Cuba Renews Appliance Sales Amid Economic Changes


AP:

Cuba is renewing sales of energy-sucking appliances, reversing a pillar of Fidel Castro’s “energy revolution” in response to popular demand and to support the growing ranks of independent workers under an economic overhaul launched by President Raul Castro.

The measure covers appliances such as air conditioners, electric stoves, coffee makers, grills and sandwich makers. The appliances will begin going on sale gradually as they become available, according to a notice published in the Official Gazette and dated Friday.

It said the action was aimed at “supplying products to the population and independent workers.”

Appliance sales have been largely restricted since 2003, and they were key targets of former President Fidel Castro’s “energy revolution.”

That initiative sought to replace aging, inefficient kitchen appliances that taxed Cuba’s shaky electrical grid and contributed to frequent summer blackouts that lasted for hours.

The former leader regularly appeared on television to push conservation measures and flog less-power-hungry rice steamers and pressure cookers. Government workers went door to door in many neighborhoods to replace incandescent light bulbs with more-efficient alternatives. Officials also overhauled the antiquated electrical grid.

Blackouts are not as frequent or severe today, though officials still urge conservation. While most of Cuba’s electricity is generated by crude oil, there have been efforts to increase renewable sources like solar.

Raul Castro launched an economic overhaul last year that aims to rescue Cuba’s perennially weak economy by including a taste of the private sector, though Castro stresses that the government is “updating” its socialist model, not embracing capitalism.

The state is planning to slash expenses, subsidies and payroll, while allowing more islanders to open their own businesses and hire employees. Many of the independent business licenses are for restaurants, cafeterias and home-based snack bars, where something like a sandwich maker or an electric coffee pot could come in handy.

Friday’s note in the Gazette specifically mentions the needs of the small business owners, and says the appliances will be available on the domestic retail market.

www.particularcuba.com

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Home sales would be a sea change for Cuba


Miami Herald: Selling an apartment in front of the Habana Libre, excellent conditionThe seller, Marita, is advertising this Havana apartment on revolico.com, an online marketplace that’s kind of like a Cuban Craigslist. She’s asking the equivalent of around $57,600 in convertible Cuban pesos.

Of course, at the moment real estate sales in Cuba are strictly illegal and have been for the past five decades. But that may change soon. As part of sweeping economic reforms unveiled at the Communist Party Congress in April, Cuba plans to allow the buying and selling of homes and cars.

A July 1 article in Granma, the Communist Party newspaper, painted the broad brush strokes of the real estate reform: such transactions would be permitted with little government interference beyond getting notary approval, making payment through a state bank and paying an as yet unspecified tax.

The real estate reform has yet to become law, but it’s possible it could when the National Assembly, Cuba’s parliament, convenes Monday for a three-day meeting at Havana’s Convention Palace. In any case, the government has said a new law will take effect by the end of the year.

This potential sea change has set off a flurry of activity on both sides of the Florida Straits. For years, Cuban-Americans have been funneling money to relatives to fix up tired properties or for under-the-table payments to “buy’’ a home or sweeten a permuta, or swap, the accepted form of acquiring Cuban real estate.

Now with the possibility of a true real estate market developing, people have been dusting off property titles or trying to find them and have been busy fixing up properties they anticipate putting on the market, said Antonio R. Zamora, a Miami lawyer who specializes in foreign investment.

“A lot of money is coming from Miami — some of it’s speculative,’’ said Zamora, who visited Cuba recently.

Some exiles say they have made under-the-table payments to purchase beach homes or other properties from family or friends with the understanding that some day they will own the homes outright. But they have no official paperwork to acknowledge such transactions.

In these cases, it should be buyer beware, said George Harper, a Miami attorney who left Cuba when he was 17. “That’s all well and good but any deal is subject to what the local laws are.’’

The expected law does not allow foreign ownership. The guidelines announced in Granma said that foreigners and Cubans living abroad can’t own property unless they are permanent residents of Cuba. Cubans will be allowed to own only one home and they can inherit a dwelling, even if the relatives of the deceased don’t live in the home, according to Granma.

Because of the influx of exile money, Zamora said it would be more realistic to “get the name of the foreign relative into the title.”

Phil Peters, a vice president at the Lexington Institute and a veteran Cuba watcher, said that the exile money flowing into Cuba may have an impact beyond investment.

“Now with the door open for Cuban-Americans to visit, to support their families, to invest and to perhaps indirectly buy real estate, it becomes not just an exile community but also an immigrant community with a foot in both places,’’ he said.

One thing that isn’t expected to be a topic of debate in Cuba is exile claims on homes.

Over time, Zamora said, families who occupied the homes of Cubans who left the island have essentially become the owners of the dwellings.

“There’s always been a difference of opinion on residential properties that were taken but now I think most people, with some notable exceptions, have given up on the notion of getting those properties back,’’ said Harper.

He’s been back to Cuba twice since he left as a teenager and visited the home where his family once lived. He found several families in the residence. “From a humanitarian point of view, it would be impractical to kick those people out,’’ he said.

Also expected to change once a property law is enacted is the messy permuta system. Currently, homes that are exchanged are supposed to be of “equal value.’’ But matching up the homes on offer with what people want is often a tricky business.

Sometimes two apartments are exchanged for a large home in a prime area and multiple parties are involved in so-called triangular deals. Although no money is supposed to change hands, there are sometimes under-the-table payments to even up deals or bribes paid to officials to let dubious swaps go through.

Under the new system, someone wanting to downsize from a four-bedroom home with a garage, for example, to a smaller apartment will probably just be able to do the swap and pay the difference in value, said Zamora. “The reform should make the permuta much easier and out in the open,’’ he said.

Besides cleaning up illicit housing transactions, the government has said the reform is designed to help with Cuba’s serious housing shortage.

But Harper said, “The fact that people can buy and sell homes won’t really impact the housing supply. If Cuba had money to build new housing, I think they would have done it by now.’’

Cuba, however, may be counting on real estate owners to expand and improve properties. In its effort to move more people off the state payroll into self-employment, the government has said that renting rooms, gardens and even swimming pools can be considered an alternative to state employment. Permitting home ownership may also encourage home building.

“If people are allowed to sell homes, this is a huge step forward in terms of property rights,’’ said Peters. “It makes assets liquid, a home can be used as collateral.’’

Because of the possibility of freeing up capital when a home is sold, other entrepreneurial activity may be unleashed, Peters said. “This really would be a sign of the Cuban government being serious about letting go of controls,’’ he said.

A Cuban housing market? Govt is lifting a taboo


HAVANA (AP) — Each morning before the sun rises too high, Cubans gather at a shaded corner in central Havana, mingling as though at a cocktail party. The icebreaker is always the same: “What are you offering?”

This is Cuba’s informal real-estate bazaar, where a chronic housing shortage brings everyone from newlyweds to retirees together to strike deals that often involve thousands of dollars in under-the-table payments. They’re breaking not just the law but communist doctrine by trading and profiting in property, and now their government is about to get in on the action.

President Raul Castro has pledged to legalize the purchase and sale of homes by the end of the year, bringing this informal market out of the shadows as part of an economic reform package under which Cuba is already letting islanders go into business for themselves in 178 designated activities, as restaurateurs, wedding planners, plumbers, carpenters.

An aboveboard housing market promises multiple benefits for the cash-strapped island: It would help ease a housing crunch, stimulate construction employment and generate badly needed tax revenue. It would attack corruption by officials who accept bribes to sign off on illicit deals, and give people options to seek peaceful resolutions to black-market disputes that occasionally erupt into violence.

It’s also likely to suck up more hard currency from Cubans abroad who can be counted on to send their families cash to buy, expand and remodel homes, especially since President Barack Obama relaxed the 50-year-old economic embargo to allow unlimited remittances by Cuban-Americans.

“All these things are tied in,” said Sergio Diaz-Briquets, a U.S.-based demography expert. “They want expatriate Cubans to contribute money to the Cuban state, and this is one big incentive for people who want to help their families.”

But few changes are likely to be as complex and hard to implement as real estate reform.

From the earliest days of the revolution, Fidel Castro railed against exploitative, absentee landlords, and enacted a reform that gave property ownership to whoever lived in a home, regardless of who held title. Most who have left the island forfeited their properties to the state. The government, Castro preached, would provide everything a citizen could need: employment, food, education and housing, all for little or no money at all.

But the housing stock, already run down before the revolution, continued to deteriorate, the U.S. embargo choked off the supply of building materials, and new construction failed to keep pace with demand.

Meanwhile, cyclones and salty air can start eating through metal bars in a year and have decimated rural shanties and older quarters of Havana. Empty lots dot the capital’s seaside Malecon boulevard as once-stately mansions regularly collapse following heavy rains. Many of those still standing are merely facades or are propped up by scaffolding and wooden beams.

While they wait for the new law to be enacted and the specifics to be announced, Cubans have few legal options. They can enroll in cooperative construction projects, build on existing properties or join the long waiting list for government housing. Or they can head to the open-air real-estate market in hopes of negotiating a “permuta,” which officially is a swap of equal-value properties but in reality usually involves illegal cash on the side.

Many enlist the services of “runners” like Manuel Valdez, an 83-year-old ex-military man who has been brokering the transactions for four decades. At the downtown bazaar, Valdez holds court on a concrete bench, keeping track of real estate offers in a tattered notebook and on posterboard that he tapes to a tree.

Gesturing at the people milling around hoping to strike a deal, Valdez said housing is such a problem that legalization was inevitable: “This is a situation that the state had to get off its back one way or another.”

There’s also www.revolico.com, a kind of Cuban Craigslist that has real estate ads asking tens of thousands of dollars. Site operators claim the real estate section alone gets 30,000 unique visits a month even though islanders must find a way around the Web censors.

Some Cubans enter into sham marriages to make deed transfers easier. Others move into homes ostensibly to care for an elderly person living there. They register at the address and, after enough time passes, can legally claim the “inherited” title. Nowhere is there an official record of the money changing hands.

A Havana professional with a job that pays far more than most salaries on the island told of swapping his tiny apartment about 10 years ago for a bigger, historic home whose bathroom and roof were falling apart, and whose occupants, a 60-something couple, could no longer manage.

The couple took over his recently remodeled and repainted flat. They also received $1,200 in cash — something that will no longer be illegal once Castro’s housing reform takes effect.

The professional reflected on the anomaly of people with money but no home to buy, and people with bigger homes than they need, and the risk they all run trying to change their circumstances. Some Cubans have had their homes confiscated when their illegal sales came to light.

“It would be so helpful if you could do that legally,” he said, speaking on condition of anonymity because of the transaction’s illicit nature.

“It is such a big problem, the housing situation,” said Diaz-Briquets, who estimated in a recent paper that the country of 11 million people was short 1.6 million units of “adequate housing” in 2010. “They have been trying for years to solve it, and it’s finally dawned on them that the state is never going to do it.”

The Cuban government puts the shortfall at closer to 500,000 homes. Still, the result is legions of bickering divorcees trapped under the same roof; newlyweds forced to bunk up with siblings, cousins, uncles, and aunts; and elderly people unable to repair their crumbling homes.

Juana Ines Delgado’s plight is typical. She shares her tiny studio in Old Havana with her grown son, married daughter and 4-year-old granddaughter, while her son-in-law spends nights at his aunt’s place down the street.

“It’s a marriage that’s not the way a marriage should be, you know what I mean?” said Delgado, 61. “My situation is what it is. … But I hope my children don’t have to end their days here.”

Cuba experts caution that the new measure is just a first step toward solving the housing crisis, and note that it deliberately stops short of creating a freewheeling, capitalist real estate market.

Raul Castro has said home ownership will be limited to one per individual to avoid accumulation of wealth. The government has announced plans to extend credit for purchasing building materials, but specifics are still unknown and no mechanism is in place for home loans. Duties will be levied on both sellers and buyers, and if taxes are too steep it could provide enough incentive to underreport transactions.

Only islanders and permanent residents will be able to buy property, but there’s at least a potential for Cubans to front for foreigners keen on owning a waterfront art-deco masterpiece.

“You start down a path of property accumulation and who knows where that’s going to lead,” says Rafael Romeu, a U.S.-based expert on the Cuban economy.

www.cubaluxuryrent.com

Cuba cuts bulk prices to support private workers


HAVANA (AP) — Cuba is lowering bulk prices for goods ranging from marmalade and mayonnaise to tools and CDs to support newly independent workers and small businesses that lack a wholesale market, official news media said Monday.

The measure addresses a central complaint by many operators of private restaurants, cafeterias and other operations authorized under a wide-ranging economic overhaul launched last year by President Raul Castro.

Under an order from the Ministry of Finance and Pricing, a 1.3-gallon (5-liter) container of cooking oil that used to sell for $11.50 can be had for $9.80, labor newspaper Trabajadores reported. A 7-pound (3-kilogram) container of tomato pure formerly worth $8.70 now goes for $7.00.

“The measure also includes tools and pneumatic and electrical equipment, all with the goal of enhancing sales to independent workers,” the article said.

Other products like tobacco, alcoholic beverages and bottled water are not covered by the order. Trabajadores did not say when it took effect.

Although the initiative targets private businesses, the same prices will apply for anyone making bulk purchases.

Cuba began allowing increased private enterprise at the end of 2010, issuing licenses for people to launch small businesses and hire employees independently of the state.

The government, which currently employs 80 percent of the labor force, plans massive layoffs although those plans have been put on hold.

Many entrepreneurs have complained about a lack of access to a wholesale market or to credit, as well as high tax rates. Cuba has said it plans to extend loans, but details have not been released.

The government fixes prices, and while some products are heavily subsidized and discounted, many other imported goods go for more than double their value elsewhere.

www.cubaluxuryrent.com

Marketplaces dot Havana for new private vendors


HAVANA (AP) — Marketplaces full of vendors hawking everything from food to religious items may be common sights across Latin America, but they’re springing up for the first time in the Cuban capital as the island’s Communist government opens its tightly controlled economy to some private-sector activity.

Nearly 140 official points of sale in abandoned structures, parking lots and crumbling old buildings have been established in recent months and are accommodating about 2,600 independent vendors, the Communist Party newspaper Granma reported Friday. The number of markets “should grow steadily,” Luis Carlos Gongora, vice president of Havana’s Provincial Administration Council, told the newspaper.

Cuba only recently began licensing a broad spectrum of private sector activity, giving rise to a nascent and growing class of self-employed people.

Former health care worker Andres Lamberto Diaz, who took out a license for to sell clothes, shoes and jewelry, said he pays 40 pesos ($1.60) a day — on top of his taxes and license fees — for the right to set up shop on a lot where few traces remain of what was an old mansion in busy Central Havana.

“Things are organized here, and the flow of people along the avenue is good,” Diaz said. “Nevertheless, I think it’s a lot to pay each day for the space.” Official salaries average about $20 a month in Cuba.

Faustino Agramonte, the state administrator of the market, said it houses 21 independent merchants, and officials are looking at possibly expanding into a little-used parking lot on the site of another collapsed building.

Buckets, spatulas, cheese graters and soup pots hung from one stand Friday. Colorful clothing was on offer at another, strung up underneath a canvas tarp to protect it from the intense tropical sun. The market launched in early 2010.

Under the new rules governing independent businesses, many people have set up shop in their own houses. Not all Cubans, however, live in spaces appropriate for home businesses, and many are taking to the streets. The government has accomodated the trend by creating authorized vending zones where sellers can gather.

Officials are considering adjustments to the tax structure for independent operators, Granma said.

Mired in deep financial woes and hamstrung by inefficiency in state-run businesses, Cuba announced last August that it would be implementing major changes in hopes of rescuing its troubled economy. From the end of 2010 through May, more than 200,000 Cubans became licensed independent workers.

President Raul Castro insists that the new private-sector activity is meant to “update” Cuba’s socialist model, not replace it with the free market.

www.cubaluxuryrent.com

Tax system to get complete overhaul


The Cuban government will completely overhaul the country’s tax system, Vladimir Requeiro, deputy chief of the Oficina Nacional de Administración Tributaria (ONAT), announced on state TV.

The overhaul of the tax law of 1994 is occurring as the number of self-employed Cubans is skyrocketing. As of early May, more than 300,000 Cubans were licensed to operate small businesses, up from 130,000 in October last year, when the government began issuing self-employment licenses. Officials announced in May that all private businesses will be allowed to hire; however, a 313-point document outlining economic changes outlines progressive employment taxes that increase with the number of employees of a company.

According to the “Guidelines” document, the new businesses must pay 25 to 50 percent taxes on profits, 10 percent sales or service tax, 25 percent employment tax, and 25 percent social security contribution.

Requeiro said that tax rates will be according to income bracket, and that agricultural producers benefit from a special tax system to stimulate food production.

Most Cubans have never had to pay taxes. Even so, Cuban economists expect the government to collect hundreds of millions of dollars of tax revenues this year from private businesses.

Soruce: Cubastandard.com

Cuba’s cigar industry – Smoked out


Economist:

ONE of the reforms approved at this month’s Congress of Cuba’s ruling Communist Party was a change in the treatment of the country’s 3,000 or so state-owned enterprises. Their management will enjoy more autonomy, but they will be subjected to thorough audits. That follows a trickle of corruption scandals. The latest involves Habanos, the state cigar monopoly.

For over a decade Manuel García, Habanos’s commercial vice-president, was the public face of the Cuban cigar industry, living a jet-set life that most Cubans can only dream of. But this year Mr García was not there to greet visitors at the Havana cigar festival. Since August 2010 he has been in jail, accused of masterminding graft on a grand scale.

The cigar industry was nationalised shortly after the 1959 revolution. But it was only in the late 1980s that Cuba took control of distribution, informing foreign retailers that it would supply only one distributor per region, in return for a 50% stake in the business.

That did not prevent the small-scale peddling of black-market cigars on the streets of Havana. But in the past decade the system has faced a bigger threat from dozens of online cigar retailers operating mainly from Switzerland and the Caribbean. Many operated legitimately, but some offered improbably low prices.

Cuban investigators believe they were able to do so because Mr García and ten of his staff, who also face trial, sold genuine cigars at a fraction of their normal price to black-market distributors in the Caribbean in return for bribes. Up to 45m cigars may have been sold this way. Since handmade habanos fetch up to £40 ($65) each in shops in the St James’s district of London, the loss was considerable.

The fraud also hurt Imperial Tobacco, a British company which inherited a 50% stake in Habanos when it bought Altadis, a Franco-Spanish firm, in 2008. Imperial has made no comment on the affair. But like the government, it will hope that the new management team at Habanos preserves the lucrative monopoly in Cuba’s most famous product.

http://www.cubaluxuryrent.com