Sunday, August 19, 2012

Cubans eager to become small-business owners

POSTED ON Saturday, August 18, 2012 AT 10:48PM

Cubans eager to become small-business owners
Yakima Herald-Republic

HAVANA, Cuba — Two blocks off the Malecón, the 4-mile esplanade that
separates this city from the sea, a small but tidy room is ready and
waiting. An air-conditioning unit — its switch in the off position —
sits idly inside a wall painted the color of the Caribbean. New,
pink-flowered linens cover the bed.

But, so far, no guests have slept here.

With no Internet in their home — and no email account or website — the
mother-daughter duo that wants to rent this room in central Havana isn't
quite sure how to go about attracting customers. Both, each named
Lourdes, are eager to take advantage of recently loosened laws that make
it easier for individuals to rent out rooms — or go into a variety of
other businesses for themselves — in a country where private enterprise
has largely been prohibited for more than a half century.

"We are in a transition," says Rafael Hernández, a political scientist
and editor of Témas, an official Cuban government magazine covering
ideology, culture and society. "The old model is not what it was, and
the new model is not there yet."

Economic reforms were announced nearly two years ago. Today, according
to the Ministry of Labor and Social Security, there are some 371,200
self-employed workers on this island country of about 11.3 million. The
number is projected to grow to more than 600,000 by the end of the year.

And it doesn't stop there. While the government now employs about 85
percent of the workforce, its aim is to increase the private sector to
as much as half of the country's economy within the next five years.

"There's an agenda for change," says economist Jorge Mario Sánchez, a
professor at the University of Havana's Center for the Study of the
Cuban Economy.

The mother-daughter duo (Lourdes I and Lourdes II), who asked that their
last names not be used because they still fear the power of the
Communist government, exemplify the changes that are transforming
economic and social life in Cuba. They have been preparing to rent their
room since last fall, about a year after the tightly-controlled central
government declared intentions to relax restrictions and open a wider
portion of the economy to low-level capitalism. Sanchez said the
changes are deliberately slow.

"We have to build a new Cuban economy step-by-step, correcting what we
are doing every day," Sánchez says. "You have a government accustomed to
controlling everything, everyone all the time. ... It is a very
distorted environment."

"Cuentapropistas," or the self-employed, are now permitted to work in
some 181 different job categories. Unlike the small-scale — and largely
reversed — changes made in the 1990s by former president Fidel Castro,
these recent measures are meant to be long-lasting and help pull the
country out of a stubborn economic crisis.

The situation is aggravated by the highly centralized government,
fragmented infrastructure and dual-currency system, among other
problems. Cuba, for example, has the lowest Internet-penetration rate in
the Western Hemisphere, making it difficult for newly minted
cuentapropistas — like the Lourdeses — to get the word out about their

But, if guests start staying in their room-for-rent, the mother-daughter
team will make double in one night what each used to take home in a
month, or about $30 compared to the $15 Lourdes I made as a lab
technician, or what Lourdes II made working as a notario, or legal
official. Similarly, owners of private, in-home restaurants, called
paladares, are able to charge more per meal than what they used to earn.

"This is the opportunity all of us Cubans want, the opportunity to move
forward on our own," Yeney Balmaceda Pérez, 23, says in Spanish through
a translator.

She runs Cuba Italia, a paladar in Old Havana, with her mom, Beralis
Pérez Guibet, 42. They serve a mix of Cuban and Italian meals — from
pizza to ropa vieja, a shredded beef dish called "old clothes." Since
opening 10 months ago, there have been nights all six tables — with four
chairs each — have been full. And there have been others with two
diners, or — worse — none at all.

"It's been very hard at times. There's a lot of competition," Guibet
says in Spanish through a translator. "All businesses come with a risk.
It could be good. It could be bad. It's too early."

While she's waiting to see whether her paladar will succeed, more
economic changes are likely on the way. They're a response, Hernández
says, to the global downturn in which Cuba's revenues from nickel,
tobacco, sugar and rum have dropped.

These days, people must pay for items that were once heavily subsidized
by the government, stretching their pesos even further than they did
before. Rations have been cut. Thousands are opting to venture out on
their own to see if they can make more as cuentapropistas under the
relaxed economic policies.

Were they going to revolt if change did not come? Not likely, according
to economic analysts. Living in Cuba is more about day-to-day survival.
They're probably more likely to become small business owners than stage
a revolt.

These new policies are, Hernández says, "very different from the
policies of Fidel."

Shortly after the 1959 revolution, Fidel Castro — who turns 86 on Aug.
13 — began expropriating major industries, including those owned by
foreigners, as well as nationalizing businesses and paying all workers
nearly the same wage. He also provided free education and health care,
and heavily subsidized other commodities, like utilities and food.

When Fidel Castro stepped aside in 2006 for health reasons, his younger
brother took over. The leadership change became permanent in 2008, and
President Raúl Castro, 81, began cutting back on subsidies as well as
pushing for more — albeit limited — private enterprise.

His aim is to cut a million government jobs — laying off more than about
20 percent of Cuba's 5.2 million state workers — by 2015 in the hope
that they will become self-employed and increase tax revenues.

Whether or not their room gets rented, the two Lourdeses must pay the
monthly tax: 150 CUCs, or the equivalent of five nights' lodging.

"We're worried. We're insecure, and we're worried," 50-year-old Lourdes
I, the mother, says in Spanish through a translator. While she's happy
for the opportunity, she also says she feels like "I have a noose around
my neck."

Like other aspiring cuentapropistas, she and her daughter, 26, also
illustrate the growing disparity between Cuba's two currencies: the peso
and the convertible peso, or CUC. Cubans need both to survive in their
society, which is characterized by a tiered system of consumption. A CUC
is worth the same as an American dollar. But there are 24 pesos to a
CUC. And the average Cuban salary, about $20 a month, is paid in pesos.

State-owned stores selling food and merchandise in pesos are sparsely
stocked. State-owned stores and private businesses that use CUCs offer
consumers more variety and higher quality — from fresher fruits and
vegetables to better home furnishings as well as luxury items. Many
goods and foodstuffs are only available in CUCs, introduced in 1994 as a
way to ease an earlier financial crisis created by the dissolution of
the Soviet Union and loss of Cuba's main patron.

Today, foreign visitors typically deal exclusively in CUCs. Besides
remittances, the easiest ways for Cubans to get the more valuable
currency is by working in tourism or jobs that involve direct contact
with tourists.

"If you work in a hotel, you are collecting tips. If you collect tips,
you can make more than a university professor," Hernández says.

Experience and education, skills and seniority don't factor in. Almost
everyone — doctors, lawyers, professors, sanitary workers, museum guides
— makes the same salary, except for those who work in tourism or for
foreign firms.

"It is not logical. It doesn't make sense that a private worker should
have a salary so high compared to a professional (who works for the
state), and that is just something we all know is true," says Lourdes I.
"That is a change that has not happened because the economy is so bad."

She says she would like to see the peso become as valuable as the CUC,
or — better — see Cuba change to a single-currency system. She would
also like to see salaries determined by experience and talent, not tourism.

"Tourism saved Cuba," she says. But, "before tourism existed, you could
live on 200 pesos," or about $8, a month. That's no longer the case.

While she lauds Cuba's free education and health care, subsidized
housing, utilities and basic rations, she worries about buying food.
State food subsidies are shrinking to essentials like rice, beans and
powdered milk.

Still, she says, it's not as bad as the so-called "Special Period,"
following the collapse of the Soviet Union. From 1991 to 1993, Cuba's
economy declined 35 percent. It was "really a nightmare," Hernández
says. "The certainty about the future was over."

Fidel Castro enacted emergency measures, including opening tourism and
creating the CUC. Most of the measures were scaled back once Cuba found
a new patron in Venezuela, which has been providing the island with
cheap oil since 2001. However, tourism and the CUC remain. In fact,
tourism is now Cuba's greatest source of revenue. But, says Sánchez,
"The value of the peso is going down and down."

That only widens the disparity between the value of the CUC and peso,
which is greatest — according to Hernández — among Cuba's blacks, young
people and women.

Before the "Special Period," he says, the difference in Cubans' real
income varied slightly, from approximately 100 to 450 pesos, or $4 to
$19. Today, he says, the difference has grown from 100 to 1,200 or 1,600
or more pesos, or $4 to $50 or $66, or more than three times the average
salary. Real income includes remittances as well as full time or second
jobs in the emerging private sector of which the two Lourdeses want to
be a part.

Both mother and daughter favor the relaxed restrictions and would like
to see more. Still, Lourdes II, a recent law school graduate, was
skeptical of her mother's plan to rent a room.

"I was afraid of the tax and the cost of remodeling," she says in
Spanish through a translator. Plus, it's her bedroom that was converted
for the new business.

• Adriana Janovich traveled to Cuba in June to study politics,
economics and a country in transition through the Annenberg School for
Communication and Journalism at the University of Southern California.
She can be reached at 509-577-7653 or

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