Cuba’s ‘resale’ economics: The island’s halfway capitalism has trapped Cubans between private business and the state economy.

The island’s halfway capitalism has trapped Cubans between private business and the state economy.

Nick Miroff, January 23, 2013.

Original Article here:  Cuba’s ‘resale’ economics

HAVANA, Cuba — Cracker Man’s cry echoes down the streets of Havana’s Buena Vista neighborhood, trailed by the clatter of his shopping cart over potholes.

“Crackers! Crackers!” he barks. “Fresh from the oven!”

He’s one of roughly 400,000 Cubans now working as state-licensed entrepreneurs in the communist country’s small but growing private sector.

Cracker Man, as he’s known in the neighborhood (“el Galletero”), sells his product for about $1 a bag. He doesn’t make the crackers, but buys them from the state-owned bakery.

He’s what Cubans refer to as a “revendedor,” a reseller who buys scarce state-subsidized items from government stores to sell at a mark-up.

That’s made many people here angry. Complaints abound in the “letters to the editor” section of Cuba’s Communist Party newspaper Granma, where resellers are disparaged as parasites and good-for-nothing speculators whose main contribution to the economy is to make basic products more expensive for everyone.

They’re also entirely the creation of Cuba’s new halfway capitalism.

Raul Castro’s recent reforms — the government calls them “updates” — have provided a place for market forces to exist alongside the centrally planned, state-controlled economy. Cubans have been granted new opportunities to become tradesman, DVD vendors, pizza makers and licensed small-scale retailers whose tiny shops and stalls have bloomed along Cuba’s main streets and thoroughfares.

Other entrepreneurs navigate pushcarts through the streets as itinerant peddlers, hawking goods under the hot Caribbean sun.

The government wants the private commerce to stimulate Cuba’s moribund economy and substitute costly imports. But experts say the authorities have yet to take the next necessary step: allowing entrepreneurs to innovate and manufacture their own products.

Cracker Man, for instance, has nowhere to buy the kind of industrial ovens, bakery equipment and wholesale supplies he’d need to make crackers. Shipping those items from abroad would trigger steep import duties, never mind the logistical obstacles.

“We still haven’t created the mechanisms for a productive economy,” says economist Julio Diaz Vazquez, a Soviet-trained expert on China and Vietnam’s so-called market socialism. He criticizes the government for wanting to encourage entrepreneurship while tightly controlling it through an obtuse bureaucratic regulatory system.

He believes that’s a lost cause. “You can’t play games with the market,” he says.

The authorities say they want to sharply reduce the number of Cubans working in low-paid, unproductive government jobs by moving them into cooperatives and small-scale private businesses.

They’re setting up pilot programs to convert state-run enterprises into worker-managed cooperatives, and have expanded the range of occupations for which Cubans are allowed to obtain self-employment licenses.

But the list remains very small, with fewer than 200 officially sanctioned professions from which Cubans can choose, including obscure jobs such as “party planner” and “palm-tree pruner.”

Not the kind of thing to lift millions out of poverty or free Cuba from having to import soap, snack foods and other bare necessities on which the government spends billions of dollars abroad while its own state-run manufacturing sector withers.

Many of the newly licensed entrepreneurs sell hardware-store items and household essentials such as bleach and dishwashing detergent. As their stalls have proliferated, many of the items they sell are disappearing from state stores because private vendors are rushing to buy up supplies. The government says it’s working to set up wholesale markets to supply the new businesses, but it has yet to do so, with a few exceptions. The authorities seem nowhere close to allowing island residents to invest in the kind of infrastructure that could help give rise to private manufacturing and industry.

Until that happens, economists say, resale economics will continue to rule.

In one area of Havana known as the La Copa, private vendors offer plumbing supplies and other items not available in the state-owned hardware store next door.

Some of their goods are imported while others — such as crudely fashioned pipe fittings — are made on the island. Like most everywhere else, the rest are bought in government-owned stores.

The vendors respond to criticism about selling state-manufactured goods at higher prices saying that as long as they can show receipts proving they acquired the items legally, there’s nothing illegal about reselling them.

“I’m providing a service to my clients and to the government,” says Yormani Alayu, a plumbing-supply vendor who says he pays taxes and goes to great lengths to acquire scarce materials. He points to several rolls of flexible plastic tubing that would be nearly impossible to find in state-run stores.

“These are from Las Tunas,” he says of a city more than 400 miles from Havana.

One customer, Tania Alvarez, says she appreciates personal attention from private vendors, in contrast to the poorly paid clerks at government stores who are often indifferent toward shoppers, if not surly.

“I also appreciate the convenience,” she adds. “I don’t have to go all over town to look for these things.” She says she doesn’t mind paying slightly more.

Other resellers says they’re adding value to products they acquire from state stores.

A 21-year-old hardware vendor named Moises Amador points to colorful rum bottles on his table filled with different kinds of paint, each labeled with instructions. The paint is sold by the gallon in government stores, he explains, but often clients don’t need to buy that much. “And not everyone can afford a whole gallon,” he adds.

“I’m providing a service,” he says somewhat defensively. “I make my own labels and print them. I buy the bottles from a recycler. It’s an investment I make.”