Cuba's Brave New Economic World

Many Cubans already have private side business to supplement government job.

HAVANA, Cuba Sept. 15, 2010— -- A brave new world is slowly dawning in Cuba as the cash strapped government of President Raul Castro cuts gratuities and subsidies, designs wage systems based on performance, sheds state jobs, revamps the feeble tax system and liberalizes agriculture in search of socialist sustainability.

The government announced plans Monday to lay off 500,000 state employees over six months and spur development of non-state jobs in their place, the biggest shift to private enterprise since the 1960s after Fidel Castro moved his revolution into the Soviet camp.

Cuba is a poor, developing country, embargoed by the United States, caught in an antiquated system and racked by hurricanes. But the basics, from jobs to food rations, health care and education were always guaranteed. Except for health care and education, that is no longer the case.

The austerity measure is certainly painful, but perhaps not as painful as one might think.

Many Cubans working for the state in jobs from driving taxis and repairing appliances to waiting on tables and making furniture will move to leasing their activity or working as cooperatives.

At the same time state employees, most of whom already do something on the side to make ends meet, will now strike out on their own.

Havana secretary Kendra, like many of those being let go, already is self employed in her spare time doing friend's nails and hair, as her state salary of $15 a month lasted barely a week.

"I guess I'll do this full time," said Kendra, who asked to be identified by her first name only.

"The recent announcement that the government will shift 500,000 state jobs to the private sector confirms the important, but gradual and slow reforms underway are irreversible," Arturo Lopez-Levy, a Cuban-American political scientist at the University of Denver, said.

"The government has committed to opening more space for small business and cooperatives, which to function need the model to change from state dominated toward the market," he said.

Lopez-Levy, like other experts, says the measures must include the recognition that the private sector is not evil but indispensable, an ideological shift that Castro has clearly supported in Agriculture where he has leased land to more than 100,000 new farmers and ordered private farmers be supported in the same way as state farms.

Cuba Says It Wants to 'Modernize' Economy

"This is a major change in the government's thinking. The new entrepreneurs and cooperatives will amount to a sort of small business sector, and the government sees them not as a necessary evil, but as a way to make the entire economy more productive," Phil Peters, a Cuba expert at the Virginia-based Lexington Institute, said.

Castro, during a speech in August, announced a five year plan to modernize the economy had been approved, but failed to give any details.

Cubans are not sure what's ahead as Castro "modernizes" the economy and states that in the future, "Cuba will no longer be known as the only country in the world where you do not have to work to live," words uttered during the August speech that certainly caused anxiety among some of his minions.

Government insiders say the jobs reform that will eventually effect more than a million state workers, 20 percent of the labor force, is part of the five-year plan that also includes more foreign investment, bank credits for small business and farmers, measures to improve efficiency, a mixed retail sector and the lifting of many regulations on the supply of inputs to farmers and sale of what they produce.

The non-descript Cubataxi garage on Palatino Street in the Cerro municipality of Havana may not look like much, but it provides a glimpse into the past, present and future.

The past, even the government admits, was characterized by suffocating bureaucracy, massive pilfering and slovenly work habits. The present still is, but also by the recognition one of the world's last Soviet-style economies must change.

Controversy over who gets what and anger at the tax man will more and more replace paternalism and passivity.

The 30-car garage opened for business on an experimental basis in January. Instead of three support staff for every vehicle as in other garages, an administrator, book keeper, mechanic and custodian man the fort.

The drivers do not work for a state wage, but lease the cars on a daily basis and pay for their gas and vehicle maintenance. They will have to pay social security and income tax at the end of the year.

Cuban Barbers Will Have to Lease Their Barber Chairs From Government

"Starting next year we will have to pay the local equivalent of more than a $1,000 to the tax office on top of everything else," a taxi driver, whose garage will go over to leasing next year, angrily said.

The average monthly wage in Cuba amounts to $20.

The government is thrilled with the pilot project, and for good reason.

On Monday, the same day that the official trade union weekly Trabajadores announced the state's massive layoffs, the paper ran a story on a meeting of transportation officials.

Buried in the article were a few paragraphs with the astounding news that productivity at the garage was up not by 55 percent, but 55 times its previous level and the state's yearly take from each taxi estimated at the local equivalent of $18,360, compared with $580 in the past.

"It's no mistake," Christina, the book keeper said, sitting outside the garage's office. "No one hangs around here anymore doing nothing for a few dollars, stealing and taking the family to the beach in a company cab all expenses paid."

The drivers are not so enthusiastic, insisting it's from their hides the fantastic statistics come.

"It is slavery. We do not have a minute for the family," Roberto, one of them said.

"We have to work day and night and seven days a week to pay the lease and tax office," he growled.

Hundreds of barbers and hair stylists across the land have also been leased their chairs and small establishments, and at least in Havana many voice similar complaints as the cabbies, while others appear satisfied and are sprucing up their shops.

Transportation officials met the drivers in June to discuss the project and according to Roberto got an ear full. They promised to hold another meeting in December to announce "adjustments" before the experiment goes nationwide.

Four drivers soon quit, while Roberto said the rest had adopted a wait and see attitude.

Christina confirmed all this, but with a scoff as if to say things were not all that bad, though she admitted given the spectacular results perhaps a bit more of the pie could be shared.