Small Private Businesses in Cuba Face Uncertainty over New Regulations

by El Toque

HAVANA TIMES – The Cuba Libros Literary Cafe (at least its essence) will disappear on December 7, 2018, when a “series” of new regulations for private business owners come into effect.

Located on the corner of 24th and 19th streets, in Havana’s Vedado neighborhood, it’s a unique place for literature lovers, who find not only a juice or coffee there, but some books that aren’t normally found on public library shelves. Books written in English.

Conner Gorry’s dream is what the cafe is today, because if it weren’t for the books, her cafe would be the same (or at least similar to) the abundance of other establishments which flooded Havana when the small scale private sector was opened up in 2010.

However, the dream which seemed never-ending, lasted only five years. Published on July 10th this year, these new regulations state, among other things, that private business owners will only be able to practice one activity, that is to say, they can only hold one license.

In order to hold onto her business as it is today, this US citizen who has been living in Cuba for over 15 years, would need to keep both of the licenses she currently holds: selling snacks and buyer/seller of used books.

“I was hoping that those of us who already had licenses before this law would be able to keep them. I thought that the changes would only apply to new establishments that pop up once it comes into effect, but that’s not the case,” she explains sitting down in the place where she has not only invested a lot of financial resources, but also her hopes, desires and other things that have no material value.

Conner says that she cried when she was made to choose and that she finally said that she would keep her license to sell snacks.

“To tell you the truth, the thing that makes the cafe different to its counterparts is that there are books, but people don’t come to buy a book every day, but they do have a coffee,” she reasons trying to console herself.

This decision which forced her to choose the license that gives her the better financial return, is killing the only English-language bookstore that exists in Havana.

“I found out about this place by chance and, honestly, I fell in love with it. It’s very different to everything else nearby; it’s really easy to socialize here because the atmosphere is really pleasant,” Vladimir Lorenzo, a Cuba Libro regular, comments.

He believes that the Cafe won’t lose customers when it becomes just this: a cafe. “However, its essence, the thing that made it unique will disappear, and it really is a shame. Things like this shouldn’t happen. Sometimes we need alternatives because not everything is black and white in life.”

There are currently eight employees working at Cuba Libros. When the bookstore disappears, two of them could end up unemployed. However, Conner doesn’t want to think about this just yet. She prefers to try and open up new doors. “Maybe we can become a library and have books, but without any intention of selling them, this would depend on some meetings that still haven’t taken place.”

Conner has less than two months to find an alternative. And she isn’t the only one trying to find answers or “adapting” to circumstances that can “constantly change”.

Cesar Javier sells phone and Internet cards

Cesar Javier Herrera, a Telecommunications Agent in the Marianao municipality tells how the new regulations will affect him.

“This is a profitable business, at least for me,” the young man says, who got his License when he was studying the second year of his Mechanical Engineering degree at Havana’s Jose Antonio Echevarria Technological University (CUJAE).

With four years behind him as an Agent for Cuba’s state telecommunications company (ETECSA), he believes that he really knows the rules of game and the changes these have undergone.

“Let me tell you again: I always get a return and I think that this is a steady business. Nevertheless, in recent years, some things have been amended and we will all be affected, inevitably.”

This Telecommunications Agent started working in December 2013, as an experiment at first, with the intention of bringing ETECSA’s products and services to the people in the neighborhood at official retail prices, which, according to his users, he managed to do.

The company’s board of directors recognize that this profession had a positive impact and improved customer service, while it became a new job. It seemed like everyone was a winner.

However, in late 2017, Cuba’s telecommunications monopoly began a process of updating Agents contracts, which involved changing commissions for selling their products and services.

“Before, we (the agents) were given a 10% discount when we bought cards. That is to say, I would get a 5 CUC card for 4.50 CUC and sell it for 5, making 50 cents. Then, a series of changes came into effect and this discount can now fluctuate, falling to as low as 3%.”

According to the engineer’s explanation, the “change” seems to attack business’ most fundamental principles. Logic says that the person who sells the most should receive the greatest discount, at least as a way to try and “recognize their performance”. However, the complete opposite is happening: “the person who sells the least has the greatest discount.”

“ETECSA officials told us that this measure was because an agent can’t earn more than an “official” employee at the company” (agents are also considered employees) Cesar explains: “This license was frozen because there were many agents. However, many people decided to leave the business when the changes came into effect and so the government unfreezed them.”

“If there is one business that the State completely controls, it’s this one. Plus, they also increased the tax we have to pay, so that everything is legit, this is why I don’t really understand what is happening now…”

The conversation ends with an awkward silence. Especially because his questions will remain unanswered after December 7th. And he will remain “uncertain because he doesn’t know what’s going on”, just like so many others.

Taxi Drivers

“We have to wait and see how this is going to play out. Anyone who says anything right now is just speculating and creating a smokescreen,” Antonio Garcia says half-upset while he waits for his car to fill up in the parking lot located in El Curita park, in Central Havana.

“I’ve just ran into the Blues (transport inspectors, called “blues” because of the color of the uniform) and let me tell you that we don’t know what’s going on exactly; what happens on the street is what will tell us. We have already started all the paperwork, but the hardest bit comes afterwards.”

According to statements made to the state-controlled press, Transport vice-minister Marta Oramas said that changes to Decree-Law 168 passed in 1996, refer to transport licenses, and issues relating to licenses will be combined into a single law, for both individuals and legal entitites.

These reforms include new classifications, which are mutually exclusive, for taxi services: taxis that run an established route, free taxis and high comfort or classic taxis.

Antonio has to decide which of these services he is going to provide, except for the high comfort or classic option because his car isn’t in the right condition to offer this service. However, he says that he still hasn’t made up his mind. “I still have many, many doubts and until I see what direction things are heading in, I won’t be sure.”

The government’s idea is to “organize passenger transport in Havana” by establishing a system of 26 departure points and 23 routes.

Whoever wants to take part in the so-called “experiment”, will receive fuel at a tiered price (as well as other benefits): 2 CUP per liter of diesel, 10 CUP per liter of lower grade gasoline, 13 CUP per liter of regular gasoline and 16 CUP per liter of premium gasoline. (25 CUP = 1 CUC)

Drivers who don’t want to take part can choose to become free taxis, working on the principle of supply and demand, and consuming a minimum volume of fuel of 225 CUC (= USD) per month.

Antonio’s car is one of the biggest vehicles running, it can seat 11 people and he can charge up to 20 CUP per passenger, depending on how full the car is.

From now on, he will need to pay what he earns from 26 packed-out journeys with a magnetic card, if he decides to become a free taxi.

Enrique Caballero is a “middle man” (who manages trips) in the El Curita Park in Havana. He says he has spoken to different drivers about the issue and believes that “there is a lot of confusion”.

“The thing is that many drivers are the owners of these cars. So, do the math, if they join the experiment and, for example, they get an offer to go to the Airport or somewhere else outside of the route, they can’t accept it; if they go to the beach with their family in the car, they have to ask for authorization. So, just imagine… They’re in a tight spot!”

And he goes on to say, “Plus, nobody has said anything about the middle men, what’s going to happen to us? Will we disappear? Will everything continue like it is now? I pay the ONAT.”

“There’s no going back”, and forwards?

Mid-2017. The Cuban government announced that it would temporarily suspend new licenses for a group of 20 private activities that had previously been approved. This is how the so-called “Refining process” of the self-employment sector began.

A year has gone past since this “freezing”, the new regulations were made public, in which only 123 professions out of the 201 currently in force would remain legal.

“No work activity is being removed,” the first vice-minister of Labor and Social Security, Marta Elena Feito Cabrera, said. Nevertheless, with this new regulation, five licenses will not be handed out anymore: wholeseller of farming products, retail seller of farming products, pushcart street sellers selling farm products, CD buyers/sellers and people who operate leisure equipment (of rustic equipment).

The regulations also stipulate that music, language or sports teachers can’t create their own schools or academies. They won’t be able to hire other teachers or instructors, or organize events. Plus, real estate agents will disappear and the so-called “Havana Transport Experiment” will be implemented.

Interviews and meetings with independent workers and some of the people who receive their services, have proved that what’s coming around the corner is still creating a lot of doubts which (it seems) haven’t been appeased with the “preparation seminars” that were given to many of them.

Government officials have repeated that these measures respond to problems that independent workers have created themselves and that they will be implemented so as to do away with the violations that have been identified up until now. “There’s no going back,” they say over and over again.

Even so, they haven’t said anything about wholesale markets which is one of the most important things that the private sector has been calling for, who have only seen the creation of one in the past five years:  Mercabal, where only cooperative members can buy.

Speaking on the “Mesa Redonda” TV program, the vice-minister of Labor and Social Security pointed out that over 434,000 new jobs have been created since October 2010, and it has “freed” the State of “unessential activities” so as to “concentrate on what is most strategic or important for the country.”  [When giving these statistics they do not say how many of those people who took out licenses are still actually in business or working.]

However, like economist Pedro Monreal says, “sometimes it seems that you can see stances in the debate which try to project the idea (which isn’t always explicit, but perceptible) that a cap needs to be placed on wealth created in the private sector so as to ensure greater equality.”

Ricardo Torres agrees with him and says: “(…) It’s contradictory to say that we want to develop our forces of production, speed up economic growth and then, at the same time, put obstacles in the way of this sector’s progress.”