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Self-employment could be key to Cuba's economic future
By Will Weissert
Associated Press
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HAVANA -- Juan Bautista Gonzalez’s living room was already crowded with customers when still more shuffled in, clutching gold necklaces with broken clasps and bent rhinestone earrings. He knew he would be skipping lunch again.

“If someone comes with a job, I’ll do it. No matter what time it is,” said Gonzalez, who gave up a government mechanic’s job four years ago and now earns more fixing his neighbors’ jewelry for $1.25 per repair. “Work more, earn more.”

Gonzalez is among the 150,000 or so Cubans — a meager 3 percent of the work force — who are allowed to be self-employed.

The communist government firmly controls more than 90 percent of Cuba’s economy. But as its new president, Raul Castro has raised expectations for tiny pockets of private initiative. With the resignation of Fidel Castro, Cubans are hoping for an even greater loosening of the economy. The easiest such reform might be to allow more people to work for themselves.

But to understand the economic issues facing Raul, one has to consider the degree to which Cuba controls private enterprise with licensing, taxes and enforcement, not to mention an onerous approval process.

To be self-employed in Cuba means a lot of hard work and patience.

“There are good months and bad,” said Gonzalez, 54, pulling a pair of pliers from his battered worktable and straightening a silver ring. “It’s worth it. Not working, that’s not worth it.”

They are tutors, tire repairmen, taxi drivers and dozens of other professionals who are licensed by the Labor Ministry and forced to pay stiff taxes — $19.20 per month — slightly more than an average state salary.

Owners of small family restaurants, musicians and artists who earn money abroad, and small farmers who sell excess produce above government quotas are also among those lawfully allowed to earn their own money. Far more Cubans work without approval in the underground economy in a country where most people need a second income to make ends meet.

Raul Castro has criticized government inefficiencies and encouraged debate about Cuba’s economic future. Now many believe he could open sectors of agriculture, retail and services to private entrepreneurs or cooperatives, though there is little expectation he will privatize major sectors such as energy, utilities, sugar or mining.

“He is the man of change. If anyone has experience with it, it’s him,” said Oscar Espinosa Chepe, a state-trained economist who became a dissident anti-communist.

Others aren’t convinced.

Ronaldo, a cobbler who receives a monthly government salary of $23 to fix shoes, is allowed to keep any money he makes above his government quota. But he has to pay 80 cents a day to rent his small workshop under the stairs of an Old Havana apartment building.

“One goes, and there’s another brother. Nothing will change,” said Ronaldo, who wouldn’t give his last name, fearing he would be harassed by authorities if he is seen as a complainer.

Cuba already has some experience with liberalizing its economy. When the Soviet Bloc collapsed, taking away subsidies that represented as much as a fourth of Cuba’s gross domestic product, the government allowed some self-employment. It reopened farmers markets based on supply and demand and encouraged foreign tourism and investment.

As Defense Minister, Raul Castro was at the forefront of that economic overhaul. His soldiers tended farms while their superiors oversaw significant enterprises in electronics, cigar production and tourism.

From the start of the Cuban revolution in 1959, “Raul Castro is the one who organized the country, and he’s the one who saved the economy at the start of the 1990s,” said Chepe, the dissident economist.

The number of self-employed Cubans had climbed to nearly 210,000 by January 1996, creating new economic divisions in Cuban society and deep feelings of envy and resentment among those stuck with tiny state salaries.

Fidel Castro eventually denounced the “new rich class” and rolled back some of the reforms. A 2004 decree forbade new licenses for 40 forms of self-employment — including auto body repairmen, masseuses, stonemasons and children’s party clowns — reducing the number to the 118 professions tolerated today.

Self-employment rates plummeted, but Cuba found new economic saviors: high nickel prices, extensive borrowing from China and nearly 100,000 barrels of subsidized oil a day from Venezuela.

Havana’s warm relationship with China and Venezuela has made the need for major economic reform in Cuba less urgent, said William Trumbull, director of West Virginia University’s division of Economics and Finance.

But Evis, another cobbler, said Cuba’s economy may need reform to stay strong.

“The revolution gives you a good education, but you can’t have educated people there on the street without jobs,” said the 44-year-old, who like his colleague didn’t want his last name used.

Evis is trained as a mechanic, barber, electrician and musician but said he can make the most money repairing shoes because it allows some autonomy.

“It’s miserable,” he said. “But it could be worse.”

Take a look
A man, who works repairing lighters, waits for costumers in a street of Havana, Monday, Feb. 25, 2008. Raul Castro, Cuba's first new president in nearly half a century, crushed hopes that a new generation would shape the country's future by promising to defer to his ailing brother Fidel and the Communist Party's old guard on major matters.(AP Photo/Ariana Cubillos)
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