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Cuba's entrepreneurs hope their time has come

Under Fidel Castro, private business has been illegal or extremely limited.

By DAVID ADAMS
Published January 6, 2007

ADVERTISEMENT [Times photo: Douglas R. Clifford] A woman commutes by bicycle taxi during the summer in Havana. Drivers are allowed to pick up Cubans only and are banned from some tourist areas. [Times photo: David Adams] Jose Berros says he lives better now fixing tires than he did when he was managing factories for the state.

HAVANA - Jose Berros is 67, and his mechanic's overall is covered in grease.

In an ideal world, he would be retired, but in Cuba he can't afford to. He makes too much money fixing punctures by the side of the road.

Berros is immensely proud of his job and considers himself one of the fortunate few in Cuba who hold small private business licenses. "I was one of the first to get one," he said, while dipping an inner tube into a bathtub of dirty water to check for a leak.

The licenses these days are like gold dust in a country where private enterprise has been frowned upon, if not entirely outlawed, for the past 47 years. But in the wake of Fidel Castro's prolonged illness, many Cubans now express a fervent hope - mixed with cautious optimism - that the country's new leadership may adopt a less stringent line.

Berros got his license 13 years ago, when Cuba began handing them out in an effort to combat the huge economic impact of the collapse of the Soviet Union.

The Cuban economy, which was heavily geared to barter commerce with the Soviet bloc in eastern Europe, virtually imploded as the country entered into a regime of severe austerity, dubbed the "Special Period."

To help revive the economy, a number of trades - 117 in all - were opened to private enterprise, including small restaurants and room rentals operated out of private homes, as well as plumbers, barbers, electricians and bicycle taxis.

At the time, the legalization of small enterprise - as well as making the U.S. dollar legal tender - was seen as a sign that Cuba was willing to shift its highly centralized socialist economy in a more market-based direction. Before then, the only area of limited private enterprise had been in farming.

In 1996 the number of licensed trades was expanded to 158. By that year, almost 210,000 Cubans, so-called cuentapropistas, held self-employment licenses, according to Cuban government figures.

The measures bore fruit. Cuba's economy slowly began to bounce back, recording economic growth ever since.

But, once it became clear that Cuba had survived the "Special Period," the experiment with market mechanisms began to lose favor. Castro's famous disdain for capitalism reasserted itself.

"The ideological flexibility that allowed communists in China and Vietnam to countenance ever-larger doses of capitalism was not to be found in the Central Committee of the Communist Party of Cuba," wrote Philip Peters, vice president of the Lexington Institute and author of a report last year on Cuba's private sector, titled "Cuba's Small Entrepreneurs: Down But Not Out."

Instead of market reforms, Cuba opted for closer commercial ties with China, Iran and most importantly oil-rich Venezuela.

The issuing of licenses slowed to a trickle. Some forms of private employment were withdrawn altogether. The U.S. dollar ceased to be legal tender.

By 2004, official figures show, the number of licenses had fallen below 150,000, accounting for less than 3 percent of the Cuban labor force, according to Peters.

Taxes and regulations

Though vastly reduced in number, the cuentapropistas remain a visible presence on the streets. Many complain of high taxes and suffocating regulations.

Restaurants, for example, are only allowed to seat a maximum of 12 people and cannot serve beef or shellfish to avoid competition with state-run restaurants. Monthly taxes are fixed for both restaurants and home rentals, no matter how good or bad business may be, and can run into hundreds of dollars.

Drivers of bicitaxis, or bicycle taxis, are allowed to pick up only Cubans and are banned from certain tourist areas.

All kinds of illegal black market activity now exist, from pirated cable TV - offering U.S. stations including the Discovery Channel in Spanish and Playboy - to illegal home improvements and room rentals.

"I don't want to be Donald Trump or Rockefeller," said one illegally employed mechanic, who previously worked as a geo-thermal technician for the state. "I just want to be allowed to do something with my life and to be able to provide for my children."

Self-employment incomes are far higher, as much as 2,000 pesos a month for a bicycle repair business. Income disparities are such that Peters calculates that in less than a day a cuentapropista can make what a state worker might earn in several weeks.

"The disparity in purchasing power among different lines of work explains why many engage in moonlighting, small-scale pilfering of state resources, or other black market activity," he wrote.

Grateful as he is for a license, Berros complained that he could be a lot more productive and efficient if he didn't have to depend on the state to obtain materials, including valves, inner tubes and spare tires. He runs his machinery off a compressor from a battered 1950s Westinghouse refrigerator.

But, he said, Cuba's state socialism preferred it that way. "We cannot be rich or have much money because that's not well-regarded here, so we have to live humbly," he said.

Berros nearly left Cuba with his brother in 1954 but fell in love instead and decided to stay. He spent 30 years managing state factories all over the country before retiring.

As soon as the self-employment law was enacted he leapt at private enterprise. "After all those years I had nothing. Nowhere to sit in my house. Total austerity," he said, during a break for coffee and a cigarette under a shade tree. "Now I live 20 times better than before."

A new era?

Many Cubans wonder if the passing of Fidel Castro could usher in a new era of reform under his brother, Defense Minister Raul Castro. Many remember it was Raul who led the process of business modernization in the '90s, as well as private farmers markets.

While Cuban officials stress the continuity of Cuba's socialist revolution, as well as Fidel Castro's continued influence - albeit physically limited - in decisionmaking, Raul Castro has already put his stamp on the conduct of government business.

Speaking to National Assembly members in late December, Raul Castro said there was "no excuse" for many of the problems the island faced, highlighting poor public transport and food supply problems.

Whether that translates into more private enterprise, no one can be sure.

Hardliners fear economic opening could dangerously open the door to social and political pressure, much as in the Soviet Union. On the other hand, the Chinese model provides a good example of market mechanisms in harmony with one-party control.

Like many Cubans, Berros is hopeful for change. "Men like Fidel only come around once. Raul is a very different character. He's less political," he said.

David Adams can be contacted at dadams@sptimes.com or (305) 361-6393.

[Last modified January 6, 2007, 00:16:55]