina Pastora The Bienmesabe team is looking to the future and future The Bienmesabe team is looking to the to their hoping to make further improvements of their excellent advantage facilities to take greater location. With nearby and the Marina Hemingway between Havana and the their location on the road Mariel port, they new special-investment-zone at the are poised to see significant growth in their clientele. the manager is empowered to terminatethe manager is empowered serious infractions. 16 COMPARING CO-OPS

THE U.S.–CUBA COOPERATIVES’ To promote socio-economic justice, the bakery SHARING SESSION cooperative also focuses on training people who are historically underrepresented in their sector. erhaps the best opportunity the U.S. and True to their values, Arizmendi has recently reached PCuban co-op leaders had to develop a mutual out to and engaged a gentrifying community in understanding and dive deeper into an examination San Francisco around questions of how to build a of their respective and shared principles, was at a local cooperative that helps preserve the historical special gathering at La Maqueta de La Habana demographic character of the community. museum in Vedado, Havana on June 29, 2016. With its extraordinary centerpiece exhibit—a 1:500 scale Pedro Fuentes of G’Obras construction cooperative model of the City of Havana—the museum proved in Havana likewise emphasized the fundamental an apt setting for a detailed review of the social orientation of his recently formed cooperative landscape. cooperative. Since their formation in 2015, G’Obras has, first and foremost, been an important force in The meeting took the form of a series of short the improvement of the quality of life of its workers. panel presentations and Q&A sessions, each Now one of the largest co-ops in the country with featuring representatives from the U.S. and 318 members, G’Obras has increased its workers’ Cuban cooperatives. On the Cuban side, the salaries by up to six times over the typical Cuban participants included Nancy Varela, President of construction worker’s salary. This higher earning the Confecciones Model textile coop, Luis Dueñas potential is not only good for the workers, but Casal of SCENIUS, and Pedro Fuentes, President of the has proven good for the cooperative business by G’Obras construction cooperative. increasing overall productivity. The profits are the collective property of the co-op members and can be distributed to provide everyone with an extra Panel 1: Co-op Culture and Mission 50% on top of their salaries. Pedro Maturana of Arizmendi Association of Cooperative Bakeries, San Francisco, California; and But the co-op’s social benefits don’t end with higher Pedro Fuentes of the Cooperativa G’Obras, Havana income for its workers and their families. According to Fuentes, many Cuban construction workers have Pedro Maturana initiated the conversation with problems with housing access. Though approximately a discussion of the importance of the principles 90% of Cubans own their own homes or apartments, of workplace democracy to the Arizmendi the State focus on healthcare and education cooperatives. Workplace democracy emphasizes spending means those without adequate housing the principle of one-worker-one-vote for all must often seek other avenues to meet this basic employees. Moreover, as Maturana pointed out, need. G’Obras thus focuses resources on helping their democratic framework recognizes the idea their members find a stable place to live. that social and interpersonal concerns are as important as traditional business concerns for Another problem for the G’Obras worker family is cooperatively managed enterprises. education, which although free and universal in Cuba, is sometimes not pursued due to economic For example, Arizmendi strives to ensure that demands. This is particularly true for many of the workers’ personal needs are taken into account, younger members. As such, the cooperative and looks for ways to help them ensure a healthy encourages them to go back to school to complete work-life balance. Moreover, because businesses are their education, with a particular focus on vocational embedded in, and should respond to the needs of skills training. the surrounding community (of which the workers and their families are often a part), Arizmendi also Finally, G’Obras provides support to its members focuses on building and maintaining strong ties to with respect to health, nutrition, and other material the community. needs, such as tools. When members have to go on health leave, the cooperative tries to maintain their 17 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA has , which specializes in members. This members. seven find a price that allows them to Confecciones Model board, which consists of board, which is tied structure and organizational decision-making self- the corporate philosophy—that closely to process, and is educational governance is a social for their members. For example, and empowering of the members includes topics the social education and sustainable pricing such as quality control to models. They work maintain profitability through periods of market fluctuation. Betancourt pointed out the Panel moderator Rafael agricultural co-ops, such as principles of Cuban cooperative important social support networks that For farms provide for their surrounding communities. the example, many have programs to advance that has been well-being of rural women in a sector traditionally dominated by men. President of Next up on the panel was Nancy Varela, Havana’s Converted making Guayabera shirts and dresses. from an SOE in 2013, Confecciones Model workers with dramatically improved the lives of its salaries approximately five times higher than those in their SOE positions. r, . Valley dairy Valley felt it very important to : Co-op Culture and Social Aspects : Co-op Culture In addition to panels, Cuban co-op academics and leaders also addressed the delegation including Camila academics and leaders also addressed the delegation including Camila In addition to panels, Cuban co-op the Cuban Economy, pictured here speaking with U.S. delegates. Piñeiro from the Center for Studies on The Organic Valley producer-members are divided are producer-members The Organic Valley into regional/local networks (called pools) and each that sets of these pools has a member committee governanceup the policies such as pricing. One rung networks is the overall these regional ladder from According to David Bruce, the Organic to David Bruce, the According cooperative formed a the need to provide around and solidarity between its means of mutual support by conventional In a market dominated producers. Organic producers, dedicated to as the name suggests, they are organic production and the attendant benefits for and economic sustainability. environmental David Bruce of Organic Valley and Nancy Varela of David Bruce of Organic textile co-op Confecciones Model salaries in the short term,salaries in some form and provide of term, over the long and compensation assistance recovered have until the worker-members from to the producer-members protection provide challenges. Moreove market and production Panel 2 18

Overall, the process of establishing the co-op has used for reinvestment or for social activities, and each been a very positive one for her workers, most of cooperative decides how to distribute these funds. whom come from the surrounding community. Given this social embeddedness, they also enjoy a Operating expenses and profit margins vary strong local support network. The grandparents, considerably across Cuban cooperative industries who comprise a key pillar of this network, are crucial just as they do across private industries in to helping the cooperative overcome one of its other countries. Moreover, as different types of primary challenges: obtaining the necessary raw cooperatives fall under the supervision of different materials (linen, thread, etc.). To confront the ministries with different rules, costs as a proportion deficit, the grandparents will often contribute in the of income also differ between industries. Thus, form of old clothing, rags, and so forth. for example, because the textile industry enjoys narrower margins than construction, Confecciones In return, Confecciones Model gives back to Model is more limited in its ability to contribute to a the community by providing training for a local social program fund than G’Obra. government-funded school that helps troubled young people by teaching vocational skills. Using To grasp the significant revenue and contract cooperative profits, they also organize community size differences between the industries, one can consider the large project contracts G’Obras is currently working on. At the moment, G’Obras This higher earning potential is not is providing the labor to reconstruct a high-end only good for the workers, but has state-run hotel on the Malecón, and also working proven good for the business by for Chinese developers who are pouring massive resources into construction projects. increasing overall productivity.

Panel 3: Consumer Cooperatives and Social Activities events and festivals. In addition, they support the Chris Maher of Briar Patch Food Co-op, Grass Valley, broader cooperative community, having recently California organized a meeting of about ten small co-ops to promote sharing of information on their challenges To round out the comparisons dialogue, Chris Maher and successes. of the Briar Patch Food Co-op discussed a form of business that is currently not a part of the Cuban Cross-Industry Comparisons for Cuban Co-ops cooperative landscape: the consumer cooperative. As a business that is embedded not only in the According to Confecciones Model, access to lines community of its consumer-owners, but also in a of credit enables the cooperative to dedicate more network of local farmers, Briar Patch recognizes of its profits to such social initiatives. However, while that the health and well-being of its customers also every supervisory government ministry has a fund that depends on the well-being of the farmers who stock guarantees up to 75% of co-op loans, lines of credit their shelves. Accordingly, in addition to empowering differ from industry to industry. Thus, whereas the and providing stable wages for its workers, Briar Patch construction cooperative enjoys an unlimited credit also provides educational and economic support for ceiling, the textile co-op’s line of credit is capped at farmers, such as training and the payment of higher 20% of the funds in its bank account. Interest rates for prices for their produce. lines of credit range from 4% – 4.5%. Briar Patch’s work also extends to the broader By law, cooperatives in every industry are allowed cooperative grocer community. It engages with sister to distribute between 50%, but no more than 70%, of co-ops via a policy advocacy network that serves to their profits to their workers, after reaching 50% of their promote government policies and regulations favoring contingency reserves. The remaining 30-50% may be natural foods, health, and environmental sustainability. 19 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

(e.g.

administrative

and

sectors

and

financial

fields

their

etc.). in

principles,

skills

cooperative management, leadership, governance, and technical management, customer service, restaurant professional marketing, personnel management, development, a wealth of learningJust as Cuba provides to draw on many resources are opportunities, there and also within the U.S. cooperative movement, network of members and within NCBA CLUSA’s broad the around partners in the cooperative movement world. As a member of the International Cooperative member of the Alliance’s Alliance, and a board Americas Region based in Costa Rica, NCBA CLUSA can leverage a huge pool of human and technical with the Cuban government to partner resources and the Cuban cooperative movement to strengthen existing cooperatives and build up co-op sector skills many countries in Cuba. Cooperative leaders from begun to engage with Cuba, such have already as Canada and some Latin American countries. and exchanges with these Seminars, conferences, countries have been ongoing. for U.S. cooperatives is a unique role there However, to play, being the largest potential trading partner, the most varied and largest cooperative movement in the world, and the country geographically best positioned to support the development of chains and markets have not allowed agricultural allowed agricultural markets have not chains and as the same autonomy to operate with cooperatives the world. around their peers experience is a rich cooperative there However, that should be agriculture to draw on in Cuban cooperatives the agricultural leveraged to strengthen their skills and tools as modernand continue to build Also, Cuba’s leading agricultural businesses. should the world around position in agroecology for substantive and is a source be acknowledged learning CLUSA participated exchanges. NCBA in Cuba conference agroecology earlier in 2016 in an that yielded rich learning and sharing of technical methodologies. cooperatives, Similarly, among the non-agricultural the is a critical need for all levels of training on there hanges, and will s and were energized by s and were

ovement. Despite challenges, Cuba has moved ovement. Despite n general, the U.S. cooperative delegation cooperative delegation n general, the U.S. Cuba learnedmembers who visited deal a great rom their Cuban colleague rom f Cuban agricultural co-ops have many more years Cuban agricultural co-ops have many more of experience than the newer non-agricultural they have been operated mainly as ones; however, supply cooperatives with heavy State production involvement as the only buyer under controlled pricing mechanisms. State-managed supply Cooperatives in Cuba are in need of technical Cooperatives in Cuba are to launch assistance, training, and other support and and sustain their businesses and to understand embrace cooperative governance, and principles, using internationallystructure accepted practices and norms. is no unifying national Since there level body, either in government or civil society (association or NGO), cooperatives are dependent not ministries are support. The line ministries for on their even in the agriculture fully equipped to play this role, co-ops have been a critical part ministry, where of the landscape for decades. Ministry officials generally do not have the practical experience or knowledge of running a co-op business, nor the sustained and coordinated to provide resources services to the sector. Cooperative education, training, and development of Cooperative education, training, and cooperative governance and management forward on these economic c on these forward All delegation members were interested in finding advance ways to engage further that meaningfully provide the cooperative sector in Cuba, and platforms and learning for mutual respect with U.S. meetings and colleagues. Based on the delegation’s of potential several areas were discussions, there collaboration identified for further exploration and follow-up. the opportunities to support the Cuban cooperative the opportunities m hopefully continue to refine and improve the for cooperatives to thrive. enabling environment Opportunities for Further Cooperative Further Cooperative Opportunities for Cuba Engagement with FUTURE ENGAGEMENT AND ENGAGEMENT FUTURE CONCLUSIONS

FOR THE FUTURE THE FOR I 20 FOR THE FUTURE

Cuba’s cooperatives across sectors. Examples purchasing cooperative. Under this model, construction of collaboration could include train-the-trainer supplies and equipment could be supplied to Cuban workshops, provision of manuals and other written cooperatives in one of two ways—1) via direct sales materials, seminars, studies, on-site technical from True Value cooperative member hardware assistance, guidance in establishing a national level stores through a Cuban import company that has cooperative center and/or association, exchange an agreement with the construction cooperative; training visits, mentorships/partnerships with U.S. or 2) through the establishment of a cooperative cooperatives working in the same sectors, and member store in Cuba, which could import inventory other activities. U.S. cooperatives are interested from True Value corporate through a state import in supporting the capacity-building of a cadre of company and sell the goods through a retail store to Cuban cooperative professionals in government, the public and to the cooperative sector. Other U.S. academia, and cooperatives who can lead Cuba’s cooperatives also provide wholesale commercial cooperative growth and strengthening, and can building supplies and equipment. tap into a deep resource within U.S. cooperative research, education, and practitioner communities. The Cuban construction cooperatives are eager to explore various options, and the U.S. delegation Supply of tools, equipment, and materials to the is also interested in pursuing this opportunity in cooperative construction industry by U.S. purchasing collaboration with NCBA CLUSA; however, such an cooperatives endeavor will likely require any U.S. cooperative business to hire legal counsel to engage with the There are a number of construction cooperatives in Cuban State and state-run import enterprises to find Cuba that are well-positioned for the burgeoning the best option and broker formal agreements with construction sector on the island. Several the Cuban cooperative and the import company. restaurants, hotels, homes, and other buildings are This will require a fair amount of perseverance and a being renovated and upgraded, and demand commitment of time and financial resources to enter is increasing for architectural and construction this market. services. The main challenge is lack of access to much-needed construction supplies, equipment, Technical exchanges on renewable energy and in some cases even foreign workers.11 Although and electric grid integration with rural electric state-run firms have access to imports from Cuban cooperatives state import companies, the cooperatives do not have a license to import on their own, and most Electric grid resiliency is critical for both Cuba have also not signed contracts with the state import and the U.S., particularly in light of vulnerability firms. This severely hampers their opportunities. to violent tropical storms and uncertainty about Much of the construction supplies and equipment continued discounted oil from Venezuela. A July are being brought in directly by foreign firms (e.g. 2016 announcement to the Parliament by Cuba’s Chinese) which have agreements with the state economy minister, Marino Murillo, said the country import companies based on approved projects, would have to cut fuel consumption by nearly a third such as the renovation of a landmark building into a during the second half of the year and reduce state Chinese restaurant. investments and imports. State workers are being asked to reduce their hours and citizens will need to A member of the U.S. delegation, True Value cut energy use. Company, is a purchasing cooperative for the retail hardware and commercial supply industries, with The Cuban government has plans to expand operations in the United States and in 59 countries renewable energy from roughly 5 % of electricity around the world, including many in Latin America generation today to 24 % by 2030. New wind farms, and the Caribbean. These businesses are individually solar plants, and bioelectric stations are all under owned stores that are members of the True Value construction.12 The U.S. electric cooperatives have

11 http://www.reuters.com/article/us-cuba-economy-labor- 12 http://www.huffingtonpost.com/david-sandalow/us-cuba- idUSKCN1011RS energy_b_9518226.html 21 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

such and

14 CLUSA,

NCBA

flavorings,

by

fee and spices,

started

firm

coffee,

trading

specialty

global sells

and

construction supplies, sector

equipment, and in some buys

The main challenge is lack The main challenge is lack of access to much-needed of access to much-needed cases even foreign workers. private that

a

specially in the cof especially theast Asia, is http://www.usatoday.com/story/news/world/2016/06/20/

cuban-coffee-sold-in-united-states-nespresso- technoserve/86117020/; Also, Cooperative Business International, as FairTrade America (FTA), the Symbol for the Small Producer (SPP), and the Latin American and Producers Caribbean Network of Fair Trade Small and Workers (CLAC) that could be leveraged into on a joint project and/or a conference/workshop organic production and certification. NCBA CLUSA Indonesia, has current coffee projects in El Salvador, and East Timor and the approval to import coffee to the U.S. market through private sector partners allowing for a platform to assist Cuban coffee producing cooperatives with organic certification. If the embargo were lifted and Cuban agricultural products had greater access to the U.S. market, organic certification would help the products gain market share and interest from the U.S. consumer co- op sector and other buyers, including European and other markets. 14 CBI, by NCBA and owned by U.S. cooperatives, including a small share CLUSA, by cooperatives in SE Asia. produced other products agents in El Salvador. Additionally, NCBA CLUSA has agents in El Salvador. Additionally, NCBA bodies agreements with several other certifying as an area in which NCBA CLUSA can assist due to CLUSA can assist due in which NCBA as an area America and experience in Latin its extensive Sou horticulture sectors. and delegation participant, NCBA CLUSA member producer of is a leading organic Organic Valley, the United States, is committed dairy and beef in business model, and has to the cooperative with USDA to develop organic pioneered working certification over 20 years ago. In addition, one partners and spin-off of NCBA CLUSA’s technical provides training on El Salvador, organizations, CLUSA USDA organic certification and others to farmers and with certifying coffee producers and connects them

13 ertification c the Department Asociación Cubana de Técnicos uba’s agricultural production is organic. uba’s agricultural production ulture cooperatives (UBPC, CCS, and CPA), hnicians (ACTAF, http://orgprints.org/17925/1/kilcher-2009-world-organic- This is a strong port markets, mostly to Europe.

agriculture.pdf 13 As the delegation learned during visits to various agric Organic certification of Cuban agricultural production Organic certification The U.S. government energy favors renewable for Cuba, and has investments and services The National Rural in this area. facilitated licenses Electric Cooperative Association (NRECA), a member the U.S. and of NCBA CLUSA, with 900 members in international in over 40 countries, is interested projects the Cuban in working with NCBA CLUSA to engage utility to Ministry of Energy and Cuba’s national exchange develop or participate in a technical engineering design and workshop regarding energy construction and the integration of renewable and sensitive into the grid. Since this is a strategic sector for the Cuban government, such an exchange Alignment would need to have State involvement. with U.S. government efforts would also be important opportunities for energy to leverage broader in order sector collaboration. been doing extensive research on resiliency and on resiliency and extensive research been doing energy with both renewable A laboratories. and university energy of Energy of approaches to bilateral knowledge-sharing electric grids by integrating building more resilient energy would provide an variable renewable engineers from both opportunity for electrical notes. countries to compare Agrícolas y Forestales) identified organic The production on these farms (e.g. coffee, honey, citrus, sugar, fruits, etc.) was certified primarily for ex potential area of collaboration with NCBA CLUSA, potential area given its international work in organic and Fair Trade certifications, and with the U.S. cooperative, organic, and natural foods sectors. Discussions with and Forestry the Cuban Association of Agriculture Tec 80% of C However, most of it does not have internationally recognized organic certifications. According to Statistics and of Organic Agriculture The World were 2010, as of 2008, there Emerging Trends 2,954 organic farms, many of which belonged to cooperatives inspected by internal systems. control 22 FOR THE FUTURE

Supply of technical assistance and access to raw from U.S. cooperatives to Cuban cooperatives. materials from employee-owned businesses for The list of needed material goods is long, and Cuban textile cooperatives by U.S. textile worker corresponds to many of the areas above, such as cooperative in North Carolina tools, construction supplies, small machinery, such as sewing machines or power tools, textiles, threads, From the visit to a Cuban garment manufacturing computers, cooperative education materials, cooperative, the delegation learned that there and many others. There is recognition that such are challenges facing textile and garment donations are not sustainable over the long run, manufacturers due to the lack of resources and raw and cannot address the larger issues of trade materials that would allow them to improve their normalization or steady market supplies, but they outputs. Consequently, this presents opportunities can build good will and relationships and address for collaboration between U.S. based worker-owned some of the more immediate needs of Cuban cooperatives in the textile sector and those in Cuba. cooperatives. Although there are a number of For example, the one factory visited had sewing hurdles to the transport and entry of such donations, equipment that was decades old (Japanese and many organizations have been providing them for East German sewing machines that dated back to years under humanitarian assistance and people-to- the 70s), and a lack of specialized equipment (such people exchanges. as embroidery, leather sewing machines, etc.) that would enable the factory to take on a more diverse On the services side, U.S. cooperatives can donate range of orders. Worker-owners also spoke to the staff time and expertise to specific cooperatives on difficulties to obtaining high-quality raw materials topics such as management, marketing, governance, (fabric, thread) on a reliable basis. The factory was service provision, and other cooperative training and at full capacity, but in order to scale (if this is what development topics identified in the first opportunity the factory worker-owners desired), developing skills listed above. This could entail both on-site travel to and accessibility to needed equipment and Cuba, as well as technical visits of Cubans to U.S. materials would play a key role. cooperatives. Such activities fall under approved U.S. government license areas and comply with Cuban One of the U.S. delegation members, Opportunity regulations as well. Threads (OT) in North Carolina, is a leader in developing textile value chains and hubs within its These are six specific opportunities identified by region, through its involvement with the Carolina the delegation, but several other areas were Textile District. OT has good relationships with cotton discussed throughout the course of the trip. cooperatives and employee-owned weavers These included sourcing of Cuban products by throughout the Carolinas and the southeast U.S. that U.S. food cooperatives; partnerships between could be sources of engagement with Cuban both organic and conventional U.S. and Cuban cooperatives. Additionally, OT members have the agricultural cooperatives on improving production, skills that could be valuable for exchange between sourcing quality inputs, production technologies, cooperatives in both countries—for example, equipment, and other areas; engagement of in patternmaking and more complex sewing, in worker cooperatives from both countries to discuss group dynamics involved in running and growing a the unique challenges of worker-ownership, successful cooperative business within the garment governance, and management; and general industry, or in sector-specific ecosystem learning exchanges, partnerships, and trade and development in this industry. investment opportunities between cooperatives in both countries. Coop-to-Coop Material Donations and Services With regard to the sourcing of Cuban products, One potential area for collaboration that could in January 2017, the first legal export of Cuban have an easier path for immediate engagement is agricultural products to the United States was the donation of equipment, supplies, and services approved. A Cuban cooperative exported artisanal charcoal made from marabu, a woody invasive 23 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA is complex. is nothing that prevents is nothing that prevents Although on paper, there there Although on paper, with U.S. cooperatives, the reality reality with U.S. cooperatives, the cooperatives from doing business cooperatives from 10-15% loss on the dollar. Furthermore, central on the dollar. 10-15% loss cooperatives’ further complicates state planning the exchange because to foreign lack of access government the an annual prioritization for creates in which businesses exchange of foreign expenditure all the other organizations must compete with and food those purchasing needing it, including social services. providing Cuban and U.S. regulations The maze of both in many cases, or lack thereof and procedures, and for businesses is a daunting environment to enter the Cuban market. other cooperatives involved Cooperatives and cooperative associations eager are in this and earlier NCBA CLUSA delegations to find ways to overcome these barriers, but in some staff to dedicate cases, may lack the resources legal services and time to the endeavor or to retain and bureaucratic to navigate these regulatory waters. Those Cuban cooperatives (and U.S. non- cooperative companies) which have persisted have and lengthy, and to be onerous found the process have paid a high price in terms of human resources and time to push through the bureaucracies and find solutions. The upside of this effort is early entry into the Cuban market, the opportunity to pioneer new ties after 55 years of separation, and a foothold for future business and development opportunities. Conclusion The U.S. cooperative delegation led by NCBA and will to pursue various CLUSA has the interest present opportunities with Cuba if the conditions are to make this collaboration productive and valuable: these include clear and specific opportunities for engagement that add value; clarity around to achieve collaboration; a avenues and processes basic level of official U.S. and Cuban government This 15 , and the end user of U.S. and Constraints e are a number of barriers to pursuing these a number of barriers to pursuing e are http://www.reuters.com/article/us-cuba-usa-export-

idUSKBN14Q0DB 15 Another key barrier is the dual currency, which Another key barrier is the dual currency, to accessing a number of challenges related creates that must be used for international currency hard exchange rates transactions, and issues of foreign with the Cuban Convertible Peso, which can cause significant losses when the official rate carries a However, equally important are the many hurdles the many hurdles equally important are However, is there on the Cuban side. Although on paper, doing from cooperatives nothing that prevents is complex. reality business with U.S. cooperatives, the with state Cooperatives must have agreements which very import businesses to import any goods, few have managed to do that was The delegation spoke with one cooperative able to garner of the import several support from companies to bring in printing and other equipment, but that seemed to be the exception. Most of them did not see any clear path to accessing supplies and rules, confused by regulations, other inputs, and were to do so. Most of the new and lack of procedures cooperatives have not been authorized to hold bank accounts, and access to financing and loans has been limited as well. opportunities. The embargo is a central one that limits embargo is a central one that limits opportunities. The trade, investment, and financial flows between U.S. Despite a number of new and Cuban businesses. of in the United States that ease some regulations is still in place and the embargo these constraints, transactions in a long history of potential shrouds Under opaque and confusing rules and relationships. is not likely the embargo Administration, the Trump eased under to be lifted, and certain regulations calling into Obama will likely be reversed, President question the ability to pursue normalization. not be an SOE or other state agency must products but rather a private sector entity: cooperatives, cuentapropistas, or the Cuban people. plant known for its clean-burningplant known properties. Barriers Ther first transaction will hopefully pave the way for other United States. exported to the to be Cuban products 24 FOR THE FUTURE

cooperation; and participation of Cuban stakeholders, offer technical support, organize events cooperative counterparts with mutual interests. and activities, and provide a platform for cooperative engagement–not just from U.S There are many forms that engagement could cooperatives, but from cooperative networks around take, some based on mutual business interests, the world. However, barriers to establishing such a and others based on a broader commitment to presence are currently high, and in light of the recent cooperative principles: Principle 6 (cooperation change in U.S. Administration, not a likely scenario in among cooperatives) and Principle 7 (concern the short- and medium-terms. for community). U.S. cooperatives can provide both materials and supplies, as well as technical In the meantime, NCBA CLUSA will continue to pursue assistance and training. They can also serve as trade opportunities for exchange between the and investment partners in commercial activities. two countries’ cooperative sectors, with targeted People-to-people exchanges open doors and build invitations to Cubans from the public and private relationships, but are limited in their impact over sectors to learn from events and technical time without some of the deeper connections and exchanges in the U.S., and with participation of the enabling environments to conduct open and NCBA CLUSA and its members in selected events in transparent business and long-term partnerships. Cuba, such as trade fairs, agricultural conferences, energy conferences, and other high-level and technical meetings to advance specific activities Cooperatives in Cuba and U.S. and outcomes for cooperatives in both countries. counterparts would benefit from a NCBA CLUSA will also pursue shorter-term potential regular U.S. cooperative presence donations of services, materials, and supplies in Cuba that would serve to that are in demand in Cuba, and that can foster cement partnerships. good will and commitment on both sides in support of strong cooperatives and cooperation. As NCBA CLUSA and the delegation members move forward, they invite both U.S. and Cuban officials, Although having sufficient financial resources to government ministries, non-governmental engage with Cuba is certainly a potential barrier organizations, cooperatives, and other businesses to for many U.S. cooperatives, it is not the main one. engage in a transparent and mutually beneficial For example, for this trip alone, the delegation dialogue and in a set of concrete actions that will as a whole contributed an estimated $132,000 not only support Cuban and U.S. cooperatives, but of participants’ resources (travel expenses and will also strengthen bilateral relations based on the time) that supplemented the support NCBA CLUSA principles of trust and cooperation. has from the Christopher Reynolds Foundation and the Cooperative Development Foundation. The primary barriers to U.S.-Cuba cooperative engagement, in addition to the embargo and stymying bureaucracies, are the uncertainty of a clear path forward, the time and effort it takes to forge new paths, and the challenge of finding the best and most effective way to work with Cuba vis-a- vis a number of competing priorities for cooperative businesses and organizations at home and abroad.

Cooperatives in Cuba and their U.S. counterparts would benefit from a regular U.S. cooperative presence in Cuba that would serve to cement partnerships, provide ready outreach to various 25 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA

providing sustainable solutions through , providing sustainable solutions through

he primary voice in the United BA CLUSA is the primary voice C States for people who use cooperatives to build States for people

NCBA CLUSA's international program has a 63 year NCBA CLUSA's international program development history of supporting sustainable local NCBA CLUSA in over 85 countries around the world. security and works in the technical areas of food nutrition, sustainable agriculture development, organizations, strengthening communities and farmer governance, natural resource management, local women and empowerment of small holder farmers, and youth cooperative principles. a better world by strengthening cooperatives, a better world by and providing building resilient communities Through its international economic opportunities. NCBA CLUSA works through development program, in more than 20 countries the cooperative principles and Southeast Asia. Since in Africa, Latin America 1916, NCBA CLUSA has shared the cooperative cooperatives advantage, highlighting the impact families and have in bettering the lives of individuals, program, NCBA communities. Through its advocacy the CLUSA educates lawmakers and promotes with public and cooperative business model, working private thought leaders. ABOUT THE NATIONAL THE NATIONAL ABOUT BUSINESS COOPERATIVE ASSOCIATION CLUSA INTERNATIONAL (NCBA CLUSA) WHO WE ARE WE WHO N 26 APPENDIX A

List of U.S. Delegates Marcus Sage Laws – Program Associate, NCBA CLUSA

Jessica Allen – Contract Associate, Jason Eric Leenson – President, Sol Economics Wiener|P.C. Dr. Martin Lowery – Executive Vice President of David Bruce – Egg, Meat, Produce and Soy Pool Member and Association Relations, National Rural Director, Organic Valley Electric Cooperative (NRECA); Board Member, International Cooperative Alliance Bruce Carrozzi – Senior Director of Retail Growth, True Value Company Chris Maher – General Manager, BriarPatch Food Co- op; Board Member, National Co+op Grocers Brian Cavey – Senior VP of Government Affairs, CoBank Pedro Maturana – Assistant/Worker, Arizmendi Association of Cooperatives Dr. Michael L. Cook – Professor in Cooperative Leadership, University of Missouri-Columbia Anh-Thu Nguyen – Director of Cooperative Programs and Partnerships, We See Beauty Foundation; Juanamaría Cordones-Cook – Professor of Romance Member, Opportunity Threads Languages, University of Missouri-Columbia Alex Serrano – Vice President of Business Amy Coughenour Betancourt – Chief Operating Development & Technical Services, NCBA CLUSA Officer, NCBA CLUSA Ruth Skafsgaard Carla Decker – President & CEO, District Government Employee Federal Credit Union (DGEFCU) Jeffrey B. Stroburg – President and Chief Executive Officer, Southern States Cooperative Keith Harrington – Writer, MA Economics Nancy Stroburg – Rotarian Dr. Ann Hoyt – Professor Emerita, University of Wisconsin – Madison, Center for Cooperatives Bobby Sullivan – General Manager, French Broad Food Co-op; Board Member, National Co+op Esteban Kelly – Co-Executive Director, U.S. Federation Grocers of Worker Cooperatives, NCBA CLUSA Board Member Jim Wedeberg – Director of International Alan Knapp – VP of Advocacy, NCBA CLUSA Cooperative Development, Organic Valley 27 WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA The U.S. Delegation at Sabino Pupo Cooperative 28 APPENDIX B

Cooperativas de Créditos y Servicios (CCS): The first Pesos Nacionales (CUP): The domestic currency in wave of cooperatives to form after the Revolution, Cuba’s dual-currency system that is used primarily by CCS co-ops were formed voluntarily by private small- Cuban citizens for day to day transactions including holder farmers for the purpose of providing credit and payroll. The exchange ratio of CUP to CUC is roughly other services to their individual members. 25:1.

Cooperativas No-Agropecuarias (CNA): Non- Special Period: The period following the collapse agricultural cooperatives. CNAs are a product of the of the Soviet Union in late 1991 when the new cooperative law passed in 2011. disappearance of preferentially priced imports from the USSR plunged Cuba into a decade long Cooperativas de Producción Agropecuaria (CPA): economic crisis. Virtually overnight Cubans faced The 1970s saw the emergence of this second dramatic shortages of food, energy supplies and cooperative model which permitted farmers to make other essentials. irreversible sales of their land to a cooperative in exchange for a voting membership in the enterprise. Unidades Básicas de Producción Cooperativa (UBPC): This newest form of agricultural coop was a Cuentapropista: An individual small private business product of the country’s so-called “special period” owner – essentially the Cuban version of a sole- of the 1990s when the loss of synthetic farming inputs proprietor. from the recently-collapsed Soviet Union forced Cuba restructure its agricultural sector. To increase Nuevos lineamientos: Meaning “new guidelines”, productivity, the state broke many of its large this is the shorthand term for the economic reform conventional farms and began leasing out parcels package included in the five-year plan passed by the to farmer co-ops. Due to their need to manage 6th National Congress of the Cuban Communist Party without synthetic petro-chemical inputs and heavy in 2011. These new guidelines included the country’s machinery, UBPC cooperatives are also notable new cooperative business reform policies. for their pioneering use of organic, agro-ecological farming techniques. Pesos Convertibles (CUC): Often referred to by its acronym (pronounced “kook”) this is Cuba’s internationally convertible currency for use in foreign trade and for domestic use by foreign tourists. As of this writing the U.S. dollar-value exchange rate for CUC is approximately 1:1 (though there is a 10-15% surcharge levied on U.S. dollars exchanged within Cuba). THE 7 COOPERATIVE PRINCIPLES 29

Voluntary and Open Membership: Cooperatives are Autonomy and Independence: Cooperatives are voluntary, open to all persons able to use their autonomous, self-help organizations controlled by their services and willing to accept the responsibilities of members. If they enter into agreements with other membership. organizations, including governments or raise capital from external sources, they do so on terms that ensure Democratic Member Control: Cooperatives are democratic control by their members and maintain democratic organizations controlled by their cooperative autonomy. members who actively participate in setting policies and making decisions. The elected representatives Education, Training and Information: Cooperatives are accountable to the membership. In primary provide education and training for their members, cooperatives, members have equal voting rights - one elected representatives, managers and employees so member - one vote and cooperatives at other levels they can contribute effectively to the development of are organized in an democratic manner. cooperatives.

Members' Economic Participation: Members Cooperation Among Cooperatives: Cooperatives contribute equally to, and democratically control the serve their members most effectively and strengthen capital of their cooperative. At least part of that the cooperative movement by working together capital is usually the common property of the through local, national, regional and international cooperative. They usually receive limited structures. compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses Concern for Community: While focusing on members for any of all of the following purposes: developing needs, cooperatives work for the sustainable the cooperative, possibly by setting up reserves, part development of their communities through policies of which at least would be indivisible; benefiting accepted by the members. members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership. SOL2 ECONOMICS

IN PARTNERSHIP WITH