Yesterday’s post described the Cuban Government’s suspension of the issuance of new permits for certain self-employment categories and closing down some paladares (private restaurants).
Why is this happening and what is its impact on Cubans?
Nora Gámez Torres of the Miami Herald reports that certain experts say the suspension is the government’s fear of the emergence of a truly successful entrepreneurial class on the island as a future political opponent of the government. As Ted Henken, a U.S. sociologist and expert on Cuba’s private sector, put it this way: “hardliners in the Cuban government are afraid of the private sector, not only because it competes with state monopolies but because economic autonomy ‘can lead to more political freedom and independence, and create a powerful lobby with a different agenda than those in power currently.’”[1]
This move by the Cuban government is seen as against its economic interest as the private sector generates more than $2.5 billion and up to 18% of the economy’s revenues while the implosion of Cuba’s ally, Venezuela, has a major negative impact on Cuba’s economy.
Meanwhile Cubans planning to open new businesses are upset. Here are some of their reactions.[2]
- Sara in anticipation of renting a house in Vedado said, “I have spent months and money invested in arranging the house to rent it to foreign tourists, I already had contacts and I was planning to apply for my license in September.”
- Sergio, a taxi driver who was planning to move to a home buying and selling office, said he lost more than 1,000 CUCs between chairs and other items he bought to set up an office. The government’s suspension of new licenses “demonstrates that no one can make more than four pesos.”
- Brian, who already had bought equipment to open an appliance repair shop in Havana, has seen his aspirations frustrated, as he had not yet submitted his license application. “Right now I do not know what to do because I owe money to several people for the purchase of equipment.”
- The owner of a cafeteria in Havana said that in just two months she planned to open a restaurant in the same place. “Now what do I do with all the cutlery, glasses and even an electric coffee maker I bought? I have to sell them or keep them until they reopen the licensing, but no one knows when that will be. The government wants us to be starving all our lives.”
- Marta, a bookkeeper who looks for accountants to manage her payments at the bank, said that these closures “affects her a lot. As new entrepreneurs do not emerge, it makes it more difficult for me to get new clients. I have been put into China by these bastards since I only had a few months in this activity.”
- Lázaro, “They do not want a middle class to emerge and they say they take these measures because there are many raw materials and equipment of illicit origin, and where do these illicit products come from? That comes from the lack of control and disaster of state companies,” he said. “They really screwed us up.”
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[1] Torres, Fear is driving Raúl Castro to punish Cuba’s new entrepreneurial class, experts say, Miami Herald (Aug. 2, 2017).
[2] Fernandez, ‘There is no one here to raise their heads,’ they complain affected by the brake on private work, Diario de Cuba (Aug. 2, 2017).
Cuban Government Shuts Down Accounting Cooperative
The Cuban Government has ordered the closure by December 31 of Scenius, which provides accounting and business consulting services and which is one of the island’s fastest-growing cooperatives. Its founder said the Ministry of Finances and Prices told him the decision to close Scenius was “based on an analysis of our social purpose, or of the activities that we have approved.”
Scenius began in January 2015 with two or three partners and in two years had more than 200. All its 70 clients are state-owned enterprises or business groups in agriculture, industry and communications.
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Assoc. Press, Cuba Orders Closure of Fast-Growing Accounting Cooperative, N.Y. Times (Aug. 5, 2017), https://www.nytimes.com/aponline/2017/08/05/world/americas/ap-cb-cuba-cooperative.html
Cuba Tries To Calm the Private Sector
On August 7, the Cuban government said the freeze on new licenses for some private-sector occupations would not last years. Its Labor Vice Minister Marta Elena Feitó said in an interview aired on state-run television,
“We are not talking about a very long period of time[for suspension of new licenses to operate private businesses]. We are not talking about years. We are talking about a normal work procedure to approve these norms.” He also said around 1,600 pending applications for licenses for affected occupations filed before the freeze was announced would be processed.
Reuters, Cuba Says Private Sector Freeze Will Not Last Years, N.Y. Times (Aug. 7, 2017), https://www.nytimes.com/reuters/2017/08/07/world/americas/07reuters-cuba-economy.html
The Government says that the paralysis of new licenses ‘will not be for a very long time,’ Diario de Cuba (Aug. 8, 2017), http://www.diariodecuba.com/cuba/1502187120_33118.html
Ministry of Labor clarifies on temporality of new measures in the sector cuantapropista (+ Video), CubaDebate (Aug. 7, 2017), http://www.cubadebate.cu/noticias/2017/08/07/ministerio-de-trabajo-aclara-sobre-temporalidad-de-las-nuevas-medidas-en-el-sector-cuantapropista-video/#.WYmilneGPj3
More Cuban Government Explanations About Actions Regarding Private Sector
Yovana Vega Mato, the second manager of the Entity Improvement Area of Cuba’s Permanent Commission for Implementation and Development, commented to Granma about the Government’s recent measures regarding the private sector.
According to Mato, most non-agricultural cooperatives show positive results while reaffirming themselves as a source of employment, diversification and acceptable quality of services. However, there has been some misappropriation of resources and income; some individuals function as partners in several cooperatives at the same time; some accounting records are deficient; some bank loans have been used for unauthorized purposes; and there has been some corruption.
He added that some cooperatives acted as private companies, where the president acted as if he were the owner, with a minimum of partners, and hired others as employees while distributing the profits only among the partners. In addition, there have been significant and unjustified differences in the income received by the partners.The bulk of these problems are in gastronomy and construction activities.
More generally he said that purpose of the temporary suspension of new licenses is consolidation of what has been achieved and ratification of the validity of this form of cooperative management in accordance with the ethical principles of socialism.
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Puig, Authoriteis explain new measures regarding non-agricultural cooperatives, CubaDebate (Aug. 9, 2017), http://www.cubadebate.cu/noticias/2017/08/09/autoridades-explican-nuevas-medidas-respecto-a-cooperativas-no-agropecuarias/#.WYsLxneGPj0
Exodus of Cuban Professionals?
According to the Associated Press, “Graduates of Cuba’s renowned free universities have been mostly left out of private jobs in their fields, because the state sees the privatization of professions like architecture and accounting as unacceptable in Cuba’s socialist system. The government has argued that individuals shouldn’t profit, feeding inequality, from society’s costly investment in free education. Professionals looking for better lives have emigrated by the tens of thousands or turned to unskilled but higher-paying work like waiting tables or driving taxis.”
Three young Cuban architects are hoping that they will be exceptions to this trend. All natives of Pinar del Rio at the western end of the island and graduates of the prestigious architecture program at Jose Antonio Echeverria University in Havana, they took state jobs in architecture and design before founding Agora, a boutique design firm, in their home town in 2014. Agora isn’t officially an architecture firm — the government doesn’t yet permit that, instead the three men are individually registered as self-employed decorators and artisans.
They anticipated that they would work largely for private citizens renovating their homes as bed-and-breakfasts in Pinar and the town of Vinales, a major tourist attraction 30 miles away. Soon after they started Agora, however, they entered and won a competition by their provincial government to redesign a Pinar median strip, a simple winding flagstone path that is now bracketed by green grass, pine trees and curving blue cement benches.
Now these three men hope that the government will recognize the contributions that they and others like them can make to Cuba and provide legal protections for such firms.
Irina Garcia, who graduated from the University of Havana’s law school in 2009 and left a job with the state prosecutor’s office to be a lawyer for a group that works with the Catholic Church to train entrepreneurs, said the state mistakenly was focusing on limiting private-sector work instead of making government jobs more appealing.
Pavel Vidal, a Cuban economist who emigrated to work as a professer at Javeriana University in Cali, Colombia, said he believes private sector employment grew 7 percent in 2016 even as the national economy shrank 0.9 percent, throwing the country into recession. But, he said, Cuba’s reluctance to legalize skilled private labor is driving a brain drain to other countries and pushes professionals from low-paying state job to higher-paying unskilled labor. “It doesn’t make sense to invest billions in education and then send its graduates to a sector of low added-value.”
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Assoc. Press, Cuba Struggling to Keep Professionals from Leaving, N.Y. Times (Aug. 16, 2017), https://www.nytimes.com/aponline/2017/08/16/world/americas/ap-cb-cuba-keeping-professionals.html
Rodriguez (Assoc. Press), Cuba struggling to keep professionals from leaving, Miami Herald (Aug. 16, 2017), http://www.miamiherald.com/entertainment/celebrities/article167442982.html (includes photos of the three men and the median in Pinar)