Entrepreneurs on rise in Cuba but change slow
Businesses out of shadows; government still gets its cut
HOLGUIN, Cuba — Sergio Luis Suarez, 24, is among the new faces of Cuba’s budding business class. He cut hair for profit before it was legal, but now he’s licensed by the government and has transformed the front of his mother’s apartment into a makeshift salon. His monthly profit: about $25, at 50 cents a cut.
Yaceli Hidalgo is another. She opened a small restaurant, using as startup money nearly $4,000 sent by relatives in Italy. In this eastern city, hers is one of 19 such establishments, catering primarily to tourists and European retirees who spend part of the year in Cuba. Business is good enough that her restaurant has stayed open 14 months.
Across Cuba, there are entrepreneurs like Suarez and Hidalgo, striking out on their own as locksmiths, plumbers, electricians and the like. They’ve always existed but operated on a smaller scale, illegally, in the informal economy.
“I can make more money,” Suarez said, comparing his take with the official government monthly salary of $20.
In the past 24 months, Cuba’s communist government has announced a series of economic openings intended to ease its announced plan to trim the country’s bloated government payroll by 1 million jobs and to buy time as the country shifts from the reign of the two Castro brothers who’ve ruled since 1959 but now are in their 80s.
The changes include expanded self-employment, a liberalization of rules for family-run restaurants, more flexibility for Cuban farmers to sell their products, and even creation of fledgling real estate markets in big cities such as Havana and Santiago.
Most of the 181 newly allowed self-employment categories involve menial labor and services such as beauty salons, barbershops and plumbers. The government says it has granted 371,000 licenses.
The changes, however, remain far from free-market capitalism. Not included among the openings are medicine, scientific research and a range of technical jobs that the government has kept under its control. There are no wholesale businesses to provide goods and services to entrepreneurs.
Programs that teach how to run a business also are rare, although the Roman Catholic Church now offers business-training programs in Havana. There are no trade or vocational schools to speak of. Capital for farming is all but nonexistent.
Nevertheless, a week of interviews across the island, during the late March visit of Pope Benedict XVI, indicates that Cubans welcome the change. Many remain wary, mindful that a similar opening 20 years ago snapped shut when the economic crisis engendered by the 1991 collapse of the Soviet Union was overcome.
Among the complaints is the cut the government takes from their now-legal earnings — something that might seem familiar to an American at tax time.
Hidalgo pays taxes every month to the government and is unhappy that at the end of the year a government auditor pores over her receipts and then gives her an additional tax bill.
“You pay all year. Why do they do it to us [again at the end of the year?]” she complained.
But her biggest challenge is the lack of a wholesale market that caters to restaurants. To ensure that she has food to serve, she must stand in line with ordinary Cubans doing their shopping, often crossing her city in search of items that invariably have run out.
“You have to walk the entire city looking for that one thing you need,” Hidalgo said.
Unsurprisingly in a country now in its 54th year of communist revolution, entrepreneurship is a novel concept and business knowledge is rudimentary.
Capitalism was anathema to Fidel Castro, founder of the modern Cuban state who turned rule over to his brother Raul temporarily in 2006 as his health failed, and then permanently in 2008, when it became obvious that he would never regain the vitality needed to be a head of state.
Fidel Castro nationalized foreign companies and all private property decades ago. For most of his rule, the country favored collective farming and state enterprises that became icons of inefficiency. It took in billions in subsidies from the Soviet Union, which bought the country’s sugar at prices far above prevailing world rates.
After the Soviet Union collapsed, Cuba opened to joint ventures in tourism, which brought in significant amounts of foreign currency.
But it did nothing for the farming sector, and other than tobacco and its famous cigars, Cuba, once a major provider of the world’s sugar, is no longer a significant exporter of agricultural goods. Several farmers complained that there still is no money for modern machinery or fertilizer needed to grow and harvest crops.
A farmer named Yaime, from near Bayamo in eastern Cuba, complained that the state had required him to raise pigs as part of an effort to boost food production, but after their slaughter had not paid him for months so that he could raise more animals. Things are not getting better, he said.
Near Vinales, southwest of Havana, farmers Osmani Duarte, 45, and Antolin Perez Diaz, 63, were cutting a second harvest of tobacco. They chuckled when asked what’s changed for them.
“Nothing,” they responded, noting that tobacco remains a state crop and source of needed foreign earnings. The price they earn from the government remains fairly constant, but they aren’t sharing the profits, they said. Some U.S. officials believe what’s taking place is being carefully managed to lessen an inherent contradiction: The more the government opens the economy, the more it embraces what it stood against for five decades.
Adding to the uncertainty is the fact that the driver of the changes is Raul Castro, 80, who ran the Cuban armed forces for decades before he became president. As army chief he turned to free-market concepts to make the military self-sufficient in crops and parts production. He’s also placed military cronies in high places, suggesting that the changes are calculated with an eye toward just how much liberalization can be tolerated.
“The military is really the economic engine of the country, so it’s done within what the military feels it can manage,” said Vicki Huddleston, a retired U.S. ambassador who ran the U.S. Interests Section in Havana from 1999 to 2002. “You have no civil society [in Cuba] is what it amounts to.”
Another U.S. official currently involved in American policy toward the island called the changes “nibbling at the margins.”
Still, for Cubans like the barber Suarez, it’s all worth it, even if he has to pay the government $12 to $15 a month for his license.
“I don’t have to hide anymore,” he said. “I can promote myself.”