Tuesday, July 31, 2012

Cuba’s Entrepreneurs: Foundation of a New Private Sector

Cuba’s entrepreneurs were viewed as a necessary evil in the 1990’s and as a strategic necessity now. 

They are essential to the government’s goals of cutting its own “inflated payrolls,” building a larger private sector, and improving productivity and fiscal balance.  This paper (pdf) examines the new policies that have enabled Cuba’s entrepreneurial ranks nearly to triple since 2010 and the policies that hold them back still, and looks at issues surrounding the larger “non-state” sector that must grow well beyond small-scale entrepreneurship if the government’s own goals are to be met.

Odds and ends: the entrepreneurial sector

Catching up on news about Cuba’s trabajadores por cuenta propia:

·         AP reports on the first rentals of retail space in Old Havana to entrepreneurs by the historian’s office, which is the all-around municipal authority in city’s two square kilometer colonial core.

·         There are 651 private restaurants in Cuba compared to 113 in late 2010, Trabajadores reports.

·         Blogger Wendy Guerra on her favorite neighborhood refuge, a new private hair and manicure salon.

·         Unlike before, entrepreneurs can now enter contracts with any kind of government or business entity.  Granma covered the province of Artemisa’s practice of contracting with entrepreneurs to get construtions and renovation projects done, lauding the results.  Reuters summed it up in English here.

·         Juventud Rebelde sent reporters all around the island to report on how Cuban youth are responding to the possibilities in the entrepreneurial sector.  It reports generally positive opinions, including some who are happy to have come in from the black market.  Sore points: the tax system and the lack of wholesale supplies.  “Many consider,” the article says, that regulations “should be more in line with the country’s high level of professional formation, since many indicate that they are in transitory jobs.”  One 23-year-old is quoted saying that the new possibilities reduce the desire to leave Cuba.  That’s a sentiment that government leaders, concerned about the country’s growing demographic imbalance between workers and dependents, surely hope is widespread.

·         A short article in Trabajadores on state workers who are being converted on the spot into entrepreneurs, staying in the same line of work and renting their business premises from the state.  It’s a reminder that not all “layoffs” are going to involve pink slips and a job search; many will be a matter of turning a public enterprise into a private one.

·         The Central Bank president discusses the new credit policy in Trabajadores, expressing surprise that few entrepreneurs are seeking loans; 99 percent of loan applications have to do with home repair and renovation projects.

·         Granma: Villa Clara had one of the highest rates of on-time filing of tax returns, 97 percent, after which comes the tax office’s task of going after the late filers to figure out what they owe, including possible penalties.

·         On the negative side, a large and popular western Havana restaurant and entertainment venue that operated under the rules for trabajo por cuenta propia was shut down based on allegations of “enrichment.”  El Cabildo was first covered here by Reuters.  BBC Spanish covered the closing, noting the owner’s protest to authorities, where he said it hurts all the more “because I am a revolutionary and believe deeply in the humanistic work of the revolution.”  More detail from Nick Miroff at Global Post.


“Raúl Castro has co-opted some of the points that made up the agenda of his political opponents. The aperture for small private businesses, the ability to buy and sell houses and cars, and the leasing of vacant land in usufruct, are all part of the measures implemented by the government in the last four years. Such a scenario obliges the opposition groups to chart new horizons and to redefine their proposals.”

   – Blogger Yoani Sanchez in Huffington Post

Charges brought in deaths of Paya, Cepero

A Granma editorial says that the Spanish Partido Popular activist Angel Carromero, driver of the car in which Cuban dissidents Oswaldo Paya and Harold Cepero were killed, now faces charges of vehicular manslaughter (“se encuentra instruido de cargo por homicidio en ocasión de conducir vehículo por la vía pública”), and Swedish Christian Democratic activist Jens Aron Modig is free to leave Cuba.  Below, the video of “a summary of the statements” made by Modig to reporters in Havana yesterday, as shown on last night’s Mesa Redonda program on Cuban television.  Prensa Latina story in English here

Monday, July 30, 2012

Cuban entrepreneurs, by the numbers

The following appears in a publication that I’ll publish here tomorrow; its figures are updated from those that appear in the print version, and I’ll further update them here from time to time:

390,598…the number of Cubans in the entrepreneurial sector May 1, 2012, including 62,747 employees

7.6…their percentage of the Cuban workforce

233,727…the number who joined this sector since October 2010   

15 and 11…the percentages of those working in food service and transportation, respectively, as of July 2012

600,000…the number expected to be working in this sector by 2013 according to government economic plans   

66…the percent of entrepreneurs who had no formal job prior to joining the sector   

18…the percent of those who had been working for the state  

170,000…the planned 2012 reduction in state sector employees   

1,500,000…the planned reduction in state sector employees by 2015   

25…the percent of new entrepreneurs who gave up and turned in their licenses, as of September 2011   

Statements from Carromero and Modig (Updated)

Statements of driver Angel Carromero and passenger Jens Modig, the Spaniard and Swede who were in the car in which Oswaldo Paya and Harold Cepero were killed, were presented on video today in a press conference organized by Cuban officials in Havana. 

Modig also appeared in person. 

Both have been held in Havana as the investigation has proceeded.  [Update: From BBC: “After the news conference, Mr Modig’s party said he had been released from custody and was free to leave Cuba.”  And this tweet from Yoani Sanchez says it was announced that Modig would be on tonight’s 6:30 p.m. Cuban national news broadcast...can't find video of that, but here's some video of Carromero's statement.]

Carromero could face criminal charges.

According to reports from the press conference they said no other car was involved, and Carromero said no car had hit them from behind.  Their statements coincided with the official account released last Friday – Modig was snoozing, Carromero driving, Carromero came upon an unpaved patch of road and lost control after braking.

Modig reportedly said that he carried 4,000 Euros to distribute to Cuban dissidents and that they intended to work with Paya’s daughter and others to create youth movements. 

More detail in stories from AP, BBC, and AFP, and in Spanish from EFE.

Friday, July 27, 2012

Interior Ministry note on the Paya crash

Cuba’s Interior Ministry today released a note with illustrations on the crash that claimed the lives of Oswaldo Paya and Harold Cepero last Sunday. 

Citing local Cuban witnesses by name, it says that the car, driven by the Spaniard Carromero, came upon a two-kilometer stretch of highway that was unpaved and under repair, lost control when the driver braked, and crashed.  It further says that Carromero’s statement was to that effect, and that the Swede Modig stated that he was dozing in the passenger seat during that part of the trip and awakened when Carromero hit the brakes.  It says that the group left Havana at 6:00 a.m. en route to Santiago.  The note concludes by saying that the investigation continues and says nothing regarding possible charges.

The National Assembly session: cooperatives, taxes, and more

Here’s a roundup of information coming out of the speeches and coverage of this week’s National Assembly session.


President Raul Castro spoke mainly about economics, noting stronger-than-anticipated growth (2.1 percent in the first half of 2012), a still-lagging agricultural sector, and a 17 percent increase in sugar production.  The process of “reordering” debt is contributing to a “gradual but sustained rescue of the credibility of the Cuban economy,” he said.

He said that following a large pilot program in the creation of non-farm cooperatives (more below), a new law governing these cooperatives will be developed.

As for the pace of reform, he held to his often-expressed conviction that the pace is right, steady but not rushed, proceeding with “decision, serenity, and audacity.”  He noted that many outside Cuba, “not always with good intentions,” call for more rapid action.  He told delegates that it is no accident that he and others refer to the lineamientos by number as they discuss their implementation; the idea is to reinforce the commitment to implement them and “not to permit that transcendental decisions for the future of the nation end up once again as a dead letter.”

His words on migration policy surely disappointed.  Rather than announce action on the commitment to loosen restrictions on Cubans traveling abroad, he reiterated the commitment to “reformulate” current norms and “proceed to their gradual application, taking into account their associated effects and the international situation.”

The National Assembly elected a new vice president, Ana Maria Mari Machado, a lawyer and supreme court judge.  She replaces veteran Jaime Crombet, who resigned for health reasons.  Raul Castro gave Crombet a fond sendoff and said he expects Crombet to work directly with him on modifications to Cuba’s constitution.


Economic reform czar Marino Murillo explained that a large-scale trial run will begin later this year in the conversion of state businesses into private non-farm cooperatives (Granma, Trabajadores). 

Notwithstanding the contributions made by the greatly expanded small entrepreneur sector, this is the initiative that must succeed in order to meet targets for reducing state sector employment and expanding the private sector.  Cuba has long had cooperatives in the farm sector; what’s new here is the application of that formula to other areas of production.  The details, as presented by Murillo:

·         About 200 businesses have been selected, almost half of which are farmers markets.

·         The legal norms are nearly finished, after which the pilot projects will begin.

·         Some will start before year’s end, the rest will follow in 2013.

·         Land and buildings will remain state property and be rented to the cooperatives for up to 10 years.

·         The 2013 economic plan “foresees” providing $100 million in credits to support these cooperatives.


The new tax law, approved but not yet published, was explained by deputy Osvaldo Martinez.  (Granma story here, and the finance minister’s preview of the law in late 2010 is here.)

Martinez said the law’s objectives, beyond generating revenue, are to encourage activities that “contribute to socio-economic development” and to discourage those that do not, and to redistribute income to those in need.

Income tax will be levied on state sector salaries in the future, but not as long as “current economic conditions” exist.

There is a slight tax rate reduction for entrepreneurs, between three and seven percent for those in the three lowest brackets.

Agricultural producers will pay income tax, but at rates 50 percent lower than those applied to other sectors.  Farmers who receive parcels of land from the state will be exempt from income tax, property or tenancy tax, and tax on hired labor for the first two years, and for the first four years if they have had to spend time clearing the land of plants such as marabu.

Property taxes applied to housing and vacant land will not go into effect until current economic conditions change and until property registries are updated.

The tax that entrepreneurs pay for each worker they hire will be reduced over the course of five years from the current 25 percent rate to 5 percent.  The tax will continue to be suspended altogether for those who employ fewer than six workers.

A series of taxes aimed at protecting the environment and natural resources will go into effect for the use of beaches and bays, the right to use underground waters and forest resources, and for other activities.

State enterprises

Reuters describes a loosening of controls on state enterprises as follows:

Murillo, in a two-hour presentation to the National Assembly, announced that an unspecified number of state companies would be partially deregulated by the end of the year.

He said the companies, previously part of various ministries, would be able to make day-to-day business decisions without waiting for government approval, manage their labor relations and set prices. After meeting state contracts, they will also be able to sell excess production on the open market.

The companies will be self-financed, including through bank credits, and expected to cover their losses, versus handing over all profit to the state and receiving financing and subsidies from the treasury.

Instead of being micro-managed by the ministries, Murillo said the companies would be evaluated by “four or five indicators” such as earnings, the relation of productivity to salaries and their ability to meet the terms of state contracts.

Here are additional stories from AP and EFE.