314,538 entrepreneurs

Since the early 1990’s they have been a barometer of the government’s willingness to mix private elements into the socialist economy.

In the current economic policy shakeup, the government has determined that productivity must increase, one million workers on state payrolls are unproductive and costly and should leave, and the solution lies not in new, low-productivity government programs but rather in the expansion of the private sector, where the productivity is. So the numbers of entrepreneurs are going up and will continue to do so. The development of non-farm cooperatives will add another dimension to this sector.

As for the entrepreneurs I cited above, the government’s policies now give positive mention to private bed-and-breakfasts as part of the tourism sector, and the government is trying to get out of the food service business rather than squeeze others out.

So the increase in numbers is interesting, and the change in official attitudes ecen more so (see Raul’s ideas on attitude adjustment from last December). The cuentapropistas were a necessary evil not long ago, and now they are regarded as a strategic necessity.

On second thought, jobs first

The May 27 note in Granma (“To continue facilitating trabajo por cuenta propia”) reported on decisions by the Council of Ministers that changed a few policies for the better, in ways that favor entrepreneurship and job creation. The decision is a sign that new policies in this reform process are being reviewed promptly, and officials are open to change.

It seems, in othjer words, that the Permanent Government Commission for Implementation and Development, a group led by former economy minister Marino Murillo and that reports to the Councils of State and Ministers, is doing its job as a sort of expediter-in-chief of the reform process.

In this case, the new policies governing entrepreneurs are scarcely six months old, but some features of the new tax code have been changed to put a higher priority on job creation first and to let taxation and revenue collection take a back seat. Hence:

· A tax holiday: The tax that entrepreneurs have to pay for each employee they hire has been suspended for 2011 for businesses with fewer than six employees.

· All entrepreneurs may now hire employees, instead of only those in selected lines of work.

· In eight lines of work where a minimum number of employees was stipulated, that requirement is now gone.

· Some monthly tax payments (roughly akin to our withholding) were reduced. Deductions were increased in some lines of work.

· Businesses can close for repairs more easily and for longer periods, suspending their licenses and their tax obligations.

· The minimum monthly tax for room rentals was dropped 25 percent to 150 pesos. Taxes for whole-house rentals dropped too.

· Private restaurants had the limit on their number of seats incresed from 20 to 50.

· Government businesses will be identified, “primarily in food service,” where there is a “low level of activity,” and where the premises can be utilized better by renting it to cuentapropistas.

More to do

The tax changes seem to respond to discussion that took place at the Party Congress (see this video starting at 2:30) and in official and Catholic church media, where it was argued that high tax rates would stymie the very growth of private enterprise that the government sought to foster.

The government’s task is much larger, and the Party’s economic policy guidelines (lineamientos) approved at he Congress amount to the system challenging itself to change, to create a very different kind of socialist economy. Page after page, the tasks require the government to let go in different areas of economic policy – to allow private entrepreneurs to provide services once provided by the state, to allow private entities to contract with government entities and joint ventures, to allow state enterprises to fail, to allow private cooperatives to form in non-agriculture sectors, to allow local governments more autonomy, and on and on. The finance minister said last December that the private sector would grow by 1.8 million workers in the coming years.

The growth in small entrepreneurship can be fairly described as just a start on the actions needed to reach the government’s ambitious goals. But it’s not just talk, it’s a real action that, one hopes, is a sign of much more to come.

Odds and ends

• A Freedom House opinion survey performed in Cuba shows that “Cubans remain generally pessimistic about reforms and skeptical about their future,” and that there are “moderate levels of optimism regarding the reforms,” according to two Freedom House professionals writing in the Miami Herald. I’m confused too; I guess you have to read the report itself.

• Reuters: Cuban oil production was up in 2010 and is up so far this year, while natural gas production dipped in 2010.

• The New York Times follows Alejandrina Hernandez, a Cuban American who goes back and forth to Cuba and earns money delivering baggage and packages for other Cuban Americans who send things to their loved ones. A poignant comment from her: “I have half my heart here and the other half there. The sad thing is, I am not really happy in either place."

• EFE: Guillermo Farinas began his 24th hunger strike last week and, in another act of self-abnegation, he ended it when other dissidents told him that if he did not stop they would start hunger strikes of their own. “I can deal with my own death but not with the death of others,” he said, noting that he did not want to be “contributing to the destruction” of the movement.

• “Internet in a suitcase,” a U.S. government initiative to develop a full set of network equipment that can be hand-carried to places where censorship or other government actions impede open Web access; New York Times story here, illustration here.

Freedom House to USAID: Keep your questions, keep your conditions, keep your money

USAID is asking for basic information about the operations it is funding in Cuba and one of its grantees, Freedom House, says the questions are more than onerous. Freedom House is returning a $1.7 million grant, the Herald reports, and will stick with $1.3 million it received from the State Department for other Cuba programs.

Where to begin?

First, this would seem to close the book on the debate over whether our foreign aid agency is running covert operations in Cuba. Its own grantee is saying that it can’t run its programs in secret if it doesn’t keep them secret from the government that funds them.

Second, it’s good that USAID is trying to get on top of its own operations in Cuba. The questions might not be necessary in other countries, but this is a place where one USAID operative landed in jail, and where the principal contacts in other operations have turned out to be Cuban intelligence agents. (See here and here.) Whether you like the programs or not, that amounts to a complete waste of money. Does anyone doubt that all the equipment that Alan Gross delivered was confiscated, and that his entire operation provided zero value for the U.S. tax dollars invested in it?

The new paladares

Paladares from Patrick H. Murphy on Vimeo.

Above, a nine-minute video on Cuba’s new paladares (private restaurants) produced by the Cuba Study Abroad Program of New York University’s Tisch School for the Arts.

On another note, dissident leader Martha Beatriz Roque roundly dismisses the opening to small enterprise and those who think it might usher change in the Cuban economy. That’s a “crass error,” she says, because “one cannot have even a bit of confidence in what the regime does.” She is also irritated at “those who imagine that dissidents can work as entrepreneurs to solve their financial problems.”