CUBA-ECONOMY: Now Open for Small Business

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Jun 22 1995 (IPS) - The Cuban state’s strict control over the provision of virtually all services to the population continues to wither away.

Recent legalisation authorizing a chain of private restaurants and cafeterias which has been operating illegally for the past two years is seen as another significant development in this regard.

The Ministry of Labour and Social Security and the Ministry of Finance and Prices, now include in their list of self-employed workers “producers and sellers of food through gastronomic services”.

“This means the birth of Cuban small private enterprise with national capital,” commented one member of the Centre for Research on the Cuban Economy, which favours the extension of private or cooperative property to a wider range of economic sectors.

Although these restaurants are limited to 12 tables, the high taxes imposed on them and the restriction of the business to the family, Cuban economists see this measure as symptomatic of the government’s decision to introduce significant changes in its economic policy.

Cuba has opened its doors to foreign capital since the beginning of this decade, as one of the essential means of dealing with the present crisis, but it is estimated that the economy will not take off unless profound domestic reforms are introduced.

A study by economists Alfonso Casanova and Juan Triana indicates that a macroeconomic redesigning of the economy would have to include a new employment policy, banking reform, reorganisation of the domestic market, more flexibility of regulations governing foreign investments and a search for solutions to the foreign debt problem.

This economic analysis, which starts from the performance of the Cuban economy in 1994, emphasises the need for “a redimensioning of the state sector” which would diversify the forms of organisation and property.

The number of so-called “Paladares” (very small, cheap private restaurants run by families), a name taken from the Brazilian television series “Everything Goes”, greatly increased here in the Cuban capital during 1993, and have spread to other regions of the country, despite their declared illegality.

Rooms in houses, patios and private gardens have been cooking and serving food to a reduced number of clients as an alternative to the national restaurant chain, which with rare exceptions has ceased being an option for Cubans as the economic crisis of the past five years continues to advance.

Though the clientele of the ‘paladares’ is restricted to persons the family can trust and people with hard currency, they have become a reasonable alternative compared to the state eating houses, which offer the same services, but at much higher prices.

“I will have to pay 400 pesos (400 dollars at official exchange rates) or 300 dollars in taxes, but I prefer this to living continually in suspense, anxiously waiting for the moment when someone might come in and close me down,” commented Liana Ramos, who for more than a year has been managing a little restaurant in Havana.

But for her, as for many others, legality brings new problems. Young and dissatisfied with her job, she decided to quit and open “The Paladar” with two friends.

“It’s difficult to stay completely within the law,” commented Ramos, who, being a university graduate, is excluded from the range of persons authorised in Cuba to be self-employed.

The legalising of the ‘paladares’ has coincided with a broadening of the law to include 19 new occupations, including toy repairer, hairdresser for pets, translator of official documents, driving instructor and chiropodist.

However, the new measures have not satisfied the expectations of a good part of the Cubans, who expected the extension of authorisation to be self-employed to include the large number of university graduates.

According to the May 12 issue of “Bohemia” magazine, after this refusal by the government, there is now the possibility of “a large exodus of highly qualified personnel towards jobs in craft industries, which are currently favoured by the economic crisis and hence better paid”.

Here in Cuba anyone is considered as belonging to the professional class whose monthly salary exceeds 400 pesos, while a similar figure or even much higher can be earned in one week by shoemaking, making domestic appliances or in the food industry.

A Gallup Poll conducted at the end of last year revealed that a significant part of the Cubans are supporters of legalising small private businesses.

Until 1993 the right to exercise certain occupations on a self- employed basis was restricted, and limited to very specific activities like hairdressing or plumbing.

Broadened as a way to satisfy the necessities of the population in the worst year of the economic crisis, self-employed jobs may now be converted into a valid alternative, given the announced rationalisation of employment.

Around half a million persons could find themselves out of a job in the coming months, as part of the government’s plan to end under-employment and make Cuban enterprise into an efficient institution in accord with the contemporary parameters of competitivity.

According to Raimundo Diaz, the economic analyst of “Bohemia”, more room will have to be made for service cooperatives, producers associations, family businesses and small or medium-sized enterprises”.

His proposal comes as part of a process of company restructuring which could lead to dissolving large companies which are no longer viable economically, and the founding of others much smaller, in which the state could participate through taxes, or as investor or associate.

For Arturo Guzman, director of the National Institute of Economic Research, the restructuring of state companies must be accompanied by a large-scale programme of territorial employment and decentralisation.

Contrary to the centralised planning prevailing until recently, Guzman declares that his solution must be tackled through “a complete opening to self-employed occupations, cooperatives and the privatisation of small commerce and gastronomy on the municipal level”.