Thursday, November 24, 2011

Reforms proceed: Loans for Self Employed, Brazilian Building Materials

* Loans to provide much-needed capital to self-employed

* Latest reform in government effort to modernize economy

By Jeff Franks

HAVANA, Nov 24 (Reuters) - Cuba's growing number of self-employed may get bank loans starting next month as the government tries to inject capital into efforts to reform the island's communist economy, according to a decree published on Thursday.

The new regulations, put out in Cuba's Official Gazette, create a loan program that goes into effect on Dec. 20 and also will be available to small farmers and those who want to improve or construct their own homes.

The intent is to "stimulate national production of generators of foreign exchange or import substitutes," said Communist Party newspaper Granma.

Credits for farmers and home projects have been available previously but are new for the self-employed, a sector the government is trying to stimulate for the first time since the difficult economic times of the 1990s.

A recent media report said there are now 364,000 self-employed in Cuba, more than twice the number two years ago, but most are engaged in low-level street sales of food and items such as toys, pirated DVDs and plumbing supplies.

Lack of capital has been one factor preventing them from improving their business and dissuaded others from getting started.

"I've been waiting for this new credit system to have the opportunity to open a small place offering fast foods," said Eugenio Sanchez, as he read the news in Granma.

The loan program is one of 300 reforms approved by the ruling Communist Party in April with the goal of strengthening Cuban communism to assure its future.

It gives heft to state support of the self-employed, known in Cuba as "cuenta propistas," who have become critical to President Raul Castro's campaign to restore the country's debt-ridden economic modeled on the old Soviet Union.

He wants to cut a million workers from the bloated payrolls of the state, which controls most of the economy and employs most of the workforce.

But he needs jobs for them to go to and therefore is encouraging private job creation.

It remains to be seen how much impact the program will have because it will be administered by Cuba's state-owned banks, which are widely viewed as inefficient.

The decree requires that the self-employed take out loans of at least 3,000 Cuban pesos, equivalent to $125, with lower limits for farmers and home projects.

Cuban seeking loans will be evaluated by the banks for how much money they should receive and can be expected to pay back, Granma said.

In recent weeks, the pace of implementing the reforms approved in April has picked up, including recent decrees liberalizing the buying and selling of cars and houses for the first time in five decades.

Brazilian home improvement chain TendTudo plans to open in Cuba because the reforms there that permit the buying and selling of homes for the first time in decades may mean a strong market for its products.

Brazilian retailer takes first steps into Cuba
Wed Nov 23, 2011 7:10pm EST

* Company will export building materials to Cuba

* Reforms expected to increase Cuban demand

By Esteban Israel

SAO PAULO, Nov 23 (Reuters) - Brazilian retail chain TendTudo, which sells home improvement products and construction materials, has taken the first steps into what it believes could be a $400 million a year market in communist Cuba.

The company recently signed a contract to start supplying in the first half of 2012 a Havana store for Cuban state company Palco, modeled on TendTudo's "home center" stores in Brazil though much smaller.

TendTudo's interest in part lies in the prospect of a strengthening market for its products after a recent reform by the Cuban government to allow the buying and selling of homes for the first time in decades, said Carlos Christensen, president of TendTudo's international unit.

"Cuba has an important demand for tools, construction materials and articles for the home," he told Reuters in a telephone interview.

"There are important challenges but for us it's a long-term objective. The idea is to start small and go accompanying the changes in the Cuban market," he said.

Cuba, a country of 11 million people, is in the midst of reforms liberalizing its troubled Soviet-style economy with the goal of assuring the survival of the communist system put in place after the 1959 Cuban revolution.

The housing reform is expected to increase demand for building materials, not only because the country has a housing shortage of more than 600,000 units but because so many of the existing homes are in bad shape after years of economic crisis and neglect.

Christensen believes that purchases just by the Cuban state, which controls 90 percent of the island's economy, would exceed $400 million annually for the electrical supplies, tools, paint, bathroom fixtures, tiles and myriad other products TendTudo sells.

Cuba's retail sector is still off-limits to private companies, but its opening would add to the island's potential, he said.

"But what happens if we establish ourselves there with a long-term vision, first looking at the corporate sector and then eventually the retail sector?" Christensen said. "The challenges are important but we are patient." (Reporting by Esteban Israel; Editing by Jeff Franks and Christopher Wilson)

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