Raul Castro's Shock Therapy for Cuban Economy


Cuba approved a dozen new laws in recent weeks that portend dramatic changes in the every day lives of islanders, as the government orders state-run companies to slash jobs even as it opens the door to private business and employment. For the first time since Fidel Castro's 1959 revolution jobs or income are no longer guaranteed and the stigma of entrepreneurship and employing others is lifting.

Decree law 276 puts an end to the practice of prioritizing employment over performance, orders state companies to "permanently look for new forms of organization and downsize those processes that do not reach expected levels of profitability as well as those that have lost competitiveness… laying off employees as needed."

The self employed, often a euphemism for small business, can now hire labor, rent store fronts, do business with the state and seek bank credits, among other novelties contained in Labor Ministry resolution 32, which the Communist party newspaper Granma said was a move to "distance ourselves from those conceptions that condemned self-employment almost to extinction and stigmatized those who decided to join it, legally, in the 1990's."

Another decree law establishes a labor tax on private businesses based on how many employees they, have up to more than 15. Still another regulates the hiring of labor by private farmers, remarkable in a land where Article 21 of the constitution states one's "personal and family property and means and instruments of work can not be used to obtain earnings from the exploitation of the labor of others."

Self employment covers everything from carpenters, gardeners, artisans and animal trainers to small businesses such as home-based bed and breakfasts, rental property, restaurants, pizzerias and snack shops.

When self-employment was first allowed in the 1990s, then-President Fidel Castro termed it a concession to capitalism and proceeded to limit licenses and over regulate them.

Resolution 35 from the Labor Ministry mandates that state workers be let go based on job performance, not length of service.

Cuba Creating New Labor Market

"People who used to stay home if they or their kids had a sniffle are going to work for fear they might loose their job," a family doctor in Havana said.

Cubans must now seek state employment, start a business, or work for small businesses and farms or lease land to till. In effect, these measures create a rudimentary labor market for the first time since the 1960s.

Lines have formed at local government offices across the country as Cubans seek information about the new opportunities.

"They are giving people forms to fill out and appointments within 15 days to legalize their status as self-employed," a government source in eastern Holguin province said in a telephone interview, asking his name not be used. "The plan is for each of the country's 69 municipal offices to process 20 people per day."

Unemployment benefits have been slashed, the price of subsidized utilities and services are going up and near gratuities such as a monthly food ration are gradually being phased out, nudging those who might prefer hanging out at home or the beach to seek work.

The government estimates some 500,000 workers will be laid-off in the next six months and a similar number after that, some 20 percent of the state labor force, resulting in a 5 percent increase in productivity in 2011.

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