Thursday, May 26, 2016

Bartenders Are Winning Cuba's Embrace of Capitalism, and Doctors Are Losing

Bartenders Are Winning Cuba's Embrace of Capitalism, and Doctors Are Losing
By Henry Grabar

Cuban state employees are abandoning their jobs for high-paying,
private-sector gigs—in Cuba. As bartenders, bellhops, and taxi drivers.

The growth of the Cuban private sector over the past two decades has
created some serious imbalances between skills and pay: A bartender with
some generous foreign customers could make more in tips in a weekend
than a doctor, each of whom is employed by the Cuban government, does in
a month.

A new reform could exacerbate that issue. Cuba will soon legalize small-
and medium-sized private businesses, according to an economic
development plan approved by the Cuban Communist Party Congress last
month. The 32-page document hit newsstands in Havana on Tuesday,
according to the Associated Press, and offers the first glimpse of the
reforms approved at April's five-year CCP meeting. It comes on the heels
of President Obama's historic trip to Cuba in March, and the relaxing of
the U.S. embargo.

The CCP hasn't released many details, but the plans have been the works
for some time, says Richard Feinberg, a professor at the University of
California-San Diego and the author of Open for Business: Building the
New Cuban Economy. It will soon be possible for Cuba's self-employed,
known as cuentapropistas, to incorporate their operations, easing the
way toward working with Cuban banks, foreign investors, and state-owned
companies. Small businesses will be the vanguard of the market economy
in Cuba, while bigger industries remain under state control.

Some private enterprise—including small restaurants, guesthouses,
construction trades, and taxis—is already legal in Cuba; a good deal
more occurs on the margins of the law. About half a million Cubans have
self-employment licenses; as many as a million Cubans may have some
illegal or informal involvement in the private sector.

"Up until now, the whole private sector was under something of a
cloud—something that was tolerated, a way to sop up some unemployment,"
Feinberg says. The CCP document, in contrast to your classic Fidelista
pronunciations, affirms the positive contributions of private property.

In some cases, anyway. Authorized private enterprise in Cuba currently
includes the sale of food and drink, the production and sale of
handcrafts, transportation, room rentals, construction, and some
services. But private professional activities—anything that requires a
college degree, basically—aren't legal yet. Engineers and lawyers, for
example, aren't yet allowed to have their own practices. If they do have
a side gig, it's by operating without (or with an inaccurate) license
and with the aide of mulas, who smuggle in supplies like printer ink
from abroad. It's not uncommon for a university professor to do tutoring
in the evenings, or a state-employed architect to have his or her own
clients outside the office.

The 200-plus legal means of self-employment in Cuba are themselves
severely restricted. Rules on property ownership would prevent the owner
of a successful guesthouse, or casa particular, from buying the house
next door, for example. The owners of paladares, Havana's chic private
restaurants, make their own menus and set their own prices—but the state
limits their size to 50 seats. When I visited Cuba last summer, one
entrepreneur, who runs a hip private cafe amid the state-run tourist
restaurants of Old Havana, told me he wasn't even allowed to put up a
sign outside.

Still, tourism is where the money is. Most emerging opportunities for
new business are directly or indirectly related to tourism, says Jorge
Duany, the director of the Cuban Research Institute at Florida
International University. Because of Cuba's dual currency system—state
wages are paid in Cuban pesos (CUP), while private businesses can take
in the vastly more valuable convertible pesos (CUC)—the country has seen
a flood of professionals into the private sector, and into tourism in
particular. "People who have higher degrees are less remunerated than
people with less education, who are able to participate in this growing
private business sector," Duany says.

So the reforms will do two things: further liberalize the country's
existing, tourist-focused private sector, which is limited to a list of
jobs proscribed by the government. That will help Cuba prepare to meet
the growing influx of American tourists. (Already, there aren't enough
tables at Havana's private restaurants to go around.) But it will also
increase the flow of professionally trained Cubans into better-paying,
nonprofessional employment.

Is it a waste of a good socialized education to have economists giving
tours and driving cabs? Probably.

On the other hand, there's only so much prestige in a white-collar job.
"Baking cakes can be fun," Feinberg says. "Maybe more fun than being a
chemical engineer."

And it pays better too.

Henry Grabar is a staff writer for Slate's Moneybox.

Source: Cuba reforms business laws, but not for professionals -

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