Monday, August 20, 2007

Private sector operates in Cuba's shadows

Posted on Wed, May. 30, 2007

A small number of Cuban entrepreneurs are able to make ends meet under the pressure of Cuba's strict government-controlled economy.
Cox News Service
It's nothing but a simple shed with a counter stuck in the front yard under a shade tree. The menu -- a tiny chalkboard hung from a rusty nail on the wall -- offers only two items: pizza and ice cream.
But for Esperanza Perez, the tiny food stand she has owned and operated in Communist Cuba for the past 13 years has been life changing.
''Before this my life was very difficult,'' she said. ``My husband died and I had to face life. I had my disabled mother and my daughter to support. This business is not making us rich, but we are surviving.''
Perez was part of a new wave of Cubans allowed to open private businesses in the 1990s, when Cuba's economy was devastated by the collapse of the Soviet Union and the loss of about $6 billion a year in subsidies.
The decision to allow privately owned enterprises was a dramatic departure from Cuba's long commitment to socialism, a doctrine adopted by Fidel Castro after his 1959 revolution.
But as Cuba's post-Soviet crisis eased in the late 1990s, Castro became uncomfortable with the threat posed by private profit in a state where riches are considered a sin.
Cuban officials in recent years have clamped down on the tiny private sector, raising fees, cutting back the number of licenses issued and increasing inspections.
According to press reports, the number of private entrepreneurs -- called cuenta propistas, or ''people working on their own account'' -- dropped from around 200,000 in 1996 to about 150,000 today.
The question on many minds now is whether Cuba will continue to rein in private opportunity, or instead open its economy further.
While Castro remains firmly committed to socialism, the 80-year-old leader has been sidelined the past 10 months by serious illness. He officially turned over power to his 75-year-old brother, Raul, last July.
Raul Castro, head of Cuba's military, is said to be a pragmatist open to the idea of limited private enterprise. Cuban officials are also candid about the need to improve the living conditions of the Cuban people.
In a recent press briefing, Economics Minister Jose Luis Rodriquez insisted the cuenta propistas will be a part of Cuba's future. ''There is not a policy to destroy private businesses,'' he said. ``Legally people are allowed to do this. The state never thought of private business as a menace.''
That is good news to the business owners, many of whom say they enjoy the challenge of running their own enterprise.
''It's a good business that enables me to maintain my house, to sometimes drink a beer and to maintain my cars,'' said Miguel Gonzales-Carbajal, a Cuban physician who for the past seven years has run a casa particular, renting rooms to tourists. ``With just my salary, it was hard to make ends meet.''
He charges $25 for a small room and $35 for a larger room, both clean, neat, air-conditioned and with private bathrooms. For this privilege, he pays the Cuban state the equivalent of about $325 per month.
''There is risk because if I have no customers, I still have to pay the license fee,'' he said. ``But if we have a month we believe will be slow, we don't have to pay the fee but then we cannot rent the rooms.''
The concept of risk is new to many Cubans, but some of the business owners seem to thrive on it.
''I really enjoy it,'' said Lazaro Ordonez, 44, who with his mother Elisa, 62, has run Los Amigos, a tiny paladar or private restaurant, out of their home for 12 years. ``You have to work more, but in the end, you have a compensation, a better life.''
Cuban law allows the businesses to hire only family members. The cost of the licenses vary. Perez, who charges the equivalent of about 30 cents for a small pizza and 13 cents for an ice cream cone, pays about $116 each month for her license and two family workers.
Entrepreneurs also pay 10 percent of their profit in yearly income tax.
Cubans are loathe to speak of how much they earn, but a Cuban professional who researched the private sector estimated that a stand like Perez's might earn $200 per month in profit.
There are also thriving private markets in Cuba, where farm cooperatives and individuals pay fees to sell goods and produce. The private markets often have higher-quality produce than state-run markets, although prices are also higher.
''The vendors pay 5 percent of sales in taxes and 5 percent to rent their stalls,'' said Orlando Valdez, manager of a market in Havana's Vedado neighborhood. ``The prices are set by supply and demand, but if a vendor is charging very high prices, we try to convince them to lower them.''
Prices seem cheap by American standards, with a pound of tomatoes costing the equivalent of about 20 cents, while chicken and pork are sold for about $1 per pound in Cuban pesos.
Other vendors sell at a street fair held once a month in Vedado.
''I buy this stuff from the state and pay 10 percent of each sale in taxes,'' said Roberto Garcia, 28, who sold mops, brooms and detergent at the fair. ``I do OK because my prices are cheaper than in the state stores. I sell soap for 5 pesos [about 20 cents], while in the state stores it's 15. I'm not getting rich, but I'm surviving.''
Most of the Cuban entrepreneurs say the same thing. But most also say they would never go back to state jobs.
At the Ordonez family's small paladar, there is almost always a long line outside waiting for a chance to eat a typical Cuban meal of pork or chicken, rice and beans. With a beer or two, the meal costs the equivalent of about $7, or roughly half the average Cuban's monthly wage.
But the place is wildly popular, and filled mostly with Cubans, not tourists.
''This is good for us and good for the country,'' said Lazaro Ordonez. ``We support our economic system, but we hope they will allow more of these private businesses.''
Mike Williams' e-mail address is mwilliams@

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