Tag Archives: Small Enterprise

IS CUBA’S VISION OF MARKET SOCIALISM SUSTAINABLE?

Posted on August 8, 2018 by Arch Ritter

William M. LeoGrande

Tuesday, July 31, 2018

Just three months after Miguel Diaz-Canel took over the presidency of Cuba from Raul Castro, his government has unveiled a new Council of Ministers—essentially, Cuba’s Cabinet—along with the draft of a new constitution and sweeping new regulations on the island’s emergent private sector. While the changes announced represent continuity with the basic reform program Raul Castro laid out during his tenure, they are nevertheless significant milestones along the road to a more market-oriented socialist system.

The discussion and approval of the draft constitution was the main event of last week’s National Assembly meeting. The revised charter will now be circulated for public debate, revised, reconsidered by the National Assembly, and then submitted to voters in a referendum early next year. The avowed reason for revamping the constitution is to align it with the economic reforms spelled out in 2011 and 2016 that constitute the blueprint for Cuba’s transition to market socialism. Cuba’s 1976 constitution, adopted at the height of its adherence to a Soviet model of central planning, reflected “historical circumstances, and social and economic conditions, which have changed with the passing of time,” as Raul Castro explained two years ago. …

Continue Reading: Is Cubas Vision of Market Socialism Sustainable_

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GACETA OFICIAL NO. 35 EXTRAORDINARIA, DE 10 DE JULIO DE 2018:

Posted on July 17, 2018 by Arch Ritter

New Regulations for Cuba’s Non-Agricultural Private Enterprises as of July 10, 2018

Complete Document available here:

Gaceta-Oficial-Extraordinaria, 10 de Juliode 2018, _CYMFIL20180710_0001

 

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CUBA MOVES BACKWARDS: NEW REGULATIONS LIKELY TO IMPEDE PRIVATE SECTOR GROWTH.

Posted on July 17, 2018 by Arch Ritter

Brookings, Friday, July 13, 2018

Richard E. Feinberg, Nonresident Senior Fellow – Foreign Policy, Latin America Initiative and Claudia Padrón Cueto, Reporter – El Toque (Havana, Cuba)

In a leap backwards, the Cuban government has published a massive compendium of tough new regulations governing the island’s struggling private enterprises. The new regulations—the first major policy pronouncement during the administration of President Miguel Díaz-Canel—appear more focused on controlling and restricting the emerging private sector than on stimulating investment and job creation, more concerned with capping wealth accumulation than in poverty alleviation.

Many small businesses that cater to foreign visitors are already suffering from Trump-era restrictions and travel warnings that have decimated the U.S. tourist trade in Havana. But the new regulations are more a product of domestic Cuban politics than foreign pressures.

On a positive note, the Cuban government promises to renew the granting of licenses for many categories of private businesses by year-end, repealing the extended suspension announced last summer. But the new regulations greatly empower government rule-makers and intrusive inspectors, casting a gray cloud over the island’s business climate. Many existing businesses are likely to retrench if not close altogether.

The private sector grew dramatically in recent years, to include nearly 600,000 owners and employees by official figures, with many more enterprising Cubans working informally; in contrast, the state sector stagnated and further decapitalized. Indeed, many thriving private businesses began to compete successfully against state entities, notably in restaurants, bars and night clubs, guest houses, construction, and transportation. The healthy wages paid by profitable private firms often eclipsed the meager salaries paid to disgruntled government officials and factory workers.

The extensive, highly detailed regulations, which go into effect in December, read like “the revenge of the jealous bureaucrat.” Drawing on a multitude of ministries and operating at all levels—national, provincial, and municipal—interagency committees will now be empowered to authorize, inspect, and regularly report upon private businesses under their jurisdictions. The regulations are replete with astoundingly specific performance requirements and innumerable legal breaches that seem crafted to allow government officials wide discrimination to impose heavy fines (or extort bribes), suspend licenses, and even seize properties.

To cite but a few such regulations: Private restaurants and guest houses must cook food at a minimum of 70 degrees Celsius for the time required for each food; day care centers must allocate at least two square meters per child, have no more than six children per attendant, and be outfitted with pristine bathroom facilities described in exquisite detail (private schools and academies are strictly prohibited); and private taxi drivers must document that they are purchasing fuel at government gas stations, rather than buying on the black market. Further, local officials can deny new licenses based on “previous analyses,” even if the proposed business plan meets all the other specifications, and can fix prices “when conditions warrant.”

The regulations could help shield state enterprises from unwanted private competition. The very ministries that stand to lose market shares are in charge of approving licenses in their sector. For example, the ministry of tourism has the lead in judging licenses for private guest houses. Appeals are possible, but to administrative authorities, not to judicial courts.

Government agencies are also seeking to reassert control over the island’s vibrant artistic communities. The regulations prohibit artists from contracting directly with private restaurants and bars; rather they must be represented by public-sector entities that charge commissions up to 24 percent of revenues. Moreover, performers must not use “sexist, vulgar or obscene language,” which if enforced could imply the banning of popular hip-hop and reggaeton songs and videos.

Perhaps most telling are the restrictive rules squarely aimed at inhibiting private capital accumulation. In a sharp turn from past practice, Cubans will now only be allowed one license for one business, effectively outlawing franchising and diversification. Capacity at restaurants and bars is capped at 50 guests. Most biting, the new regulations establish an upward-sloping wage scale (whereby wages rise as more workers are hired); hiring more than 20 workers becomes prohibitively expensive (six times the average wage). Unlike in the past, employers will now have to pay taxes on the first five workers hired as well.

Many private businesses must also record their transactions (revenues and expenditures) in an account at a government financial institution and keep three months of prospective taxes on deposit. Intended to reduce under-reporting of income, this measure will significantly raise the effective rates of taxation. Investors must also explain their sources of funds. In a country where political authority is unchecked, these financial impositions alone will discourage many potential entrepreneurs.

The Cuban authorities have repeatedly asserted their interest in attracting foreign investment, to compensate for weak domestic savings. However, foreign investors are likely to view these new regulations, even though they apply to domestically-owned firms, as indicative of an official wariness if not hostility toward private enterprise in general. Risk-averse foreign investors will also note that the Cuban government is quite capable of precipitously altering the rules of the game.

The new regulations are the first major policy initiative promulgated during the administration of President Miguel Díaz-Canel. Many of the resolutions were approved by the Council of State under Raúl Castro, prior to Díaz-Canel’s inauguration in April, but nevertheless were issued during his young tenure. Not a good sign for those hoping that Díaz-Canel, 58 years old and ostensibly representing a younger generation, might quickly place his own imprimatur over the extensive state apparatus.

The new regulations make one thing abundantly clear: The Cuban government, state-owned enterprises and the ruling Cuban Communist Party do not want to risk major competition to their own interests—economic, commercial, and political—from a potentially capital-rich, diversified emerging private sector. Apparently, perceived interests in security and stability have overruled Cuba’s own declared economic development goals.

 

 

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CUBA IMPOSES MORE TAXES AND CONTROLS ON PRIVATE SECTOR AND INCREASES CENSORSHIP ON THE ARTS

Posted on July 12, 2018 by Arch Ritter

BY NORA GÁMEZ TORRES

Miami Herald, July 10, 2018 07:01 PM

The Cuban government announced that it will start issuing licenses to open new businesses — frozen since August 2017 — but established greater controls through measures intended to prevent tax evasion, limit wealth and give state institutions direct control over the ‘self-employment’ sector

Original Article: TAXES, CONTROLS, CENSORSHIP

The Cuban government issued new measures on Monday to limit the accumulation of wealth by Cubans who own private businesses on the island. The provisions stipulate that Cubans may own only one private enterprise, and impose higher taxes and restrictions on a spectrum of self-employment endeavors, including the arts.

The government announced that it will start issuing licenses to open new businesses — frozen since last August — but established greater controls through a package of measures intended to prevent tax evasion, limit wealth and give state institutions direct control over the so-called cuentapropismo or self-employment sector.

The measures will not be immediately implemented. There is a 150-day waiting period to “effectively implement” the new regulations, the official Granma newspaper reported.

Cubans who run private restaurants known as paladares, for example, will not be able to rent a room in their home to tourists since no citizen can have more than one license for self-employment.

“There are workers who have a cafeteria and at the same time have a manicure or car wash license. … That is not possible. In practice, he is an owner who has many businesses, and that is not the essence and the spirit of the TCP [self-employment], which consists of workers exercising their daily activities,” Marta Elena Feitó Cabrera, vice minister for labor and social security, told the official Cubadebate site.

About 9,000 people, half in Havana, are affected by the measure, said the official.

In addition, all private sector workers must open an account in a state bank to carry out all their business operations. And the boteros, those who work as private taxi drivers, must present receipts to justify all their deductible expenses. Other measures curb the hiring of workers in the private sector, which currently employs 591,456 people, or 13 percent of the country’s workforce.

The government also stated it would eliminate the tax exemption for businesses that have up to five employees and would instead impose a sliding scale that increases with each worker hired. It also ordered an increase in the required minimum monthly taxes of businesses in various categories.

Government officials quoted by Granma said that the measures will increase tax collection and reduce fraud. But economists have warned that more taxes on hiring employees could dramatically hamper the development of the private sector at a critical moment. A monetary reform — which could bankrupt nearly half of the state companies, potentially leaving thousands unemployed — is expected to happen soon.
The new measures also maintain a halt on new licenses for things such as “seller vendor of soap” and “wholesaler of agricultural products,” among others.

One significant provision states that those who rent their homes to tourists and nationals may also rent to Cuban or foreign companies but “only for the purpose of lodging.” That would presumably prevent renters from subletting units.

The “rearrangement” of self-employment, as the new measures were framed in the official media, reduces licenses by lumping together various elements of one industry while limiting another. For example, while there would be only one license for all beauty services, permits for “gastronomic service in restaurants, gastronomic service in a cafeteria, and bar service and recreation” were separated — meaning that one can own a restaurant but not also a bar.

To increase controls, each authorized activity will be under the supervision of a state ministry, in addition to the municipal and provincial government entities, which can intervene to set prices. The level of control reaches such extremes that the Official Gazette published a table with classifications on the quality of public restrooms and the leasing rates that would have to be paid by “public bathroom attendants,” one of the authorized self-employment categories. Some public bathrooms are leased by the state to individuals who then are responsible for upkeep and make their money by charging users a fee.

The regulations are the first significant measures announced by the government since Miguel Díaz-Canel was selected as the island’s new president in April. But the proposed regulations had been in the making for months by different government agencies, according to a draft of the measures previously obtained by el Nuevo Herald. The announcement comes just as the Cuban economy is struggling to counter the losses brought by the crisis in Venezuela — its closest ally — and the deterioration of relations with the United States.

The new measures could also have a significant impact on the cultural sector. The decree may be used by the Ministry of Culture to increase control over artists and musicians and impose more censorship in the country.

Decree 349 of 2018 establishes fines and forfeitures, as well as the possible loss of the self-employment license, to those who hire musicians to perform concerts in private bars and clubs as well as in state-owned venues without the authorization of the Ministry of Culture or the state agencies that provide legal representation to artists and musicians.

Many artists in urban genres such as reggaeton and hip-hop, who have been critical of the Cuban government, do not hold state permits to perform in public. However, many usually perform in private businesses or in other venues.

Painters or artists who sell their works without state authorization also could be penalized.

The measures impose sanctions on private businesses or venues that show “audiovisuals” — underground reggaeton videos or independent films, for example — that contain violence, pornography, “use of patriotic symbols that contravene current legislation,” sexist or vulgar language and “discrimination based on skin color, gender, sexual orientation, disability and any other injury to human dignity.”

The government will also sanction state entities or private businesses that disseminate music or allow performances “in which violence is generated with sexist, vulgar, discriminatory and obscene language.”

Even books are the target of new censorship: Private persons, businesses and state enterprises may not sell books that have “contents that are harmful to ethical and cultural values.”

Some CuentaPropistas:

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BOOK REVIEW, ENTREPRENEURIAL CUBA: THE CHANGING POLICY LANDSCAPE

Posted on May 2, 2018 by Arch Ritter

Boulder, CO: First Forum Press, 2015. 373 pp.

By Archibald R. M. Ritter and Ted A. Henken

Review by Sergio Díaz-Briquets,

Cuban Studies, Volume 46, 2018, pp. 375-377, University of Pittsburgh Press

The small business sector, under many different guises, often has been, since the 1960s, at the center of Cuban economic policy. In some ways, it has been the canary in the mine. As ideological winds have shifted and economic conditions changed, it has been repressed or encouraged, morphed and gone underground, surviving, if not thriving, as part of the second or underground economy. Along the way, it has helped satisfy consumer needs not fulfilled by the inefficient state economy. This intricate, at times even colorful, trajectory has seen the 1968 Revolutionary Offensive that did away with even the smallest private businesses, modest efforts to legalize self-employment in the 1979s, the Mercados Libres Campesinos experiment of the 1980s, and the late 1980s ideological retrenchment associated with the late 1980s Rectification Process.

Of much consequence—ideologically and increasingly economically—are the policy decisions implemented since the 1990s by the regime, under the leadership of both Castro brothers. Initially as part of Special Period, various emergency measures were introduced to allow Cuba to cope with the economic crisis precipitated by the collapse of the communist bloc and the end of Soviet subsidies. These early, modest entrepreneurial openings were eventually expanded as part of the deeper institutional reforms implemented by Raúl upon assuming power in 2006, at first temporarily, and then permanently upon the resignation of his brother as head of the Cuban government.

In keeping with the historical zigzag policy pattern surrounding small businesses activities—euphemistically labeled these days as the “non-state sector”—while increasingly liberal, they have not been immune to temporary reversals. Among the more significant reforms were the approval of an increasing number of self-employment occupations, gradual expansion of the number of patrons restaurants could serve (as dictated by the allowed number of chairs in privately owned paladares), and the gradual, if uneven, relaxation of regulatory, taxing, and employment regulations. Absent has been the authorization for professionals (with minor exceptions, such as student tutoring) to privately engage in their crafts and the inability to provide wholesale markets where self-employed workers could purchase inputs for their small enterprises.

The authors of this volume, an economist and a sociologist, have combined their talents and carefully documented this ever-changing policy landscape, including the cooperative sector. They have centered their attention on post–Special Period policies and their implications, specifically to “evaluate the effects of these policy changes in terms of the generation of productive employment in the non-state sector, the efficient provision of goods and services by this emergent sector, and the reduction in the size and scope of the underground economy” (297).

While assessing post-1990 changes, Entrepreneurial Cuba also generated a systematic examination of the evolution of the self-employment sector in the early decades of the revolution in light of shifting ideological, political, and economic motivations. Likewise, the contextual setting is enhanced by placing Cuban self-employment within the broader global informal economy framework, particularly in Latin America, and by assessing the overall features of the second economy in socialist economies “neither regulated by the state nor included in its central plan” (41). These historical and contextual factors are of prime importance in assessing the promise and potential pitfalls the small enterprise sector confronts in a changing Cuba.

Rich in its analysis, the book is balanced and comprehensive. It is wide ranging in that it carefully evaluates the many factors impinging on the performance of the small business sector, including their legal and regulatory underpinnings. The authors also evaluate challenges in the Cuban economic model and how they have shaped the proclivity for Cuban entrepreneurs to bend the rules. Present is a treatment of the informal social and trading networks that have sustained the second economy, including the ever-present pilfering of state property and the regulatory and transactional corruption so prevalent in Cuba’s centralized economy.

While none of the above is new to students of the Cuban economy—as documented in previous studies and in countless anecdotal reports—Ritter and Henken make two major contributions. First, they summarize and analyze in a single source a vast amount of historical and contemporary information. The value of the multidisciplinary approach is most evident in the authors’ assessment of how the evolving policy environment has influenced the growth of paladares, the most important and visible segment of the nonstate sector. By focusing on this segment, the authors validate and strengthen their conclusions by drawing from experiences documented in longitudinal, qualitative case studies. The latter provide insights not readily gleaned from documentary and statistical sources by grounding the analysis in realistic appreciations of the challenges and opportunities faced by entrepreneurial Cubans. Most impressive is the capacity of Cuban entrepreneurs to adapt to a policy regime constantly shifting between encouraging and constraining their activities.

Commendable, too, is the authors’ balanced approach regarding the Cuban political environment and how it relates to the non-state sector. Without being bombastic, they are critical of the government when they need to be. One of their analytical premises is that the “growth of private employment and income represents a latent political threat to state power since it erodes the ideals of state ownership of the means of production, the central plan, and especially universal state employment” (275).

This dilemma dominates the concluding discussion of future policy options. Three scenarios are considered possible. The first entails a policy reversal with a return to Fidel’s orthodoxy. This scenario is regarded as unlikely, as Raúl’s policy discourse has discredited this option. A second scenario consists of maintaining the current course while allowing for the gradual but managed growth of the non-state sector. While this might be a viable alternative, it will have limited economic and employment generation effects unless the reform process is deepened by, for example, further liberalizing the tax and regulatory regimes and allowing for the provision of professional services.

The final scenario would be one in which reforms are accelerated, not only allowing for small business growth but also capable of accommodating the emergence of medium and large enterprises in a context where public, private, and cooperative sectors coexist (311). As Ritter and Henken recognize, this scenario is unlikely to come to fruition under the historical revolutionary leadership, it would have to entail the resolution of political antagonisms between Washington and Havana, and a reappraisal by the Cuban government of its relationship with the émigré population. Not mentioned by Ritter and Henken is that eventual political developments—not foreseen today—may facilitate the changes they anticipate under their third scenario.

In short, Entrepreneurial Cuba is a must-read for those interested in the country’s current situation. Its publication is timely not only for what it reveals regarding the country’s economic, social, and political situation but also for its insights regarding the country’s future evolution.

…………………………………………………………………………….

Table of Contents

 Table of Contents,

 List of Charts and Figures

Chapter I Introduction       

Chapter II      Cuba’s Small Enterprise Sector in International and Theoretical Perspective

Chapter III    Revolutionary Trajectories, Strategic Shifts, and Small Enterprise, 1959-1989

Chapter IV    Emergence and Containment During the “Special Period”, 1990-2006

Chapter V        The 2006-2011 Policy Framework for Small Enterprise under the Presidency of    Raul Castro

Chapter VI    The Movement towards Non-Agricultural Cooperatives

Chapter VII  The Underground Economy and Economic Illegalities

Chapter VIII  Ethnographic Case Studies of Microenterprise, 2001 vs. 2011

Chapter IX  Summary and Conclusions

APPENDIX                                                              

GLOSSARY                                                                                                                         

BIBLIOGRAPHY

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CUBA ABRE SU PRIMER MERCADO MAYORISTA DESTINADO SOLO A COOPERATIVAS PRIVADAS

Posted on March 20, 2018 by Arch Ritter

EFE,  17 de marzo de 2018 01:15 PM

Original Article: MERCADO MAYORISTA

LA HABANA

Mercabal, el primer mercado mayorista de Cuba, abrió el sábado sus puertas en La Habana destinado inicialmente solo a cooperativas privadas no agropecuarias y con la promesa de extenderlo a los demás trabajadores autónomos de la isla, informa el diario oficial Granma en portada.

El mercado cuenta ya con 35 clientes, que tienen acceso a un descuento del 20 por ciento del precio de venta minorista en productos como frijoles, cigarros, refrescos, cervezas, azúcar, sal, confituras, hamburguesas y salchichas, muy demandados en los restaurantes, cafeterías y bares del sector privado.

El pollo, uno de los alimentos más consumidos, se rebajará hasta un 30 por ciento respecto a su precio en la red minorista, indica Granma, que reconoce que el gobierno cubano responde así a “uno de los reclamos más reiterados de quienes ejercen las nuevas formas no estatales de gestión en el país”.

Localizado por ahora solo en la capital del país, los próximos mercados mayoristas abrirán “de forma paulatina” en el resto de la isla, “una vez que esta propuesta inicial esté en óptimo funcionamiento y en dependencia de los lugares donde más trabajadores por cuenta propia existan”, señaló la ministra.

En Cuba existen hoy más de medio millón de trabajadores privados o “cuentapropistas”, acogidos a las categorías de trabajo permitidas por el gobierno cubano.

Más de 12,000 son socios de cooperativas no agropecuarias, que ya suman unas 420 en todo el país, en su gran mayoría dedicadas a la gastronomía, el comercio, los servicios, la construcción y la industria.

Ubicado en el municipio habanero de Plaza de la Revolución, Mercabal abrirá de lunes a sábado con productos de diez proveedores directos, que reabastecerán el mercado según los pedidos mensuales de los clientes.

Para poder contratar los servicios de la nueva instalación los autónomos deben tener actualizada su ficha de cliente y poseer una cuenta con tarjeta magnética, emitida por el estatal Banco Metropolitano.

La ampliación del trabajo privado -donde se incluyen las cooperativas no agropecuarias- en el 2010 ha sido una de las reformas clave del gobierno del saliente mandatario cubano Raúl Castro para actualizar el modelo socialista y reducir las abultadas plantillas del sector estatal.

Desde agosto, la isla comenzó un proceso de reordenamiento del “cuentapropismo”, dentro del que paralizó temporalmente la entrega de licencias a restaurantes privados y casas de renta turísticas, entre otras actividades, para frenar ilegalidades, “desviaciones” y “corregir deficiencias”.

Las licencias congeladas son, precisamente, las más demandadas del sector.

A pesar de que prometió que no mantendría “por un período de tiempo muy largo” esta medida, el Gobierno cubano aún no ha retomado la entrega de autorizaciones a los autónomos cubanos, que ya representan el 12 por ciento de la fuerza laboral del país.

  

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CUBAN DRAFT RULES PROPOSE CURTAILING FLEDGLING PRIVATE SECTOR

Posted on February 23, 2018 by Arch Ritter

Sarah Marsh  FEBRUARY 22, 2018 / 7:08 PM

HAVANA (Reuters) – A draft of new Cuban economic regulations proposes increasing state control over the private sector and curtailing private enterprise, a copy of the document seen by Reuters showed.

The tightening may signal that the ruling Cuban Communist Party fears that free market reforms introduced eight years ago by President Raul Castro may have gone too far, amid a broader debate about rising inequality.

The draft document, circulating among Cuba experts and private entrepreneurs, goes beyond proposed restrictions announced in December. For example, it would allow homes only one license to operate a restaurant, cafeteria or bar. That would limit the number of seats per establishment to 50. Many of Havana’s most successful private restaurants currently hold several licenses enabling them to have a seating capacity of 100 or more.

There is uncertainty over the direction of economic policy generally as Cuba prepares in April to mark the end of six decades of rule by Castro and his older brother Fidel, who stood down formally as a leader in 2008. That has been heightened by U.S. President Donald Trump partially rolling back the Obama-era detente with the United States.

The head of the Communist Party’s reform commission, Marino Murillo, announced restrictions on the private sector in December, some of them included in the new document. But the draft regulations go into greater detail and show how far the push back could go.  “The decree strengthens control at a municipal, provincial and national level” over the private sector, according to the 166-page document, dated Aug. 3, 2017 and signed by Marcia Fernández Andreu, deputy chief of the secretariat of Cuba’s Council of Ministers.

The document said resolutions were drafted by the reform commission and were being sent to provincial and national organs of administration for consultation. Reuters could not independently verify its authenticity. Cuban authorities did not immediately respond to a request for comment.

Some analysts said they suspected the draft was leaked to gauge public opinion and could be revised.

The regulations state that measures that will apply to infractions will be more “rigorous.”

The government has increased criticism of wealth accumulation over the past year and gone on the offensive against tax evasion and other malpractices in the private sector.

The number of self-employed Cubans soared to 567,982 as of the middle of last year, versus 157,731 in 2010 at the start of the reform process designed to boost Cuba’s centrally planned economy.  Private sector workers now make up roughly 12 percent of the workforce, but the prosperity of some Cuban entrepreneurs, particularly those working in the tourist sector and receiving hard currency, has become a source of tension. The average state monthly wage is $30, the same sum a B&B owner can charge for a night’s stay.

The restrictions unveiled by Murillo in December included limiting business licenses to a single activity per entrepreneur.

Some entrepreneurs had hoped they could get around that by transferring business licenses, for activities as diverse as manicures or bookkeeping, to family members.

It was unclear from the draft document whether the measures would be applied retroactively.

Murillo said in December the number of categories in which self employment would be permitted would be reduced and in some cases consolidated. For example, manicurist, masseuse and hairdresser would fall under an expanded beauty salon license.  The draft lists 122 categories, down from approximately 200 previously.

The document calls for a new division under the Ministry of Labour to administer and control self-employed work.

 

 

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TOURISM BOOMING IN CUBA DESPITE TOUGHER NEW TRUMP POLICY

Posted on January 22, 2018 by Arch Ritter

Published 1:15 PM ET Fri, 19 Jan 2018, The Associated Press

Original article: Tourism Booming In Cuba

  • 2017 was a record year for Cuban tourism, with 4.7 million visitors pumping more than $3 billion into the island’s otherwise struggling economy.
  • But the tourism dollars from big-spending Americans seem to be heading into Cuba’s state sector and away from private business.
  • That’s largely due to tougher Trump policy requiring “people-to-people” travel to take place only in tour groups, which depend largely on Cuban government transportation and guides.

On a sweltering early summer afternoon in Miami’s Little Havana, President Donald Trump told a cheering Cuban-American crowd that he was rolling back some of Barack Obama‘s opening to Cuba in order to starve the island’s military-run economy of U.S. tourism dollars and ratchet up pressure for regime change.

That doesn’t appear to be happening. Travel to Cuba is booming from dozens of countries, including the U.S. And the tourism dollars from big-spending Americans seem to be heading into Cuba’s state sector and away from private business, according to Cuban state figures, experts and private business people themselves.

The government figures show that 2017 was a record year for tourism, with 4.7 million visitors pumping more than $3 billion into the island’s otherwise struggling economy. The number of American travelers rose to 619,000, more than six times the pre-Obama level. But amid the boom — an 18 percent increase over 2016 — owners of private restaurants and bed-and-breakfasts are reporting a sharp drop-off.

“There was an explosion of tourists in the months after President Obama’s detente announcement. They were everywhere!” said Rodolfo Morales, a retired government worker who rents two rooms in his home for about $30 a night. “Since then, it’s fallen off.”

The ultimate destination of American tourism spending in Cuba seems an obscure data point, but it’s highly relevant to a decades-old goal of American foreign policy — encouraging change in Cuba’s single-party, centrally planned system. For more than 50 years, Washington sought to strangle nearly all trade with the island in hopes of spurring economic collapse. Obama changed that policy to one of promoting engagement as a way of strengthening a Cuban private sector that could grow into a middle class empowered to demand reform.

Cuba’s tourism boom began shortly after Obama and Cuban President Raul Castro announced in December 2014 that their countries would re-establish diplomatic relations and move toward normalization. U.S. cruise ships began docking in the Bay of Havana and U.S. airlines started regular flights to cities across the island. Overall tourism last year was up 56 percent over Cuba’s roughly 3 million visitors in 2014.

While the U.S. prohibits tourism to Cuba, Americans can travel here for specially designated purposes like religious activity or the vaguely defined category of “people-to-people” cultural interaction.

Obama allowed individuals to participate in “people-to-people” activities outside official tour groups. Hundreds of thousands of Americans responded by designing their own Cuban vacations without fear of government penalties. Since Cuba largely steers tour groups to government-run facilities, Americans traveling on their own became a vital market for the island’s private entrepreneurs, hotly desired for their free spending, heavy tipping and a desire to see a “real” Cuba beyond all-inclusive beach resorts and quick stops on tour buses. The surge helped travel-related businesses maintain their role as by far the most successful players in Cuba’s small but growing private sector.

Trump’s new policy re-imposed the required for “people-to-people” travel to take place only in tour groups, which depend largely on Cuban government transportation and guides.

As a result, many private business people are seeing so many fewer Americans that it feels like their numbers are dropping, even though the statistics say otherwise.

“Tourism has grown in Cuba, with the exception of American tourism,” said Nelson Lopez, a private tour guide. “But I’m sure that sometime soon they’ll be back.”

While Trump’s new rules didn’t take effect until November, their announcement in June led to an almost immediate slackening in business from individual Americans, many Cuban entrepreneurs say. The situation was worsened by Hurricane Irma striking Cuba’s northern coast in September and by a Cuban government freeze on new licenses for businesses including restaurants and bed-and-breakfasts. Cuban officials say the freeze was needed to control tax evasion, purchase of stolen state goods and other illegality in the private sector, but it’s had the effect of further restricting private-sector activity in the wake of Trump’s policy change.

Cuban state tourism officials did not respond to requests for comment.

Trump’s policy changes did not touch flights or cruise ships. Jose Luis Perello, a tourism expert at the University of Havana, said more than 541,000 cruise ship passengers visited Cuba in 2017, compared with 184,000 the previous year. Even as entrepreneurs see fewer American clients, many of those cruise passengers are coming from the United States, he said.

Yunaika Estanque, who runs a three-room bed-and-breakfast overlooking the Bay of Havana, says she has been able to weather a sharp drop in American guests because a British tour agency still sends her clients, but things still aren’t good.

“Without a doubt our best year was 2016, before the Trump presidency,” she said. “I’ve been talking with other bed-and-breakfast owners and they’re in bad shape.”

A Great Casa Particular, my Home for Cuba visits from 1997 to 2017, undoubtedly still thriving due to its excellence.

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PRIVATE SELF-EMPLOYMENT UNDER REFORM SOCIALISM IN CUBA

Posted on January 4, 2018 by Arch Ritter

Mario A. Gonzalez-Corzo and Orlando Justo, The City University of New York

The Journal of Private Enterprise 32(2), 2017, 45–82

Complete Article Here: 2017_Private Self-Employment under reform Socialism in Cuba Journal_of_Private_Enterprise, 32, 2.

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Abstract

The expansion of private self-employment is one of the main economic measures implemented by the Cuban government since 2010 to update its socialist economy under a unique brand of “reform socialism.” State policies (a “push factor”), as well as economic incentives and the desire for greater economic independence (“pull factors”) have contributed to the remarkable growth of self-employment in Cuba since 2010. While employment in the state sector has declined significantly (13 percent) since 2010, self-employment has grown by more than 187 percent, and its share of total employment has increased from 3 percent to close to 9 percent. Despite these advances, Cuba’s self-employed workers face significant obstacles that limit their growth and potential economic contributions. In addition to addressing these challenges and obstacles, ensuring the success of Cuba’s self-employment reforms requires re-conceptualizing the state’s attitude toward self-employed workers and their potential contributions to economic development and growth.

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U.S. POLICY IS HURTING CUBA’S ENTREPRENEURS

Posted on December 12, 2017 by Arch Ritter

BY NIURIS HIGUERAS, YAMINA VICENTE, JULIA DE LA ROSA QUESADA AND MARLA RECIO

Miami Herald, DECEMBER 11, 2017

Original Article: HURTING CUBA’S ENTREPRENEURS

NIURIS HIGUERAS IS THE OWNER OF ATELIER RESTAURANT; YAMINA VICENTE IS THE OWNER OF DECORAZON, A DECORATING COMPANY; JULIA DE LA ROSA QUESADA IS CO-OWNER OF LA ROSA DE ORTEGA B&B; AND MARLA RECIO IS THE OWNER OF HAVANA REVERIE, AN EVENT PLANNING COMPANY.

It is a tough moment in Cuba for hundreds of thousands of entrepreneurs and millions of families with relatives in the United States. President Trump’s new Cuba policy, announced in June and recently written into law, and the partial draw-down of the U.S. Embassy, are hurting the private sector and taking a terrible toll on Cuban families.

As business owners and the heads of our households, we’re saddened by the turn of events that are causing so many of our friends, family and colleagues to suffer. We’re tired of hearing about “support for the Cuban people,” while those very policies take money out of our pockets and food off our tables, and separate us from our families.

The new restrictions on travel are crushing the private sector. Limits on individual travel and calls for stricter enforcement have confused and scared U.S. visitors, many of whom are choosing to go elsewhere or canceling their Cuba travel plans. As a way of kicking us while we’re down, an unjust State Department travel warning and the partial closure of the U.S. Embassy in Havana have further affected U.S. travel and hurt our businesses.

The closure of consular services is dividing families, making reunification and family visits nearly impossible. Hundreds of thousands of Cuban families are suffering, not knowing when they will be reunited with loved ones. It also makes it impossible for entrepreneurs to take part in workshops and training programs, cultural groups to tour the U.S. and Cuban students to get visas to study in the States. The accompanying travel warning, which is completely unjustified, is scaring off American visitors.

Together, the travel warning and new restrictions have had a clear impact: Restaurants are empty, occupancy rates are down, events are canceled and freelance guides and taxi drivers and others roam the streets looking for work. Many of us now must decide which of our workers to lay off.

Unfortunately, despite the rhetoric in U.S. policy about support for the Cuban people and support for the private sector, our reality is not taken into account and our wants and hopes fall on deaf ears. Last year, we went to Washington, D.C., to have lawmakers hear our voices and discuss how a more open policy of trade and travel helps Cuba’s private businesses. The country’s top 100 private businesses sent a letter to President Trump making that case, believing as a business person he would understand.

A group of us, Cuban women entrepreneurs, reached out to Ivanka Trump, assistant to the president, hopeful she would understand the importance of empowering women who are business leaders on the island. Our letters and meeting requests to the administration went unanswered, time and time again.

Sen. Marco Rubio claims to be the leading architect of the administration’s policy toward our country. Facing criticism of how the new travel policy would affect Cuban entrepreneurs, Rubio tweeted: “If Cuban people are hurt it will be because the Castro govt doesn’t allow them to own their own business, not because of the new policy.”

We would like Rubio to know that we do in fact own our own businesses, and we are hurt by the new policy.

We have repeatedly requested meetings with Rubio and his staff to share our knowledge and firsthand experiences as entrepreneurs and community leaders in Cuba. Unfortunately, like administration officials, he has ignored our requests to meet.

Policymakers refusal to meet with us and, more important, take our aspirations and livelihoods into account, is symbolic of decades of U.S. policies that aim to punish the Cuban people because of disapproval of the Cuban government. Not only is this way of thinking and acting ineffective and counterproductive, it is cruel and causes real suffering for the people they’re supposedly trying to help.

We call on Rubio to stop trying to divide and separate our two countries. Stop pushing forward measures that harm families, entrepreneurs and average Cubans. We also call on the State Department to immediately lift the unwarranted and politicized travel warning, fully reopen embassies and make clear that the confusing and convoluted new regulations permit individual travel.

Rhetoric, finger pointing, and restrictions are not the type of “support” the Cuban people want and need. What we want are fully functioning embassies and the freedom of travel for Americans and Cubans alike. We can take care of the rest.

NIURIS HIGUERAS

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