Monday, December 19, 2011

Cuban entrepreneurs reshaping island’s stagnant revolution


Cuban entrepreneurs reshaping island's stagnant revolution
sonia verma
HAVANA— From Thursday's Globe and Mail
Published Wednesday, Oct. 12, 2011 8:42PM EDT
Last updated Sunday, Dec. 18, 2011 11:45PM EST

Barbershops, beauty salons, restaurants and car washes have sprung up
across Cuba in the year since the Communist Party allowed citizens to
open small, private businesses in an effort to save the country from ruin.

The government says more than 157,000 people have qualified for business
permits and are currently self-employed. This new generation of Cuban
entrepreneurs is quietly reshaping the island's stagnant revolution in a
way that was inconceivable when Fidel Castro was in control. The
economic changes brought about by his brother Raul, however, are proving
slow to take hold.

Cubans wait to order their meals at Tio Tito in Havana, Cuba Sept. 27,
2011. Taking its colour scheme from American fast food giant McDonald's
the small restaurant is one of many that have opened up since recent
economic reforms in Cuba have allowed for some private enterprise to exist.

Many are being implemented by young Cubans with virtually no memory of
life before communism. Some new entrepreneurs are struggling to
understand how to pay small-business taxes or navigate the country's
labyrinthine bureaucracy. With virtually no access to bank loans or
credit, most are relying on family living abroad to float their new

Still, Cuba is buzzing with new energy as people attempt, for the first
time in their lives, to make money outside of the underground economy.
Business owners are experimenting with novel concepts, such as
advertising and open competition. It's unclear, however, how far the
Cuban authorities will allow the reforms to go – whether small business
owners will be permitted to accumulate vast amounts of wealth, for
example, or build empires.

At the moment, however, these new entrepreneurs seem content enough to
turn a profit they can officially pocket.


His idea for a restaurant might ring a bell: a fast-food joint with a
red and yellow colour scheme where, for a couple of bucks, clients get a
meal deal.

Mr. Pena, 39, spent a decade of his life as a poorly paid information
officer in Cuba's tourism department before he decided to open Tio
Tito's in January. He siphoned his savings, hawked his personal gym
equipment and sold his mobile phone to finance the construction of a
modest grill in his front yard, borrowing refrigerators and Tupperware
from friends.

"Some of my friends thought I was crazy. Others encouraged me," recalled
Mr. Pena, his voice partially drowned out by the song Stand By Me
blasting from a super woofer on a shelf, next to the mustard.

With no restaurant experience to speak of, he relied on what he gleaned
as a customer from previous trips abroad, to Spain, Chile and Portugal.
An American friend offered to design and build a website, which is
hosted in Miami. He hired six employees, including his brother, Tito,
who works as head chef, paying them the equivalent of $25 a month, plus
a commission.

His inspired colour scheme? "If it works for McDonald's it can work for
me," he reasoned.

The family has yet to recover their initial investment of $3,000.
Business is brisk, however, and Mr. Pena is hopeful that soon he will
turn a profit.

"I want Tio Tito franchises all over Havana," he said.

He prefers the life of an entrepreneur to his previous existence as a

"You're obtaining profit from your own work. If you work more you will
earn more. The disadvantage is that this is much more work than being an
information officer."


He's led a double life since officially entering Cuba's work force:
During the day, he worked construction for a government ministry; by
night he worked as an underground mechanic, fixing cars for friends and
relatives at an unofficial workshop.

Between his two gigs, he earned about $15 a month.

His fortunes, however, changed in December when he quit his day job and
applied for a business licence to open his own garage. Since officially
opening shop, his income has tripled.

"I still have the same clients, but now I can do the work in the open,"
Mr. Rafael, 31, said standing in the shade outside his seaside apartment
in Havana's quiet Miramar neighbourhood.

His wife, Rachel, is an economist in the provincial Communist Party
office. Under Cuba's new economic plan, her job could be in jeopardy as
the country seeks to drastically trim its public service by half a
million workers over five years.

With his own thriving business for them to fall back on, Mr. Rafael
isn't particularly worried. His biggest problem at the moment is finding
a garage to rent – or even buy – when Cuba changes the law to allow
people to purchase private property in the coming months.

For now he works on the street, which is strewn with cables and car parts.

Today, he is trying to coax an aging Peugeot to start. Five more cars
await service with troubles ranging from a trunk failing to open to a
broken headlight.

A team of government inspectors has paid a visit to demand proof he has
paid his last instalment of taxes.

Mr. Rafael produced a bank receipt showing he paid the $40, but the
inspectors said the government has not received it, and ordered him to
pay it again.

"The system is not yet perfect," he says, "but at least we are moving in
the right direction."


When she worked as a cook in a state-run cafeteria, her kitchen was
fully stocked when she arrived at work each morning. Now, as her own
boss, she scrambles to find basic supplies in the shops.

"This is very hard," the mother of two teenagers said, standing behind
the counter of La Jugada Perfecta, her baseball-themed restaurant
dedicated to the Industriales, Cuba's wildly popular baseball team that
was founded 50 years ago in the wake of the revolution. The restaurant
name translates as A Perfect Play.

"We are not used to this and we have to go out and find everything we
need. It's not like working for the state," she added.

Sometimes she comes up short. Unable to source proper kitchen
appliances, she appealed to relatives in Miami who sent a brand-name
blender and two bright orange coolers from Home Depot.

Ms. Alvarez's husband, an accountant, helped set up the books, but the
restaurant is women-owned and women-run.

Most days, clients line up all the way to the sidewalk to order an Extra
Base (hamburger with fries) or a Strike (bacon burger). The prices are
roughly twice that of a state-run cafeteria.

"I don't mind paying for quality," said a 26-year-old economist named
Alfredo Garcia, sipping on a strawberry milkshake.

Ms. Alvarez used to earn the equivalent of $80 dollars a month. Now she
pays $16 tax every month, as well as about $4 in social security for
each of her two employees, both cousins.

She is ploughing all her profits back into the restaurant, and hopes to
one day pay back the relatives in Miami who floated her.

"Up to this point I believe we made the right choice," Ms. Alvarez said.

"This is a new thing for us, but as time goes by I hope we are going to
be well," she said.


She's a life-long bureaucrat who currently presides as director of the
office for work and social services in Havana's Plaza Revolucion.

She harbours no ambition to start her own business, but anyone in the
neighbourhood who does must first receive the blessing of her staff,
which issues all permits for the district.

Since the new law came into effect, about 40 people file through this
crumbling building each day, searching for door No. 6, where a handful
of state workers surrounded by broken filing cabinets sort through
applications. The process takes about eight minutes.

Applicants submit their identity cards with two pictures and a written
application. Five days later, they come back to pick up their permits.
The process has been simplified from a few months ago, when applications
had to be reviewed by the neighbourhood Committee to Protect The
Revolution before permits could be issued.

On this day, Nara Creas, a 63-year-old who constructs costumes and
pinatas for children's birthday parties, has come to renew her license.
Nelson Cruz, a 26-year-old taxi driver, is also applying for a permit,
to turn his illegal taxi business into something official.

"Our department rarely takes five days to complete the application
process. We can do it in one or two days," Ms. Legra said with pride.
Her office has processed roughly 6,000 applications since last October,
when the decree came into effect.

Permit in hand, entrepreneurs then proceed to the local tax office for
an assessment of how much they will pay per month.

After that, they can officially open for business.

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