Thursday, January 28, 2016

Cuba’s Private Sector - The Dangerous Road Ahead

Cuba's Private Sector: The Dangerous Road Ahead
January 27, 2016
Osmel Ramírez Alvarez

HAVANA TIMES — Until the end of the 1980s, the words "business person"
were akin to an obscenity in Cuba. Working for the State was the norm
and even farmers who hadn't handed over their lands to a cooperative
were suspect. The communist ethos had imposed its rules on the population.

Everything changed in the 90s, when the collapse of the Soviet Union and
socialist bloc left the country in worse shape than breaking ties with
the United States had. Begrudgingly, Fidel Castro authorized
self-employment as a non-State means of economic activity.

It was a simple formula that envisaged individual labor and not the
hiring of others (or the hiring of others under highly exceptional
circumstances). Hence the singular name given Cuba's private sector
("self-employment"), which suggests a primitive economy more than a
capitalist one.

It was the government's hope that the socialist State economy would
recover and sweep this sector off the map in a matter of years. Within
this context, the self-employed faced many limitations and applicants
weren't granted licenses for many years. The idea was to take away such
licenses, not encourage the growth of the sector.

When turning back no longer was an option
In 2006, Raul Castro inherited a totally bankrupt country. Fidel
Castro's lectures at Havana's Convention Center, where he publicly ate
Cuban chocolate bars and the household appliances of the so-called
"energy revolution" were put on display, proved very popular, but those
measures doubled Cuba's foreign debt and brought no significant
investments in the productive sector.

We made it to the list of untrustworthy countries in terms of credit. It
was then that the new president had the courage – or had no choice but –
to make some changes, including authorizing the granting of new licenses
for private initiative. The range of authorized private sector
activities was broadened and now allows for the hiring of personnel,
albeit in a limited manner.

Before these liberalizing measures, all such work was illegal and a
carpenter, a street vendor or trucker was officially a delinquent hiding
from the law. Today, they hold licenses to operate, but, in many ways,
they are still treated like "law-abiding criminals."

In his speeches, Raul Castro has asked that the State apparatus respect
the newly-established forms of production and contacts between State and
private entities are now permitted. There are arguments to claim,
however, that the Cuban State disdains the private sector and merely
tolerates it as a necessary evil. Worse still, it forces members of this
sector to engage in criminal activities, to lie and to do most things
"under the table."

Two examples suffice to get a global sense of the situation
The self-employed do not have a wholesale market where they can purchase
supplies at fair prices. Under the law, they can turn only to Cuba's
retail market, which has very high prices and proves unreliable. As
their customers are mostly impoverished Cubans, the self-employed are
forced to turn to the black market, where products are stolen from State
workplaces. They have no other choice.

In addition, taxes are steep and stifling. The government taxes small
businesses as if they were transnational companies. If you're an honest
taxpayer, you simply have to shut down your business.

To get a clearer picture of the situation, if the owner of a pizzeria
were to legally purchase the flour, cheese and tomato sauce, they would
be forced to sell their small individual size pizzas at 25 pesos, a
prohibitive price for customers that earn less than that in 8 hours of
work. They can only offer affordable prices by working with stolen
supplies. Imagine how much flour is stolen from the Cuban State, what
with the thousands of pizzerias operating every day (and the fact this
is the most popular junk food in Cuba).

The same holds for trucks that transport goods and passengers, or with
cabs. There are thousands of them on the road and they all operate with
stolen fuel. Who would be able to afford the fare if these people were
to legally purchase the extremely expensive diesel fuel at State gas

Setting a precedent
The most disquieting aspect of these practices isn't the fact resources
are being stolen from the State, it is the negative precedent it sets
and the nefarious consequences this could have in the future. If a child
is born in a dysfunctional home, they have less chances of becoming a
responsible adult. If Cuba's private sector is required to evade taxes
and to commit crimes since infancy, what can we hope for in the future?

Today, we're dealing with sacks of flour, tanks of diesel and the
occasional white lie, but, as we rough it one day at a time, the
country's moral and ethical values are becoming deformed. One wonders
whether our future business class will have any qualms about evading
taxes or laundering money.

The State is concerned about the growing strength of the private sector
because it threatens its economic supremacy, but they have let go of the
reins and can't stop the process now. Some radicals are accusing the
State of causing the cost of living to go up. However, those of us who
have a bit more perspective know this is not exactly the case.

The private sector has to grow and consolidate itself as a determining
force in the development we need. We need only be concerned with its
birth defects and the potential consequences this can have in the future.

Source: Cuba's Private Sector: The Dangerous Road Ahead - Havana -

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