Who Will Build Hospitals and Schools? PRECONS III Shuts Out Private Enterprises in Cuba

The introduction of Cuba's new pricing system for construction, known as PRECONS III, might serve as an obstacle rather than a catalyst for development, according to Cuban entrepreneur Yulieta Hernández Díaz. Leading the microenterprise Pilares Construcciones, Hernández conducted a thorough review of the Ministry of Finance and Prices (MFP) and Ministry of Construction's Resolutions 153 and 173, issued on May 12.

These regulations impose strict limitations: a maximum profit margin of 15% on direct costs, labor rates capped at five times the current rates, and constraints on indirect expenses (with a maximum coefficient of 1.0 on direct labor costs and 0.3 on equipment usage). Additionally, PRECONS III mandates operations solely in Cuban pesos, without access to foreign currency, in an economy where 60% of supplies are purchased in USD or EUR. Costs must also be verifiable and auditable.

“For private construction firms, working with the state without incurring losses is not feasible,” Hernández remarked in a detailed analysis she shared on Facebook. She also highlighted the impact of forced banking and the lack of a formal currency exchange market on the sector's operations. Unable to obtain foreign currency through official channels, private builders rely on the informal market, where the dollar trades at 370 CUP compared to the official rate of 120 CUP, significantly raising costs in a de facto dollarized economy.

Hernández further criticized how the new model fails to cover the real costs of skilled labor, which has shifted to the informal market or abroad due to unsustainable outdated wage scales. While a tiler earns over 150,000 CUP monthly in Havana, official scales only offer 3,000 CUP.

State and Private Construction at Odds

Hernández also drew attention to a structural contradiction: the state needs buildings but blocks the only sector capable of operating effectively. “Public (state) construction companies lack materials, tools, equipment, protective gear, and human resources. Private builders find it unfeasible to construct for the public sector under these resolutions. Who will build the hospitals and schools?” questioned the CEO of Pilares Construcciones.

In addition, she pointed out the web of restrictions surrounding sectors like tourism and real estate. The government maintains a system that excludes Cuban private construction firms from hotel projects, often opting for foreign architects who lack understanding of the Cuban context.

Proposals for Reform

Hernández lamented the absence of national competitions that would allow Cuban architects and engineers to design projects suited to local realities. She suggested specific measures, such as relaxing cost limits, allowing private builders to engage in state projects, opening channels for financing and credit access, and recognizing the role of independent architects and engineers.

She also proposed a model to rehabilitate deteriorated properties with private investment, where builders would hand over a portion to the state and sell the rest to cover costs and earn a reasonable profit. These reforms aim to stimulate investment, optimize resources, and foster sustainable growth without depending on high direct state investment.

In Hernández's view, “Cuba faces a public infrastructure crisis, part of a broader systemic crisis, with a pricing system that doesn't align with the country's economic reality. Without profound reforms, the national infrastructure will remain a statistical illusion. Urgent changes are needed to prevent the sector's collapse.”

Impact of Rising Construction Costs

PRECONS III, set to take effect in July, was presented by authorities as a legal update intended to organize Cuba's construction sector, “correct distortions” and curb unjustified budget increases in state projects. While the MFP views it as “a key tool to combat inflation in construction services, promoting a more favorable development environment,” its real impact seems to be pushing microenterprises and private builders out of the public sector, unable to operate under a scheme that doesn't cover even their basic costs.

The Cuban government announced a substantial increase in wholesale prices for domestic cement on Wednesday. Authorities claim the measure aims to ensure the financial sustainability of the industry, yet it comes amid a severe economic crisis, rampant inflation, material shortages, and an ever-growing unmet housing demand.

This price hike will equally affect state companies, private builders, and citizens trying to construct or repair their homes. The rising cost of cement escalates expenses throughout the construction chain, from public works to private projects.

Housing Crisis Highlights Economic Challenges

The collapse of housing construction in Cuba starkly illustrates the depth of the country's economic and social crisis. In 2024, 5.5 times fewer homes were built compared to 1984, and 15 times fewer than in 2006. Even in 1992—a critical year of the Special Period—nearly three times as many houses were constructed as last year, according to economist Pedro Monreal.

Only 1,344 homes were built in the first quarter of 2025, representing just 12.4% of the official plan for 10,795. This figure not only confirms the downfall of the state construction program but also highlights the structural crisis in the sector and the government's inability to address one of the population's most pressing needs.

Meanwhile, statistics from recent years show a clear trend: since at least 2014, investments in tourism have increasingly taken precedence in the national budget, at the expense of key sectors like housing or social infrastructure. Despite economic stagnation and widespread deterioration in critical areas like public health or food supply, these investment priorities reveal a growing disconnect between the Cuban government's priorities and the real needs of its people.