Cuba's tiny private sector struggles to survive

Cuba's tiny private sector struggles to survive
Thu Aug 17, 2006 4:42 PM ET

By Anthony Boadle

HAVANA (Reuters) - Long held in check by President Fidel Castro, Cuban
entrepreneurs ranging from plumbers to pizza makers hope to enjoy some
slack while his brother Raul is in charge.

But the self-employed tradesmen and owners of family businesses in the
communist-run country do not expect Cuba's economy to embrace the
private sector overnight.

"Paladares," family restaurants that can only seat 12 people at a time,
and bed-and-breakfast inns still face multiple restrictions, heavy taxes
and a constant threat of losing their licenses even though they have
been allowed for more than a decade.

"Raul could continue opening up the economy. We want less state
control," said Gilberto, a book seller in central Havana, displaying a
photo of Fidel Castro prominently on his stall.

Raul Castro supported economic reforms in the early 1990s and is said to
favor a Chinese path. As defense minister, he introduced Western
management practices in the armed forces, which now run Cuba's most
efficient and profitable companies.

Since Cuba's ailing leader handed over power to his younger brother on
July 31, some so-called "cuentapropistas," or the self-employed, are
taking a wait-and-see approach.

"They say Raul is more open. The truth is nobody knows what is going to
happen here," said the owner of a paladar in the converted garage of a
house who asked not to be named.

Battered by an economic crisis following the 1991 collapse of its
benefactor the Soviet Union, Cuba opened up to small businesses in the
services sector, mainly food and transport. Private taxis were allowed
to use vintage American cars to fill the lack of public transport.

Fidel Castro has wanted to run the self-employed out of business and
attacked them in recent years for getting rich at the expense of the
Cuban people and the state.

The numbers of self-employed have declined since peaking at 209,606 in
January 1996, shrinking to 166,700 at the end of 2004, according to
official figures.

The government says this drop is due to economic recovery as Cuba puts
its post-Soviet "special period" behind it. With the aid of subsidized
oil from Venezuela and soft loans from China, Cuba's has pulled itself
up and began recentralizing control over the economy three years ago. At
least 90 percent of output is state-run.

NO CLOWNS OR MAGICIANS

No new licenses have been given since 2004 for paladares, or for clowns,
magicians, masseurs and florists.

Private restaurants and snack stands in particular have been hit hard,
said Phil Peters, vice president of the Lexington Institute, a think
tank in Washington, who has studied Cuba's private sector.

"Cuba's small entrepreneurs are down but not out. They are reduced in
number and permitted to work in fewer lines of business. But they are
still visible in every town in Cuba, in many cases competing with state
enterprises," he said.

In provincial capitals, tourists choose between state hotels and lodging
in private homes of licensed entrepreneurs.

Peters said Cuba has no faster way to jump-start growth and employment
and increase tax revenues than to create a better climate for small
enterprise, which could be done without ending the state's dominant role
in the socialist economy.

Cuentapropistas will not comment on the politics for now.

"We are just entrepreneurs, not political strategists," said Enrique
Nunez, owner of Havana's most successful paladar, La Guarida, where
photographs on the wall boast visits by actors Jack Nicholson and Matt
Dillon and Queen Sofia of Spain.

(Additional reporting by Rosa Tania Valdes)

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