Cuba opening to private enterprise spurs service sector start-ups
Cuba opening to private enterprise spurs service sector start-ups
President Raul Castro has ordered a long list of reforms, and Cuba has
embarked on a far-reaching experiment to salvage its depleted and, until
now, tightly regulated Marxist economy.
Private business gets a boost in Cuba
By Tracy Wilkinson, Los Angeles Times
August 6, 2011, 5:01 p.m.
Reporting from Havana—
They began with a hose and a few rags when Amilcar Santa Cruz and his 30
siblings and cousins set up a carwash in Havana's Miramar district, a
little family business to help make ends meet.
And that's all it was for several years.
But in the last few months, the business has exploded. The carwash today
is a bustling piece of new Cuban enterprise, complete with metal
roofing, fluorescent lighting, a cafe and a full line of air fresheners
to hang from the rearview mirror.
"Everyone here is real hardworking," Santa Cruz said. "It's all about
Cuba has embarked on a far-reaching experiment to salvage its depleted
and, until now, tightly regulated Marxist economy. By significantly
expanding permits for Cubans to open their own businesses and hire
workers, the Communist government has launched the island on its most
remarkable change in years, an expansion of free enterprise that was
unthinkable when Fidel Castro was in full control.
But his more pragmatic younger brother, Raul, who formally took over in
2008, has ordered a long list of reforms that include slashing the state
workforce by up to 1 million people, eliminating many of the subsidies
that dominated life here and, most recently, promising to ease travel
off the island by Cubans.
Change, of course, comes in fits and starts. Most Cubans probably have
yet to feel much in the way of new prosperity, and many among the
emerging crop of fledgling entrepreneurs continue to complain of
burdensome red tape and the taxes they are required to pay. With credit
virtually nonexistent, most must scramble for other sources of capital,
such as remittances from relatives in the United States or Europe.
Still, a walk along the seafront Malecon, or through graceful Old
Havana, or in any residential neighborhood, down a street of crumbling
facades or past freshly painted colonial homes reveals a buzz of
activity. Hand-lettered signs have popped up, seemingly every few yards,
announcing a new restaurant, hair salon or cellular telephone repair shop.
At Santa Cruz's carwash, business the other day was brisk. Customers
pulled in one after another, from a boxy old white Lada to a fancy
Juan Formell, the conductor of the iconic Cuban band Los Van Van, was
there having his car washed, the interior swept, the tires fortified
with a silicone mixture. It all costs up to 5 pesos, or roughly $5, a
fortune for most Cubans but worth every cent, Formell said. (Waxing
"We need a lot more places like this," Formell said. "The private
business pays a lot more attention to detail and is a lot more careful
than the state. This is good for society and, in a few years, the
economy will really take off."
Santa Cruz said his family has gradually been able to move out of the
tiny house shared by so many. And last month they added the cafe, with
its fresh coat of sea-green paint and Italian-style tile, where cousin
Yelena Ponce was dishing out thick pork chops into little cardboard
boxes for hungry customers.
"The business gives us enough to live and then to do a little more,"
Santa Cruz said.
Cuba's economic experiment has the potential to transform its society.
The new policy creates jobs, circulates money and stirs a new mentality
that values quality and competition. It will not completely remake the
economy, however, because for the most part the new work involves
services and not production. But it's an important beginning.
As of July 19, according to Deputy Labor Minister Carlos Mateu, more
than 325,900 Cubans had taken out licenses to open, run or work at
private businesses involving nearly 200 designated activities, including
hairstyling, carpentry, shoemaking and dance instruction.
Another important change is that proprietors no longer have to hire only
relatives; with the proper license, they can employ any Cuban.
Nowhere is the boom bigger than in restaurants. The Cuban government
first permitted privately run eateries, known as paladares, from the
Spanish word for "palate," in the difficult 1990s, when the nation was
reeling from the collapse of the Soviet empire and the loss of its major
sponsor. But the paladares operated with crippling restrictions, and
only the hardiest survived.
Today you can easily find choices varying from the simplest pizza to
true gourmet dining. By a rough estimate, more than 100 restaurants have
opened in recent months.
Roberto Robaina, unceremoniously dumped as foreign minister in 1999, has
just opened the doors on his Chaplain Cafe, where customers sit on white
wrought-iron furniture and nibble salmon-stuffed cucumber rolls on black
"I wanted to do something different," Robaina said. Dedicated to
painting after leaving government (and being expelled from the Communist
Party), Robaina has decorated the restaurant in a former mansion with
some of his artworks.
One of the waiters, a young Brad Pitt look-alike named Carlos, said he
had been laid off from a job at a state-run cafeteria as part of the
government's effort to trim its payroll, but he quickly found new
employment. "There's a lot of competition now," said Carlos, 21, with
gelled blond-tipped curls.
Bom Apetite is a restaurant that has been around since the '90s but is
now expanding in leaps and bounds to accommodate a growing clientele,
said manager Adrian Riera. The menu includes items once prohibited, such
as shrimp and lobster, he said, and they are adding on a bar with
capacity for 40 people that will serve wine and tapas until 3 a.m.
"We are now something really professional," Riera said, pausing from a
meeting with the president of the Cuban Sommeliers Assn. (yes, there is
such a thing). "Private businesses are no longer just a family matter.
We are moving into another category."
Willians Vivanco, a 30-year-old computer programmer, has taken advantage
of the boom and also taken a gamble that Internet access is inevitably
going to grow on the island, where government censorship keeps Internet
penetration among the lowest in the world.
Vivanco and a group of friends in May launched a website dedicated to
the restaurant scene, sort of a Cuban opentable.com (which he said was
an inspiration). They will profile a restaurant for free but charge if
the establishment wants extra information or a photo gallery posted. So
far alamesacuba.com ("to the Cuban table") lists nearly 70 restaurants.
This may sound elementary to the technologically savvy world, but in
Cuba it's a first.
As soon as Raul Castro announced the economic reforms, "we started
looking for ways to earn money," said Vivanco, who has never traveled
off the island and rarely eats out. "We didn't have the money to start a
cafe, and we're not going to start driving taxis. But we knew computers."
Vivanco wants his main audience to be Cubans, though the majority have
no computer access and probably can't afford many of the restaurants. He
has started an email newsletter about restaurants and bargains in hope
of widening exposure. There are about 300 subscribers to the newsletter
(half Cuban), and the website averages 250 daily visits. So far, he
figures, he's earned about $22.
When Cuba's economy finally takes off, he said, "the key is to be prepared."
There is possibly more change on the horizon.
The Castro government has said it plans by the end of the year to begin
allowing Cubans to buy and sell residential real estate. In keeping with
one of the pillars of the revolution, Cubans have been allowed only to
swap property in an informal street-corner transaction called a permuta,
and no money can change hands. The goal was to prevent fat-cat
speculation by absentee landlords who fled to Miami, and the result has
been a critical housing shortage.
Under the new rules, Cubans on the island and permanent residents will
be permitted to own homes, though no more than one per individual; both
sellers and buyers will pay taxes.
Raul Castro, whose economic program was endorsed in June by the Cabinet,
has indicated that he has been encouraged by initial results, including
1.9% growth in the gross domestic product for the first six months of
"We must continue to gradually recover international credibility for our
economy," Castro said in a speech this month. "The biggest obstacle that
we face … is the psychological barrier formed by inertia, indifference
and insensitivity…. Without changing our mentality, we will not be
able to carry out the changes necessary to sustain [Cuba's] irrevocable