Customers are entertained as they dine inside the newly licensed restaurant "El Bedouino" in Havana April 1, 2012. |
When Ojacy Curbello and her
husband opened a restaurant at their home in Havana in late December, not a
single customer showed up.
It was a disheartening debut
for Bollywood, the first Indian restaurant in the Cuban capital. Curbello
worried that their dream of cashing in on recent reforms in this Communist-run
country would collapse.
People eat at a popular low-end, privately licensed restaurant, or "paladar," in Havana. |
“It has been amazing how
quickly it has taken off,” said Curbello, still looking slightly stunned. She
sat with her husband, Cedric Fernandez, a Londoner of Sri Lankan descent, in
the main dining area, hung with prints of Indian figures.
Bollywood’s story is an
example of how life is slowly changing in Cuba since President Raul Castro
launched a string of limited economic reforms in 2010.
After his ailing older brother, Fidel, stepped down as president four years ago, Raul Castro began to encourage self-employment. He initiated changes in sectors previously restricted to the state or which had operated illegally in Cuba’s vast black market.
He has given Cubans the right,
with some restrictions, to buy and sell homes and cars for the first time since
the early days of the 1959 revolution, led by Fidel.
Would-be farmers can lease
land from the government. New small entrepreneurs are being allowed to enter
into contracts with state companies and local governments.
As a result, more Cubans are
setting up their own businesses as the cash-strapped government moves to cut
spending and boost tax revenue.
The self-employed, known on
the Caribbean island as “cuenta propistas,” literally “on their own account,”
are selling food, services and assorted goods out of their homes or off
sidewalk tables. Private restaurants are opening, and the cries of street
vendors, common before the revolution, again echo through neighborhoods.
A privately licensed shoe repairman works along a street in Havana. |
Havana says more than 371,000
Cubans are self-employed, up from 157,000 before President Castro announced his
private-enterprise measures in September 2010. Economy Minister Adel Yzquierdo
Rodriguez has said as many as 240,000 more nonstate jobs will be added in 2012.
More such change may be in the
works. In April, a senior Communist Party official, Estaban Lazo Hernandez,
said in a speech that Cuba will move nearly 50 percent of the country’s
economic activity to the “nonstate” sector in the coming five years, up from 5
percent now.
This is not capitalism for
capitalism’s sake, however – and political reform is not part of the program.
The goal is to keep the
Communist Party in power by nurturing a larger private sector and a smaller,
more efficient state bureaucracy. Cuba says it is developing its own model, but
think China 30 years ago, on a far more modest scale.
A woman with a private license to sell goods sets up her stand in front of her home in Havana. |
Whether it will work is one of
the great unknowns about Cuba’s future.
Interviews with a wide range of cuenta propistas found a mixed record of success and failure, with most doing well enough to keep going but only moderately improving their lives.
Interviews with a wide range of cuenta propistas found a mixed record of success and failure, with most doing well enough to keep going but only moderately improving their lives.
A few said they are succeeding
hugely. Others have already quit or are thinking about it. Roughly 25% of the
new businesses have failed, local economists say.
Cuba needs the budding private
sector to thrive because in the future the government will no longer offer what
essentially has been guaranteed employment.
The state employs about 85% of
its 5.2 million workers. The plan is to cut a million jobs by 2015, with the
hope that many of those laid off will go to work for themselves.
CONSERVING POWER
Leather craftsman Arle Toro tries to sell a hat to a pedestrian along a street in Havana Unseen in the past, this vendor is an example of how life is changing in Cuba. |
Some observers believe Castro
is opening a Pandora’s box with his reforms. Allowing a little capitalism could
lead to a desire for more and perhaps pose a threat to the future of communism
he envisions. Others think that if Cubans become less dependent on the
government, they will be less accepting of its social and political control.
For that reason, said Marifeli
Perez-Stable, a Cuban-American professor of sociology at Florida International
University in Miami, Castro is proceeding cautiously.
“Raul is going slowly because
he knows what he faces,” she said. “They are being conservative because they
want to conserve power.”
Cubans seem generally pleased
that economic change is afoot. Some like the idea they can strike out on their
own, with an opportunity to earn more than the paltry state wages. The average
Cuban salary rose slightly in 2011 to the equivalent of US$19 a month.
While most Cubans say change
is needed, they also worry about losing their social safety net if there is too
big a dose of capitalism. They get low-cost or free housing, a heavily subsidized
monthly food ration, and free health care and education.
Cuba, which nationalized all
businesses in the years after the revolution, allowed a brief blush of private
enterprise in the mid-1990s following the collapse of Havana’s patron, the
Soviet Union. When that grim time — known in Cuba as the “special period” –
began to ease, the government put the brakes on the low-level capitalism that
had bloomed and used onerous regulations to run many cuenta propistas out of
business.
This time, government leaders
have said the reforms are not temporary.
A woman sells homemade sweets to pedestrians along a street in Havana. |
“We are not applying patches
or improvising, but looking for permanent solutions to old problems,”
81-year-old Vice President Jose Ramon Machado Ventura said in a speech in
central Ciego de Avila last July.
“It’s deeper, the scope is
much bigger, and the objective is larger,” says Philip Peters, a Cuba expert at
the Lexington Institute in Virginia. “In the 1990s the goal was to make a few
adjustments to the model to get their heads back above water. … This time they
are making changes to the model.”
Cuba’s new entrepreneurs face
challenges common everywhere, as well as some peculiar to a country where
private enterprise has been largely prohibited for a half century. Many lack
startup capital and experience, and their customers have limited purchasing
power.
A vice minister in Cuba’s
Labor Ministry recently said the self-employed are heavily concentrated in the
making and selling of food, transporting cargo and passengers, and working as
contract laborers.
Two-thirds were not working
when they started their businesses, he said. A state television report said 16
percent are pensioners.
Former agriculture worker
Oscar Oquendo is 78 years old. A tall man with wispy gray hair and a withered
face, he walks along a crumbling central Havana street selling pastries he
makes at home.
Like many of his generation, he says he is loyal to the Castros and communism, but needs money to supplement his monthly pension, equivalent to $10.
Like many of his generation, he says he is loyal to the Castros and communism, but needs money to supplement his monthly pension, equivalent to $10.
4 CENTS APIECE
Oquendo, 78, sells his
pastries for one Cuban peso, or 4 cents, apiece. Without a word, he pulls a
pastry from his bag, holds it up to a potential customer’s startled face, looks
him in the eye and waits for a response.
It works – he says he is
earning $33 a month.
“I’m very happy with that. I’m
helping myself and my country,” Oquendo said as he prepared to confront another
passerby.
Success has been more elusive
for Rafael Barrios, who sells plumbing items from a stand on 10 de Octubre
Avenue, where dust swirls past century-old buildings.
At 42, he wonders if he should
have left his job at a state warehouse. The insecurity and the long hours
needed to earn a little more money are wearing on him.
“At least there I didn’t have
to work very hard and I got paid every month,” he grumbles from behind a table
he set up in between abandoned buildings.
But with the government
cutting jobs, there is no turning back for him. He is scouting new locations.
Leather goods salesman Arle
Toro Perez, 58, faced the same dilemma as Barrios, glumly sitting on a folding
chair in a gravel-strewn driveway with few customers to buy the few belts, key
chains and wallets he hung from a stand.
A man offers chairs for sale along a street in Havana. |
He was making about three
times more than the $13 a month he earned at the state job he had quit, but
still just scraping by. Taxes were high and business slower than he hoped. Some
days he sold nothing at all.
He later moved to a new
location across from the Havana Libre hotel, which opened in 1958 as the Havana
Hilton, and things picked up. There were more tourists and more sales. Today he
has a much bigger inventory and a smile on his face.
“Some days I’m making twice as
much as I did at the old location. I can take better care of my family,” he
said.
Some of the new entrepreneurs
are stretching the limits set out by the government and doing well.
Alex, who spoke on condition
that his last name not be used, was an architect before he discovered the
profitability of “pirateria.” Today he sells counterfeit DVDs from a dingy,
makeshift storefront in central Havana.
A man sells nuts to pedestrians along a street in Havana. |
He moves between shoppers
examining his movie selection, heavy on the latest Hollywood features. One
customer looks over a copy of “Killer Elite,” starring Robert De Niro and Clive
Owen, then hands it back.
Alex has had the business for
years, but before the reforms the store was illegal, though not the copyright
violations. In Cuba, copyright laws are ignored and state television and movie
theaters routinely show pirated movies.
Now, his feel for capitalism
unleashed, Alex is diversifying, expanding and, by Cuban standards, making a
bundle of money – about $80 a day.
“I have two other stands like
this one, and with the money I’ve accumulated I’m getting into the food
business,” he said. “I’ve got a big house with four bedrooms and I’ve got two
cars.”
TOURISM TROVE
A car with a "for sale" sign is seen on a street in Havana. |
In late 2010, shortly after
Raul Castro announced the opening for the self-employed, the restaurant where
Alberto worked closed. They painted their home bright orange and turned it into
a guest house, renting rooms to tourists.
One of the first guests
praised it on the travel website TripAdvisor.com, and it has been mostly full
ever since. The couple began with two rooms, expanded to four and now want to
add another and perhaps a pool. A chef now cooks for guests.
“We are more comfortable,”
Alberto says, declining to divulge numbers. He praised the reforms for giving
Cubans a chance to do better. “The people have many ideas.”
As a group, the splashiest new
businesses are home-grown restaurants, or “paladares” as they are known in
Cuba, which have exploded in number in the past year. (“Paladar” means “palate”
in English and was the name given to a chain of restaurants opened by a
small-time vendor in a popular Brazilian soap opera.)
Expatriates and visitors used
to complain that there were too few good places to eat in Havana. Now they have
trouble keeping track of all the new ones.
An Internet list showed 93
paladares in Havana districts where foreign residents and tourists are
centered. Some date back to the 1990s, but the latest have popped up so quickly
they are not yet cited.
The eastern province of
Santiago de Cuba had four such eateries before the reforms; now there are 104.
In the same period, the total number of self-employed in the province jumped
from 8,000 to 25,800.
Many of the new paladares are
upscale, with names like Le Chansonnier, El Partenon and Cafe Laurent. They are
usually in nicely renovated homes, with fancy decor and hefty prices. Filet
mignon with pepper sauce, grilled lobster, roast duck, and fish with white wine
replace the usual Cuban fare of rice, beans and pork.
Some owners complain that
business has not lived up to expectations and taxes are high. The self-employed
must pay 10 percent sales tax every month, a monthly license fee that varies
according to profession, and a yearly income tax that also varies but is 50%
for paladares.
The government says it keeps
taxes high because it needs money and doesn’t want its reforms to lead to wide
class differences, with some people accumulating great wealth.
RAMPANT REAL ESTATE SALES
But the housing market, which the
government has opened, could be a major source of capital for Cubans, with the
potential to boost living standards and infuse money into the economy. Cuba has
billions of dollars worth of real estate that could be turned into liquid
assets, and prices are already rising.
“Home ownership is very high
in Cuba, about 85-90%,” says Antonio Zamora, a Cuban-American lawyer who visits
Cuba regularly and has studied its investment laws.
Cubans who stayed after the
revolution were allowed to keep their homes. Over the years, through laws
designed to do away with the for-profit real estate market, renters were also
able to earn title to the places where they live. Selling homes was not
permitted, and instead a home-exchange system was introduced.
“The net value of Cubans and
the country as a whole is going to go through the roof,” Zamora said.
Interest in buying and selling
homes is running high. A recent check showed 11,025 listings on revolico.com,
an Internet marketplace for Cubans, with prices ranging from a few thousand
dollars for cramped apartments to several hundred thousand for spacious homes
built before the revolution.
On Paseo del Prado, a main
Havana avenue, unlicensed sales agents say the market for less expensive
properties in better neighborhoods has been so brisk that stock is running low.
The Cuban government says the country needs another 600,000 homes. Foreigners
are still largely barred from buying Cuban property.
Retired government worker Jose
Leon said he turned down an offer equal to $100,000 from a European buyer with
a Cuban wife for his 1950s three-bedroom apartment in Havana’s once-exclusive
Miramar neighborhood. He did not want to pay the 10 percent fee the agents
charge and thinks prices will go up.
Many believe that as long as
keeping communism afloat is Castro’s goal, he will not go far enough to make
much of a difference to their lives. Others think he will, but slowly. Castro
has said his reforms will take five years to implement because the leadership
wants to avoid making mistakes.
Skeptics point out that the
government still tells people how many homes they can own and how many chairs
they can have in their restaurants. It has set out 181 jobs in which
self-employment is allowed – but everyone must be licensed for their jobs.
Alex, the seller of pirated
DVDs, nonetheless argues that the changes have put Cuba on an irreversible
path. “Three years ago we didn’t even think about having cell phones, now we
have cell phones,” he says. “For years we couldn’t sell houses, now we can sell
houses. For years, we couldn’t buy a car, now we can buy a car.
“And now we can have a business. They are small, they are micro-businesses. But it’s yours, and it depends on your ability, your effort, your tenacity.”
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