Cuba’s Efforts to Expand the Private Sector

The degree of impatience with which people regard changes in Cuba never ceases to amaze me. The article “Cuba Hits Wall in 2-Year Push to Expand the Private Sector” (The New York Times) is a perfect example. Two (to five) years to overhaul the economic structure of an island with a population of over 11 million . . . this is slow? See excerpts here:

Nearly two years into the Cuban government’s economic overhaul aimed at slashing public payrolls and bolstering private enterprise, the reforms have slowed so much that many Cuban entrepreneurs and intellectuals are questioning the aging leadership’s ability — or will — to reshape one of the world’s last Communist systems and shift nearly half of the island’s output to private hands. Those awaiting measures to create even more opportunity for private business got the opposite last week, when news spread of a little-advertised government decision to charge steep customs duties on the informal imports, from Miami and elsewhere, that are the lifeblood of many young businesses. “This could have a huge impact,” said Emilio Morales, president of the Miami-based Havana Consulting Group, who said state-owned shops in Cuba were losing business to street vendors. “It shows the state isn’t ready to compete with the private sector.”

After the Cuban government began allowing people to open businesses in late 2010, nearly a quarter of a million of them have opted to work for themselves over the past 20 months, opening restaurants, snack bars and makeshift shops, driving taxis and fixing cellphones. Together with those who took advantage of an earlier experiment with privatization in the 1990s, about 387,000 Cubans, out of a population of about 11 million, are now self-employed; Cubans are also buying and selling homes and cars among themselves for the first time in 50 years.

As the private sector has grown, so has the deluge of goods brought to Cuba each day in suitcases and duffel bags, principally from Panama, Ecuador, the United States and Spain. With no access to a wholesale market, Cubans turn to friends, relatives and so-called mules for everything from food to trinkets to iPhones. This parallel trade has ballooned to more than $1 billion per year, Mr. Morales estimates, since the Obama administration began loosening of restrictions on travel and remittances in 2009.

[. . .] Economists, businesspeople and diplomats believe President Raúl Castro is treading carefully because of resistance from midlevel functionaries reluctant to lose their perks, and from conservative officials nervous about the social and political impact of economic enfranchisement. The Cuban leader, who has sworn off the “shock therapies” that ruptured the Soviet Union, said in a speech in December that the government would proceed “without hurry or improvisation, working to overcome the old dogmatic mind-set and correcting any mistakes in a timely fashion.”  [. . .] Given the lack of progress, the government’s pledge in April to move about 40 percent of the country’s output to the nonstate sector in five years is less and less plausible, experts say.

[. . .] Not all the entrepreneurs are struggling. Some restaurants and taxi services are making profits, and Carlos Saladrigas, a Cuban-American businessman, said during a visit to Havana in March that he knew of people “making a lot of money, even by American standards.” In interviews, a dozen Cuban entrepreneurs said they were making much more than they were in the public sector.

For full article, see http://www.nytimes.com/2012/07/17/world/americas/economists-question-cubas-commitment-to-privatizing-businesses.html?_r=1&nl=todaysheadlines&emc=tha2_20120717

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