Amid Doubts, Cubans Pursue Private Sector Dreams


Postchronicle.com: For some, it is the pursuit of a dream, for most, a necessity. Whatever the motive, a steady stream of Cubans are taking the government up on its offer to let them work for themselves instead of the state.

At municipal labor offices around the country, Cubans are filing in with plans that include everything from opening small restaurants to renting out rooms as they seek one of 250,000 self-employment licenses to be issued in Cuba’s biggest reform in years.

About 30,000 of the permits have been handed out, state-run press reported, and another 16,000 are pending in the first few weeks of President Raul Castro’s plan to improve the Communist-led island’s economy by expanding the private sector and cutting government’s role.

The licenses are key to Castro’s gamble that he can slash 1 million jobs from state payrolls, absorb the unemployed through private businesses and keep Cuba on the socialist straight-and-narrow for years to come.

The government, which controls most of the economy and employs 85 percent of Cuba’s workforce, has outlined 178 jobs or sectors where self-employment will be permitted. It will retain a heavy dose of control through regulations and stiff taxes of 25 percent to 50 percent of net income.

The reform is criticized by some experts as being too limited, but others view it as a reasonable first step toward greater change in one of the world’s last Communist countries.

Clutching a raft of government forms, license applicants wait in line for an opportunity they say is welcome and, despite worries about their chances for success, worth a try.

“I have always wanted to have my own business,” said Ismael Hidalgo, who plans to leave his construction job and do what he always wanted to do — raise animals for sale.

“I think the measures they are taking are very good. Let each one live from what they are capable of doing. Let them live from their own sweat,” he said, standing outside a dimly lit government office in Central Havana.

Maria Caridad Sulton, who will open a small cafeteria, said: “I hope that everything goes better. I think that workers will be able to see the fruit of their labor and a little more.”

SMALL EXPECTATIONS

Like most of the applicants interviewed, Caridad said she does not expect to make a lot of money, only enough to supplement a meager pension.

Cubans receive various social benefits, but they earn an average salary equivalent to about $20 a month and insist that they need more to live.

“Necessity, necessity and more necessity. If I didn’t have the necessity, I wouldn’t do this,” said Caridad’s husband, Pedro Sarracent Belon, a retired weight lifting coach. “This is a plan for surviving.”

He and others share a concern that taxes and regulation may be too big a burden for the new entrepreneurs, particularly in a country where taxes have been almost nonexistent under the Communist government installed after the 1959 revolution.

“I was born in this revolutionary process and I don’t know what taxes are,” said Sarracent, 56. “I’m doing this test, but I think there are going to be a lot of failures.”

Yudenia Artiles, who plans to sells snacks in the street, was equally skeptical because of taxes, but also because she believes Cuba’s economic problems will get worse with the planned government layoffs.

“There’s no money,” she said. “Now the war is going to be in the street, a lot of competition between vendors in the street, and you’re going to always see problems.”

According to government figures, 20 percent of the licenses granted so far have gone to people who want to sell food.

Like many other Cubans, Artiles has been plying her trade illegally to make ends meet, so a license will allow her to do it without threat of arrest or worse.

She pulled back her shirt sleeve to show a bruised shoulder that she blamed on a whack from a baton-wielding cop.

“The police mistreat you a lot. I have a ‘bastonazo’ from a policeman for illegally selling sweets,” she said.

There are other worries as well.

Many people fear that the government will open the door to private enterprise, then close it as it did during the economic crisis of the 1990s.

While that experience has discouraged some would-be entrepreneurs, it helped Emilio Perez decide to seize the moment and seek a license to rent out a room in his house and to sell food.

“You have to grab this chance. It’s now or never,” he said. “This is Cuba, what will happen tomorrow, I don’t know, but he who doesn’t take the risk neither wins nor loses.”

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Over 81,000 Cubans Apply for Self-Employment Licenses


avana, Nov. 27 (Prensa Latina) About 81,500 Cubans have applied for self-employment licenses in less than a month; one-fifth of them are linked to the making and sale of food, local newspapers reported on Saturday.

The figure represents the licenses that have been requested since the announcement of the regulations for extending self-employment on October 25, until November 19.

According to the report, 73,800 applications were made at the Municipal Job Offices, 6,100 were made for passenger transportation, and 1,500 for house rental.

Authorities have already granted 29,000 licenses, while another 16,265 are being processed.

From the total, 43 percent of the granted licenses belong to retired people or people receiving some type of pension, and the 12 percent are persons hired by self-employed people.

Havana City and Matanzas, in western Cuba, and Villa Clara, in the centre, are the leading provinces in self-employment applications.

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Cuba to import $130 million of equipment, materials in 2011 for private businesses


HAVANA (AP) – Cuba’s government will spend about $130 million next year to import raw materials and equipment for independent businesses following its decision to allow some kinds of self-employment, officials said Friday.

In a bid to increase the efficiency of its cash-strapped economy, the communist government announced that it would lay off a half-million state workers and in October authorized 178 kinds of self-employment ranging from translator and teacher to shoe or watch repair.

Most of the newly permitted forms of self-employment require tools, equipment and infrastructure, Maria Victoria Coombs, director of employment at the Ministry of Labor and Social Security, told Communist Party newspaper Granma.

“The country will ensure, to the extent that it is possible, the supply of raw materials and supplies needed for self-employment,” Granma reported Friday.

The granting of licenses in nine of the permitted forms of self-employment had been suspended because of the impossibility of legally obtaining the needed equipment and fears that those carrying out the jobs were using material stolen from state centers.

Enrique Ramos, commerce director of the Ministry of the Economy and Planning, said the state will supply independent businesses with the raw materials through established retail networks, since economic conditions don’t allow it to create in the near future a wholesale market with special prices for the self-employed.

Cubans often complain that state-run retail stores have elevated prices. A wholesale market could give small businesses access to goods at lower prices.

Ramos said “for 2011 it is projected that imported goods and materials worth $130 million, of which food represents $36 million, will be incorporated into the existing supply.”

Earlier this year, President Raul Castro began announcing measures to reform the island’s socialist economic model to allow some forms of private enterprise without giving up the state’s firm control of the economy. Laid-off workers could apply for licenses to run small businesses.

Castro said Cuba’s labor laws and extensive subsidies had created a culture of inefficiency that fed an economic crisis.

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Cuba self-employed to pay taxes up to 50 percent


HAVANA (Reuters) – Cuba has set income tax rates at 25 to 50 percent for its soon to be expanded private sector, with the biggest earners paying the most taxes, according to official decrees published on Monday.

The rates will range from nothing for those making 5,000 pesos — equivalent to $225 — or less a year to 50 percent for those in the highest bracket, which is more than 50,000 pesos, or $2,252.

The new tax rates came out in the Official Gazette as the government prepares to cut 500,000 workers from state payrolls and issue 250,000 new licenses for self-employment to create new jobs in President Raul Castro’s biggest economic reform so far.

Those making more than 5,000 pesos will have to pay taxes, starting at a rate of 25 percent and rising from there as income increases.

The cash-strapped government is looking to the self-employed to increase tax revenues to help pay for expensive social programs such as free health care and education.

Last week the government, in a story in Communist Party newspaper Granma, warned that tax scofflaws “will feel the weight of the law imposed upon them by those mandated to enforce it, the National Tax Office.”

The gazette, where the government publishes in thick legalese its new laws and decrees, is not usually a hot seller, but on Monday in Havana people could be seen lining up at newsstands to buy copies, then quickly leafing through them on the street.

INTEREST IN STARTING BUSINESSES

Many Cubans have expressed interest in opening their own businesses, with the hope of earning more than the country’s $20 a month average salary.

Currently, about 85 percent of the country’s labor force of more than 5 million works for the state. Castro, who took over from his ailing older brother Fidel Castro in 2008, wants to trim that number and cut costs.

As of the end of 2009, there were only 143,000 licensed self-employed, although thousands more worked for themselves illegally.

Reaction on the street to the thick decrees, which came out in two separate editions of the gazette, was mixed.

Antonio Soria, a shoemaker working for the state, said he intends to start his own business and views it as a chance to help both himself and the state.

“As a private shoemaker I can retire and have financial support for the future,” he said.

“This is a way to contribute to the state’s income. Remember that health care and education are free and now that we have the chance to have small businesses, we have to help the country.”

Transport worker Ibrahim Fernandez said he supports the private sector expansion, but worried taxes will be too high to encourage small businesses.

“From what I’ve been able to understand, the topic of the licenses has a defect, which is that they are overcharging taxes. Very expensive, the taxes,” he said.

In last week’s Granma story, the government outlined a new tax code it said was friendlier to small businesses because while it requires new taxes, it also allows bigger tax deductions.

For the first time since Cuba nationalized small businesses in 1968, the self-employed will be able to legally hire workers.

The regulations issued on Monday said they would have to pay a labor tax amounting to 25 percent of the average salary for their work.

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Cuba gives details on new taxes for selfemployed


HAVANA (AP) — Cuba has laid out details of a sweeping tax system for the newly self-employed — a crucial step in the socialist state’s plan to convert hundreds of thousands of state workers into self-employed businesspeople.The tax code described in a two-page spread in the Communist Party newspaper Granma will have many Cubans paying more than a third of their income to the state, while those who create businesses and hire their own employees will pay more.

Cuba announced last month that it was laying off half a million state workers — nearly 10 percent of the island’s work force — while opening up more avenues for self employment.

At times, the article reads like a children’s lesson for a population with little experience at entrepreneurship — and almost none with the concept of taxes. It also offers a detailed peek at a mix of levies that would be complicated even for an accountant.

Throughout, there is an attempt to soften the blow by explaining that no government can provide services without revenue.

“Perhaps because Cubans are used to receiving medical care without taking a penny out of our pocket, or studying for free at any educational center we want, few stop to ask where the money the state uses for this comes from,” the article reads.

Those selling goods and services will pay a 10 percent income tax monthly, as well as another 25 percent into a social security account, from which they will eventually draw a pension.

Those who hire employees also will also have to pay a 25 percent payroll tax. The article says taxes will rise for successful businesses with many employees, but does not give details.

“The tax has a regulatory character in order to avoid a concentration of wealth or the indiscriminate use of the labor force,” the article says. “The more people hired, the higher the tax burden.”

Anyone making more than 50,000 Cuban pesos ($2,400) a year will have to open a bank account and keep detailed books — perhaps creating a market for the private accountants who will be allowed under the economic reforms. Those who earn less need only maintain a list of income and costs. Most Cuban state workers make about $20 a month.

The article says people in some forms of self-employment will be exempt from the 10 percent tax and instead will pay a fixed amount each month, regardless of what they make. It does not say which jobs will be eligible for this approach, however, nor say how much tax workers will pay. These workers will also be obligated to pay the social security tax.

The reforms are an effort to breathe life into a dormant socialist economy that can no longer afford to provide free or nearly free health care, education and basic food to its population. They are the most significant adopted by the communist government since at least the early 1990s.

The new system borrows many aspects of capitalism, while keeping in place Cuba’s state-dominated control of the economy. Citizens will be allowed to apply for licenses to work for themselves in just 178 areas, from car maintenance to rabbit farming, accounting to circus clown.

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Cuba details brave new world of private enterprise


AP: HAVANA тА” Cuba’s communist leaders began laying out the details of their drive to create more free enterprise on the island on Friday, mapping out a brave new world of bosses and employees, personal accountants and a dizzying number of small-time businesses.

The plans тА” laid out in a three-page spread in the Communist Party-daily
Granma тА” follow last week’s announcement that the government will lay off
500,000 workers by the end of March, the biggest change in this country’s
economic system since the early 1990s.

For the first time, Cubans in 83 private activities will be allowed to employ
people other than their relatives. The Central Bank is even studying ways to get small loans into the hands of the country’s new entrepreneurs, according to the newspaper, which cited Economy Minister Marino Murillo Jorge and a vice-minister of labor and social security, Admi Valhuerdi Cepero.

Granma is the voice of the Communist Party and one of the principal ways the
government communicates plans with the people. The paper promised more details in coming days, saying that the expanded private enterprise would be “another opportunity, under the watchful eye of the state, which as a representative of the people, must find ways to improve the quality of life of Cubans.”

The new openings are sure to be welcome in a country where young people have been clamoring for more opportunities for years, but they will also create tension and upheaval.

The state dominates nearly every aspect of the Cuban economy, employing at least 84 percent of the work force and paying an average of $20 a month. In return, islanders are guaranteed free education and health care, as well as nearly free housing, transportation and basic food.

President Raul Castro has said the government can no longer afford such generous subsidies and that he wants to modernize Cuba’s economy, without abandoning socialism. Still the changes outlined over the past two weeks are sure to expand the breach between haves and have-nots in a land that has spent 50 years striving for an egalitarian utopia.

The article tries to allay any fears that the country is embracing free-market
capitalism, saying that the changes will always be “faithful to the socialist
principles our constitution demands.”

In all, some 178 private activities will be allowed and expanded, though only
seven of those are entirely new тА” including accountants, bathroom attendants, tutors and fruit vendors. One entire page of the newspaper was devoted to listing jobs that will qualify for self-employment. The list has everything from floral wreath arrangers to animal trainers to interior decorators.

The rules, which are set to go into effect next month, will also allow for a
great expansion of private restaurants тА” called paladares тА” which will be
able to serve more people and expand their menus to include higher-priced items like beef and lobster.

Previously, government rules limited them to 12 seats and placed restrictions on what their menus could offer, though most establishments blatantly violated the rules.

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Cuba to lay off 500,000 in 6 months, allow private jobs


Havana, Cuba (CNN) — Cuba announced on Monday it would lay off “at least” half a million state workers over the next six months and simultaneously allow more jobs to be created in the private sector as the socialist economy struggles to get back on its feet.

The plan announced in state media confirms that President Raul Castro is following through on his pledge to shed some one million state jobs, a full fifth of the official workforce — but in a shorter timeframe than initially anticipated.

“Our state cannot and should not continue maintaining companies, productive entities and services with inflated payrolls and losses that damage our economy and result counterproductive, create bad habits and distort workers’ conduct,” the CTC, Cuba’s official labor union, said in newspapers.

Castro had announced layoffs in August, but said they would occur over the next five years.

At the time, he said the government “agreed to broaden the exercise of self employment and its use as another alternative for the employment of those excess workers.”

The drastic and unprecedented economic changes have many Cubans worried that jobs they had long taken for granted under the Communist government will no longer be guaranteed.

Others are hopeful that they will have more freedom to set prices and earn more than the average state wage of $20 a month.

The state currently controls more than 90 percent of the economy, running everything from ice cream parlors and gas stations to factories and scientific laboratories. Traditionally independent professions, such as carpenters, plumbers and shoe repairmen, are also employed by the state.

State media on Monday did not give details about where private enterprise would be allowed to grow or which sectors would suffer layoffs, but did talk about which areas are still strategic.

“Within the state sector, it will only be possible to fill the jobs that are indispensable in areas where historically the labor force is insufficient, like agriculture, construction, teachers, police, industrial workers and others.”

The announcement avoided the word “private,” but said alternative forms of employment to be allowed included renting or borrowing state-owned facilities, cooperatives and self employment and that “hundreds of thousands of workers” would find jobs outside of the state sector over the next few years.

Castro has launched a few, small free-market reforms since taking over from his brother Fidel Castro in 2006.

In April, for example, barbershops were handed over to employees, who pay rent and tax but charge what they want. Licenses have also been granted to private taxis.

For a couple of years, fallow land in the countryside has been turned over to private farmers. The more they produce, the more they earn.

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