* Co-ops latest addition to “non-state” sector
* State shedding secondary economic activity
By Marc Frank
HAVANA, July 1 (Reuters) - Communist-run Cuba ceded a bit more ground to private initiative and market forces on Monday, announcing the first non-farm cooperatives since the 1959 revolution were up and running.
“Starting today, 124 cooperatives began to function on an experimental basis in diverse sectors of the economy such as construction, transportation, garbage collection and produce markets,” the Communist Party daily, Granma, reported.
The Council of Ministers, in a statement issued on Monday, said it had approved an additional 71 cooperatives in areas as diverse as bird raising, light manufacturing and food services.
The measure was welcomed by Cubans.
“Something had to be done, because as it is, nothing works properly,” said Alberto Prada, who sells clothing and other items from his home in Havana. “Nor is there any reason for concern. Cooperatives are absolutely compatible with a socialist system,” he said.
Most of the first batch of cooperatives are former state-run produce markets with few employees now being leased to them as cooperative members.
“We are allowing cooperatives to administer activities where the state has proved inefficient,” Grisel Trista Arbesu, who is in charge of the Communist party’s efforts to reform state companies, told Granma.
“It also allows the state to free itself from matters that are not transcendental to the development of the economy,” she said.
The cooperatives will function independently of state entities and businesses, set prices in cases where they are not fixed by the state, operate on a democratic basis, divide profit as they see fit and receive better tax treatment than individually owned businesses, according to a decree law published in December.
The law allows for an unlimited number of members and use of contracted employees on a three-month basis.
The government says many more establishments will follow, beginning in 2014, as an alternative to small and medium-sized state businesses.
President Raul Castro, who took over from his brother Fidel in 2008, has already taken steps to deregulate small private businesses in the retail sector, lease small state shops and taxis to individual employees and fallow state lands to would-be small farmers in search of improved production and efficiency.
According to the government, more than 430,000 people now work in the non-state sector which consists of private entrepreneurs, their employees and individuals who own or lease taxis and the like.
The figure does not include some 2,000 agricultural cooperatives and 400,000 small farmers.
“It’s no surprise that officials chose the cooperative as the legal form. Cooperatives represent a middle ground between state-ownership and individualistic forms of business organization,” said Jose Gabilondo, associate professor of law at Florida International University.
“If given free rein, these reforms are baby steps towards a hybrid economy with market pricing, widely-distributed business risk, and private initiative in targeted sectors,” he said. “The invisible hand it’s not, but at least the pinkie is being flexed.” (Editing by Kevin Gray and Vicki Allen)