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CUBA
Economy in motion
Lídice Valenzuela
4/5/2013
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Economic reforms and changes allowed the surge of some 400,000 private workers.

Two years after the reforms to the Cuban socioeconomic model began, one must ask: have substantial changes to the life of this Caribbean nation of 11 million people been observed? What is missing for the economy to be able to advance in the accelerated manner that is demanded by a population mostly worn down by the U.S. economic, financial, and commercial embargo, internal errors, and the dependency on other nations?

To avoid creating false expectations, President Raúl Castro warned at the Sixth Congress of the Communist Party of Cuba, or PCC, in April 2011: “We will act with no hurry, but without pausing,” which means that the period of improvising and economic chaos has ended — at least officially.
In that context, opening up to private initiative is directing national politics.

It is still recent history that during the so-called Special Period of the economy — established to face the crisis triggered after the fall of the socialism in Eastern Europe at the end of the 1980s — the return to private enterprise was sought, albeit having been limited to two sectors: home rentals and the opening of mini-restaurants called Paladares, most of which ended up closing because of state obstacles that indicated more of a political contradiction than an economic one. Now they once again proliferate in all cities.

In 2011, following the Sixth Congress’ guidelines, private work reappeared to drive the semi-paralyzed economy, although there are still inherent obstacles because of an internal resistance to change by some state officials.
A year before, the Ministry of Labor and Social Security put into effect Resolution No. 35 that liberalized 181 activities, including careers and professions of different ranks that range from professors of different educational levels to barbers and domestic workers. Some 400,000 people take part in this strategy.

Even with a small contribution to the gross domestic product — around 10 percent — the private sector frees the state from providing small services and tries to reverse the tense agricultural situation, which offers no solution to the feeding of the people, an issue Castro considers “of national security.”

Currently, there are many forms of private businesses that stand out: home rentals, cargo and passenger transportation, food manufacturing, and mobile vendors of agricultural products. Land leasing with usufruct rights to some 176,000 farmers also has a vital role. These farmers still do not achieve high production levels for reasons attributed in large part to official deficiencies, such as the guarantee of work tools, transportation for the harvests, and low prices for the products.

Tax obligations
The national economy was the sole main issue discussed by the delegates to the Sixth Congress of the PCC. The debate resulted in the approval of the “Economic and social guidelines of the Party and the Revolution” – the guiding document for all of the changes, consisting of more than 300 reforms and previously discussed and enriched by the people.

However, Marino Murillo, vice president of the Council of Ministers, told the press in March 2012, “[We] must continue to perfect the implementation of the guidelines,” given the previously identified obstacles.

Although the people understand the official needs, they are dissatisfied with the high prices imposed by the so-called “self-employers.” There are very costly alternatives for the average state employees, who earn a daily average of 10 pesos (one of the two official currencies, along with the CUC, the Cuban convertible peso). Among them are the taxi services, the Paladares, the clothing industry, and home products.

Another delicate situation occurs when wholesale providers cannot steadily deliver products to private businesses. The latter are forced to buy from the retail market which supplies to the population, thus hoarding products which are for family consumption. For almost three years now, basic food products are sold outside of the so-called ration card, such as eggs, pork meat, bread, cheese, or tomato puree.

In the middle of this diverse landscape, some experts link the process of labor reorganization in the state sector, started in October 2011 and which left 340,000 workers as available labor force, with the emergence of private business.

“The reappearance of private [enterprise] lacks a link to the labor reorganization, a process on its way to greater efficiency in the labor force, which considers the employment peculiarities, conditions, and alternatives of the different territories. The relocation of the available labor force happens in the state sector itself, and at a lower rate in the private sector,” said Ariel Terrero, specialist in economic issues, to the Cuban television.

Experiences in the private sector
Karelia Sopena leases a room in her house in the Nuevo Vedado neighborhood since 1997, when the tax system took its first steps in Cuba.

“Taxes were exceedingly high,” she tells Latinamerica Press. “Then, they charged me more than 200 per month although I did not have clients. With the Tax System Law of this year,” she comments; “now I pay 35 CUC each month, while I charge 35 CUC a day for my room.”

In the flower shop “Angélica,” an establishment leased from the state in the municipality of Playa, six contracted individuals work 12 hours in alternating days. They pay two monthly taxes: a work license to be part of the private sector and social security for retirement. For vendor Indira García, this kind of job “is harsh but positive,” for her salary is higher than that of a state employee’s. Although she is not the owner of the shop, she understands the internal management and says that obstacles to their business come from lacking a state supplier.

In the municipality of Central Havana, Manuel Pedroso owns a formal food and light food cafeteria. He pays some 1,000 pesos per month in taxes, but his daily income is about 2,000 pesos. His employers make 100 pesos a day in 10-hour alternating shifts. “Obtaining the supplies is difficult, but it’s worth the sacrifice,” he points out.

In an informal analysis, it is observed that more adjustments to the state-private management relationship are still necessary, but the balance is positive if the essential economic movement is considered.

2013 promises socioeconomic novelties. The Cuban first vice-president, Miguel Díaz Canel, informed last March that “the actualization process is starting its most important and complex stage because of the decisions to be taken and their importance in the future development of the country, seeking greater economic and productive efficiency within the socialist system with the ongoing transformations.”
— Latinamerica Press.


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Though at higher prices than state products, many clients prefer the quality of private flower shops. (Photo: Mariela Pérez Valenzuela)
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