Sheyla Delgado Guerra & Anneris Ivette Leyva

IT was expected. More efficient management within Basic Units of Cooperative Production (UBPC), and the elimination of patterns which have held them back for years, are important to the updating of Cuba’s economic model.

With these basic objectives in mind, the Council of Ministers’ Executive Committee has approved a series of measures focused on legitimizing the autonomy with which these units were originally conceived, an autonomy which existed on paper but rarely in practice. Among these are New General Regulations, published September 11, in the official state gazette No.37.

Created in 1993 to revitalize the country’s agricultural production system, the UBPC emerged from state farms, organized around four cardinal points which were to govern their functioning. These were codified in Decree-Law No.142 and remain relevant today: Linking producers to specific areas of work; promoting responsibility; allowing workers and their families to meet their own food needs within the cooperative; correlating income to production levels and developing effective, autonomous management.

The awarding of land in usufruct for the indefinite future to UBPC’s; the provision of basic supplies required for agricultural production; an adequate workforce and the fact that what was produced belonged to the cooperative, were all basic strengths of the conceptual and legal structure established. Also important were the right to elect the leadership of the cooperative and to control its bank accounts, to honor obligations and retain or distribute earnings to the membership. At least in theory…

The concept did not evolve naturally as expected. State enterprises dealt with the UBPC’s as immediate subsidiaries and assumed as "normal operations" the imposition of production plans and selected managers; even, on occasion, requiring the cooperative to seek authorization to pay salaries.

The result? The legal status of the UBPC was undermined and not recognized, to the extent that establishing contractual relations with other state entities was not even allowed.

This type of subordination included the implementation of resolutions and procedures which were far removed from the original conception.

Beyond these practices which hindered the work of UBPC’s - and a number of devastating hurricanes - poor organization and management of production led to accumulating debt and losses.

"In 1994, a year after their legal establishment, there were 2,519 UBPC’s in the country. Now there are 1,989, the great majority functioning within the Ministry of Agriculture’s (MINAG) system, according to Julio A. Martínez Roque, the Ministry’s director of UBPC services.

He explained that these cooperatives are responsible for more than 1,770,000 hectares of land, representing 28% of the country’s agricultural land. However, he added, 23% of this land is currently idle, reflecting the low level of production, underutilized resources and untapped potential of the UBPC’s.

"At the close of 2011, around 15% of the cooperative units reported losses and 6% did not even submit an economic balance sheet," Martínez Roque said.

He commented that, overall, UBPC’s have received more than 3.3 billion pesos from the state budget. The National Bank has granted extensions on their debt and lowered interest rates in an effort to given UBPC’s some "breathing space"… which they have certainly taken advantage of.

According to the Ministry official, UBPC’s within the MINAG system had accumulated, at the end of 2010, almost 1.23 billion pesos in debt, losses from previous years amounting to some 680 million, in addition to debts of 203 million owed by dissolved cooperatives. In all, a total debt of 2.11 billion pesos! In other words, it’s "a miracle" that they function at all.

For the first time in their 19 years of existence, these productive units were subjected to a rigorous, comprehensive diagnostic, which clearly established their weaknesses and laid the foundation for their recovery.

"A preliminary analysis allowed us to place UBPC’s into three basic categories. In the first are those in a positive financial and productive situation. They have the human resources they need and stable management structures. There are 540 UBPC’s in this category -112 of these function within the Sugar Industry Group," Martínez Roque reported.

"The second group includes those with difficulties of an organizational, productive and/or financial nature, which can, however, be remedied through a series of changes, to create the conditions to increase production. The bulk of the cooperatives are in this category, some 1,122, representing 57% of the total.

"Lastly, there is a group of UBPC’s in critical condition, in all relevant aspects, with no indication whatsoever of a possible recovery. There are 327 of these identified, all within the MINAG system."

Thanks to this analysis, the Sugar Group’s units were reorganized and the process has gradually begun within the Ministry of Agriculture’s system.

Above all, it was absolutely necessary to establish a financial arrangement which would allow UBPC’s to increase production and pay off accumulated debts owed to banks and other enterprises, within the near future.

"Basically," Martínez Roque explained, "the 116 million pesos allocated in the State Budget as working capital were redirected to cover losses experienced in previous years by UBPC’s in the first two categories described – for a total of 332,100,000 pesos – as well as a portion of the debts to banks and other enterprises."

Debt which these funds cannot cover will be repaid with a 5% assessment levied on gross income, beginning in 2013, which will be part of the State Budget and serve to provide capital for UBPC’s. Bank debts will be renegotiated and extended to a maximum of 25 years, the MINAG official said.

The plan developed also indicates that those UBPC’s which respond to this support productively and show financial responsibility, will be prioritized in the provision of financing from this fund.

Martínez Roque emphasized that, beginning next year, the State Budget will not continue to subsidize UBPC’s, except in cases of special national interest. The cooperatives will, however, be exempted, for a five-year period, from taxes on earnings, recently approved in the country’s new Tax Law. Additionally, overdue bank debt, which in the case of UBPC’s in the first two categories amounts to 7.8 million pesos, will be forgiven.

All of this to contribute to financially strengthening these cooperative units.

UBPC’s were legally and conceptually well-founded, but the diagnostic analysis undertaken revealed that obstacles to their development and limitations on their autonomy – reaching unbearable levels – emerged as practices which were outside the letter of the law.

Thus, in order to assure adherence to Decree-Law 142, which established the UBPC’s in 1993 and remains fully in effect, the New General Regulations were established, approved by the Ministry of Agriculture August 13, 2012 in Resolution No.574 and published in the state gazette.

The regulations, which enter into effect immediately, reaffirm that UBPC’s are cooperative entities, governed by the law, internal regulations and their general assemblies, as the highest decision-making body. These assemblies have the authority to decide what percentage of earnings will be distributed among members, except when the cooperative has experienced previous losses and is required to devote 50% of its earnings to covering these.

Likewise, the regulations clarify that the cooperatives may purchase, by check or in cash, products such as salt, sugar, vinegar and containers in Ministry of Domestic Commerce retail and wholesale outlets, as well as construction materials, at unsubsidized prices, to erect dwellings or other facilities.

Authority to carry out such actions is coherent with other regulations addressing housing owned by UBPC’s, which may vary in their state of repair. The regulations clarify that these may be appraised and sold to members of the cooperative, who can undertake the repairs on their own. If a cooperative wishes to maintain ownership, it may allocate funds for work on such homes.

The new regulations also make clear that state supervision will be carried out only by the relevant entities with authority in specific areas. The enterprise to which a UBPC provides agricultural products may only verify that the cooperative is abiding by established technical norms and fulfilling terms of the contract signed to meet state needs. Production exceeding that which was contracted may be sold by the cooperative, as it sees fit.

"UBPC’s have received help since their emergence, above all financially. The new measures are noteworthy since, although they provide significant financial support, this is combined with other components meant to ensure their long-term success, to eradicate the root problems," said Julio A. Martínez, summarizing the essence of the 17 measures designed to reaffirm the status of UBPC’s as independent legal entities, with the same rights as other forms of production.

Along these lines, beginning in 2013, figures in the national economic plan will be disaggregated to the basic unit of production level, facilitating the establishment of relations between individual UBPC’s and other bodies and enterprises, on the basis of clearly formulated contracts, as established in the New General Regulations.

Also specified is that UPBC’s will, without the involvement of any other entity, contract directly with Ministry of Agriculture enterprises, or the Sugar Group, to acquire supplies, including fuel.

To ensure that no limitations are placed on the implementation of the measures, the Executive Committee of the Council of Ministers sent a directive to national and local government administrations, indicating that these bodies are expected to ensure that subordinate entities in their respective systems provide services and sell supplies directly to UBPC’s.

To avoid mistakes and misunderstanding, steps taken included the design of an initial training program for UBPC directors and administrative boards, as well as enterprise and MINAG officials. The content addressed will be compiled and distributed as a working tool for UBPC’s and government entities.

It is also essential that UBPC assemblies carefully study the New General Regulations and proceed to reformulate their internal regulations.

As part of the plan, almost 300 UBPC’s in the third category, those showing no potential for recovery, will be fused with others or dissolved. Supervisory structures within the Ministry of Agriculture and the Sugar Group, according to Martínez Roque, will carefully follow the implementation of all the approved measures.

"This process had been underway for two years, emerging precisely as a result of concerns expressed by the UBPC’s themselves and is unprecedented in the 20 years since their creation," he stated. Martínez Roque also indicated that the new measures will be extended, in as much as they apply, to Agricultural Production Cooperatives (CPA) and Credit and Services Cooperatives (CCS) of small landowners, since these have not been spared similar obstacles to their development.