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article imageCuba set to tighten screws on private sector

By Carlos BATISTA (AFP)     Dec 4, 2018 in Business

Ten years after they were first authorized to do business in Cuba, private entrepreneurs will be subjected to tougher restrictions from Friday -- a move likely to stall their expansion on the communist-ruled island.

For Estrella Rivas, who rents out rooms in Havana's Vedado neighborhood, the new rules means she will be unable to offer breakfast to her guests -- just a place to sleep.

"That means less money for me," Rivas says matter-of-factly.

So who is going to enforce the new rules on private-sector businesses, which now account for 13 percent of Cuba's workforce, or 592,000 people?

"I don't know," replies Rivas. "It seems there will be inspectors questioning the tourists."

Since the new measures were published in July in the country's official gazette, setting off a 150-day countdown to implementation that ends Friday, the government has worked overtime to explain them.

But those efforts have been to no avail -- confusion is still the order of the day.

For lawyer Julio Antonio Fernandez, it's pretty simple: the new rules will "put significant limits on private business activity."

"It's a devastating blow to a lot of people," Fernandez told AFP.

Since 2008, these small business owners have run restaurants, fixed bikes, made clothes, driven taxis, cut hair... at least 1.5 million people are believed to be dependent on that income, on an island of 11.2 million.

- One license per person -

The new constitution, which will be put to a referendum on February 24, seemed to promise great new things for entrepreneurs, as it recognizes for the first time the role of market forces and private enterprise in Cuba.

It seemed to be a way to codify former president Raul Castro's efforts to modernize the Cuban economy by allowing individuals to run their own businesses.

But new President Miguel Diaz-Canel, who took over from Castro in April, "appears set on pursuing progressive reforms without touching the backbone of the centralized system, or the state's monopoly on commerce," Cuban economist Pavel Vidal told AFP.

With economic growth barely registering at 1.1 percent in the first half of 2018, the government seems more and more interested in foreign investment, rather than in a homegrown groundswell of economic activity -- hence the new restrictions.

Among the most significant moves are new limits on business licenses, with only one allowed per person and per location. In theory, that would prevent a restaurant from having a separate bar or a guest house from serving food.

A business owner will also have to have a bank account and signed contracts with his or her employees.

The number of authorized trade categories will be reduced from 201 to 123.

And the new legislation forbids all negotiations with foreign entities, who are more and more present in Cuba. There are new types of infractions on the books, with stiffer fines.

- Welcome or not? -

The government's stated goal is to combat tax evasion and off-the-books employment -- in other words, don't get rich on the backs of others in a society that is meant to be egalitarian.

The new constitution, which reaffirms that Cuba is socialist by definition, specifies that private property must not be "concentrated" -- a phrase that many Cubans see as an official ban on being too successful.

For Fernandez, that part of the constitution must be more explicit or "we are preventing business owners from going as far as they can, from making real progress."

Estaban Morales, a political analyst and economist, says if Havana subjects its entrepreneurs to too many restrictions and regulations, it begs the question of whether "they are really welcome or not in our economy."

A dollar a day is roughly the average monthly wage for a government worker, but those in private enterprises can make far more.

For now, the government seems to be putting its emphasis on private cooperatives, which will have sole access to the island's wholesale trade.

In late September, there were 434 such cooperatives (outside the farm sector), 157 of them in the restaurant business. But according to the official blog Cubadebate, "quality, image and prices leave much to be desired."

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