Cuban Government Permits Partnerships Between State Enterprises and Private MSMEs: What Are the Implications?

Amid an economic downturn characterized by rampant inflation, currency shortages, and a collapse in production, the Cuban government has introduced a pivotal shift in the nation's business model.

For the first time, the Official Gazette No. 24, released on March 3, 2026, details the framework for state enterprises to partner with non-state players, including private micro, small, and medium enterprises (MSMEs) and cooperatives.

This development follows closely on the heels of Miguel Díaz-Canel's urgent call for immediate reform of the economic and social model.

During a Council of Ministers meeting, Díaz-Canel emphasized the need for "urgent transformations" concerning "business autonomy" and the exploitation of partnerships between state and private sectors, particularly at the municipal level.

The new legislation transforms these discussions into a formal legal structure.

Introducing a New Entity: The Mixed Limited Liability Company

Decree-Law 114/2025, titled “On the Association between State and Non-State Business Entities,” lays out the legal framework for these partnerships and introduces a previously nonexistent entity in the domestic economy: the Mixed Limited Liability Company (Mixed LLC).

Article 1 specifies that the law regulates associations through:

• The creation of mixed limited liability companies
• The acquisition of shares in an existing private limited liability company by a state enterprise
• The absorption of a private limited liability company
• The formation of economic association contracts

In practical terms, this means:

• A state company can establish a new Mixed LLC with a private MSME or cooperative.
• It can acquire shares in an existing private LLC.
• It can absorb a private enterprise.
• It can enter into economic association contracts without forming a new legal entity.

Previously, interactions between the state and private sectors were confined to gray areas or limited contractual frameworks. This regulation institutionalizes the possibility of internal mixed capital, a concept politically unthinkable until recently.

Centralized Control by the Ministry of Economy

However, this opening comes with a clear control axis: the Ministry of Economy and Planning (MEP).

Article 3 of the Decree-Law states: “The Ministry of Economy and Planning is the Central State Administration Body responsible for directing and controlling the national policy for the development and functioning of associations.”

No entity can be formed without its explicit approval.

Resolution 8/2026, published alongside the decree, establishes an evaluation commission within the MEP, presided over by a deputy minister and comprising key ministry directors.

Furthermore, the National Institute of Non-State Economic Actors will be a permanent invitee in the review process.

Every operation—constitution, merger, division, absorption, share acquisition, partner changes, capital alterations, or changes in business objectives—requires a ministerial resolution. Even economic association contracts need authorization.

If a consulted body fails to respond within ten calendar days, it is deemed to have agreed, bearing responsibility for its inaction.

Thus, autonomy is born conditioned by a political-administrative filter.

Business Autonomy Within State Control

A key government talking point has been “business autonomy.” Article 29 of the Decree-Law states:

“Mixed limited liability companies enjoy business autonomy within the framework of existing legislation.”

The recognized powers include:

• The ability to export and import directly
• Manage and administer their assets
• Determine profit distribution
• Operate bank accounts, including in foreign currencies
• Define products and services
• Set prices in accordance with the Ministry of Finance's provisions
• Determine labor structure and wages, with union participation

Additionally, Article 48 declares that these companies “are not subjects of the Economic Plan,” formally excluding them from the centralized mandatory planning system. However, the regulation also clarifies that:

• They are subject to the state mechanism for currency management, allocation, and control.
• They must report strategic indicators to the state (energy, investments, foreign currency inflows and outflows, food production, among others).
• They cannot operate in health or education services.
• They cannot engage in activities related to armed institutions, except for specific exceptions.

This is not full liberalization but rather limited autonomy.

Flexible Capital with Strict Protection of State Assets

The decree removes the minimum social capital requirement: “No minimum social capital is required for the constitution of the company” (Article 18.2).

This facilitates the creation of new entities. However, capital must be proportional to the level of activity and fully disbursed at the time of constitution.

When state assets—whether tangible or intangible—are contributed, an appraisal is mandatory and must be certified by the Ministry of Finance and Prices. This serves as a protective measure to prevent opaque transfers or undervaluation of public assets.

Viability Filters and Political Control

Resolution 8/2026 outlines the reasons the Ministry may deny a request. These include:

• Failure to meet legal requirements
• Incomplete information
• Lack of economic viability
• Existence of hidden debts or litigation
• Repeated fiscal or banking non-compliance
• Objectives that are “illegal or contrary to public order, defense, and national security”

Furthermore, if the company name includes the name of a martyr or historical reference, it must have the backing of the corresponding party instance.

The process is not just technical and financial; it also adheres to political and ideological criteria.

Flexible Economic Association Contracts

Chapter III introduces economic association contracts, allowing cooperation without creating a new company.

Article 51 states that these contracts: “Do not imply the constitution of a legal entity distinct from its parties.”

Parties can freely establish clauses, form a common fund, and define participation percentages. However, they must be formalized before a notary and registered in the Mercantile Register, and also require MEP approval.

This approach is potentially more agile than creating a Mixed LLC, though it remains subject to state control.

Economic Context Behind the Measure

This announcement does not occur in a vacuum. According to the Minister of Economy, as of January's end, year-on-year inflation reached 12.5%. The energy crisis, food shortages, and declining purchasing power keep the economy under constant strain.

Díaz-Canel has emphasized that the goal is “to increase foreign currency income and develop national production, with an emphasis on food.” He has also shifted responsibilities to municipalities:

“Municipalities must manage economic associations between state and non-state sectors.”

The new regulation institutionalizes this directive and opens the door for local governments to drive productive alliances under central supervision.

Structural Reform or Tactical Adjustment?

In concrete terms, Official Gazette No. 24:

• Formally recognizes the interdependence between the state and private sectors.
• Allows for internal mixed capital.
• Authorizes state enterprises to act as partners in private MSMEs.
• Institutionalizes so-called “productive linkages.”

However, at the same time:

• It does not privatize strategic assets.
• It does not eliminate central planning.
• It does not decentralize approval processes.
• It maintains political control over each operation.

Rather than a liberalization, the regulation formalizes a hybrid model under state control. The government creates a path to partner with the private sector without relinquishing economic leadership.

In a nation desperate for currency and productivity, the state acknowledges its reliance on the private sector. The question remains whether these new alliances can operate with the flexibility the crisis demands or if they will be trapped in the same bureaucratic structure that the regulation, at least in its discourse, aims to overcome.