Cuba’s Private Sector: The Dangerous Road Ahead

Osmel Ramírez Alvarez

Photo: Juan Suarez
Photo: Juan Suarez

HAVANA TIMES — Until the end of the 1980s, the words “business person” were akin to an obscenity in Cuba. Working for the State was the norm and even farmers who hadn’t handed over their lands to a cooperative were suspect. The communist ethos had imposed its rules on the population.

Everything changed in the 90s, when the collapse of the Soviet Union and socialist bloc left the country in worse shape than breaking ties with the United States had. Begrudgingly, Fidel Castro authorized self-employment as a non-State means of economic activity.

It was a simple formula that envisaged individual labor and not the hiring of others (or the hiring of others under highly exceptional circumstances). Hence the singular name given Cuba’s private sector (“self-employment”), which suggests a primitive economy more than a capitalist one.

It was the government’s hope that the socialist State economy would recover and sweep this sector off the map in a matter of years. Within this context, the self-employed faced many limitations and applicants weren’t granted licenses for many years. The idea was to take away such licenses, not encourage the growth of the sector.

When turning back no longer was an option

In 2006, Raul Castro inherited a totally bankrupt country. Fidel Castro’s lectures at Havana’s Convention Center, where he publicly ate Cuban chocolate bars and the household appliances of the so-called “energy revolution” were put on display, proved very popular, but those measures doubled Cuba’s foreign debt and brought no significant investments in the productive sector.

We made it to the list of untrustworthy countries in terms of credit. It was then that the new president had the courage – or had no choice but – to make some changes, including authorizing the granting of new licenses for private initiative. The range of authorized private sector activities was broadened and now allows for the hiring of personnel, albeit in a limited manner.

Here we sell anything and everything. Photo: Juan Suarez
Here we sell anything and everything. Photo: Juan Suarez

Before these liberalizing measures, all such work was illegal and a carpenter, a street vendor or trucker was officially a delinquent hiding from the law. Today, they hold licenses to operate, but, in many ways, they are still treated like “law-abiding criminals.”

In his speeches, Raul Castro has asked that the State apparatus respect the newly-established forms of production and contacts between State and private entities are now permitted. There are arguments to claim, however, that the Cuban State disdains the private sector and merely tolerates it as a necessary evil. Worse still, it forces members of this sector to engage in criminal activities, to lie and to do most things “under the table.”

Two examples suffice to get a global sense of the situation

The self-employed do not have a wholesale market where they can purchase supplies at fair prices. Under the law, they can turn only to Cuba’s retail market, which has very high prices and proves unreliable. As their customers are mostly impoverished Cubans, the self-employed are forced to turn to the black market, where products are stolen from State workplaces. They have no other choice.

In addition, taxes are steep and stifling. The government taxes small businesses as if they were transnational companies. If you’re an honest taxpayer, you simply have to shut down your business.

To get a clearer picture of the situation, if the owner of a pizzeria were to legally purchase the flour, cheese and tomato sauce, they would be forced to sell their small individual size pizzas at 25 pesos, a prohibitive price for customers that earn less than that in 8 hours of work. They can only offer affordable prices by working with stolen supplies. Imagine how much flour is stolen from the Cuban State, what with the thousands of pizzerias operating every day (and the fact this is the most popular junk food in Cuba).

Locksmith. Photo: Juan Suarez
Locksmith. Photo: Juan Suarez

The same holds for trucks that transport goods and passengers, or with cabs. There are thousands of them on the road and they all operate with stolen fuel. Who would be able to afford the fare if these people were to legally purchase the extremely expensive diesel fuel at State gas stations?

Setting a precedent

The most disquieting aspect of these practices isn’t the fact resources are being stolen from the State, it is the negative precedent it sets and the nefarious consequences this could have in the future. If a child is born in a dysfunctional home, they have less chances of becoming a responsible adult. If Cuba’s private sector is required to evade taxes and to commit crimes since infancy, what can we hope for in the future?

Today, we’re dealing with sacks of flour, tanks of diesel and the occasional white lie, but, as we rough it one day at a time, the country’s moral and ethical values are becoming deformed. One wonders whether our future business class will have any qualms about evading taxes or laundering money.

The State is concerned about the growing strength of the private sector because it threatens its economic supremacy, but they have let go of the reins and can’t stop the process now. Some radicals are accusing the State of causing the cost of living to go up. However, those of us who have a bit more perspective know this is not exactly the case.

The private sector has to grow and consolidate itself as a determining force in the development we need. We need only be concerned with its birth defects and the potential consequences this can have in the future.

9 thoughts on “Cuba’s Private Sector: The Dangerous Road Ahead

  • January 27, 2016 at 5:41 pm
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    It would be instructive and interesting were the USG to cease its embargo and all other hostile activities against Cuba and just let it rise or fall of its own inherent merits or faults .
    Of course they’ve never in history done that; allowed an alternative economy to free enterprise capitalism exist unmolested.
    There’s a list of about 30 or 40 cases of the USG crushing such movements in “Killing Hope ( book and website) for those interested .
    Even Cuba’s STATE CAPITALISM in which the system is just as totalitarian as it is under free enterprise but where the owners ( the state) share the wealth, (the profits of the workers’ labor) equitably is unacceptable to the private sector which drives U.S. imperialism to have to crush any alternative economy and especially socialism which is democratic and antithetical to the concepts of free-enterprise ( privately-held ) capitalism in which most at the top do not have to or want to share the common wealth.
    For this reason Cuba’s alternative must not be allowed to succeed any more than the Soviets, the Vietnamese, the Nicaraguans, the Chileans, the Guatemalans, the Indonesians and on and on.
    The fact that the USG has persisted in maintaining the crippling embargo on Cuba is a sure sign that the capitalists fear that it would be too successful if left alone.
    It’s what they do .
    It’s what they’ve done for 100 years and since the US invasion of the Soviet Union in 1918 that maybe 1% of Americans know about .

    Reply
    • January 28, 2016 at 6:20 am
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      John, you write the same old clap trap despite how ridiculous it is. You should be recognized for your consistency. The US has NO FEAR that Castro-style socialism will succeed. If it didn’t work in the Soviet Union, it hasn’t got a chance in Cuba. Americans WANT free markets. Socialism is antithetical to a free marketplace. Many socialist countries have tended to evolve into totalitarian regimes which is also antithetical to our democracy. Don’t confuse America’s desire to open new markets with a fear of closed markets as exists under socialism.

      Reply
      • January 31, 2016 at 12:19 pm
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        Consider this: suppose Cuba had something approaching free elections and many of the liberties we take for granted in the US, but despite this, the Communist Party remained in power, with a legitimate mandate. (I qualify free elections and liberties in the previous sentence because I’m familiar with Singapore, which, while not a civil libertarian’s paradise, is not a totalitarian hell-hole either. The ruling party has ruled for about as long as the Cuban Communist Party has, but has an opposition, to which it occasionally loses in local elections for representatives to the Parliament.)

        Suppose also that much more freedom was given to Cubans to start their own businesses (with all the attendant apparatus needed for that, i.e wholesale markets, credit-granting institutions, the rule of law for contracts, etc). We’ve seen the Chinese and Vietnamese Communists go half-way there, with very good results.

        Suppose finally that the extensive social provision that Cuba is (rightly, in my opinion) famous for, particularly in education and health, remained. (This implies a fairly high tax rate, but Sweden manages to combine high taxes to fund good social provision with a a robust free economy.)

        In other words, imagine Cuba as a Caribbean Singapore/China/Sweden, with better music.

        Would any of us really have anything to argue about then?

        Reply
        • January 31, 2016 at 11:20 pm
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          I don’t think so. Well, maybe who makes the best cigars?

          Reply
      • January 31, 2016 at 4:21 pm
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        The USA has devolved into a dog eat dog world where brother will kill brother to get a competitive advantage. The USA is a society that does not take care of those who have less and are struggling. Yes America has given us wonderful technology and medical advances but I would give that up for safety and security. It is not right that my fellow citizens must work two or three jobs to survive and still face utter ruin if he falls sick with him and his family thrown out on the street. And as John has shown we have less and less proper paying jobs for more and more people. I think the power elite is very scared of Cuban socialism. Look how well Bernie Sanders is doing. He and what those the support him represent (a free and fair socialist market) scare the elites to death.

        Reply
        • January 31, 2016 at 11:15 pm
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          Socialist market? That’s an oxymoron.

          Reply
          • February 1, 2016 at 9:37 am
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            It is a marketplace that respects the rights of consumers. It is a socially responsible market. It is a marketplace that is fair and allows everyone to purchase what they need not only the very wealthy. Why must I with my humble means not be able to buy my children a simple computer and instead I have to drive hours to find library and other ways my children must complete their homework. The rich are able to make their children succeed while the poor have their children severely handicapped because they can’t get their children what they need. I have very smart children who were accepted in what is called a charter school but they treat it like a private school. always asking for money and always homework on computer that need to have printer. School should have this available for everyone to provide balance. not so smart children get ahead because of wealthy parents and smart children stay behind because of lack of resource.

          • February 1, 2016 at 12:41 pm
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            I’m sorry to hear of your struggle. You can work to elect school board members to change the policies that concern you. In Cuba there is no such opportunity. Likewise, in Cuba, even when you have the resources to buy a computer or some other technology, you are unable to make certain purchases owed to centralized purchases and anti-free market practices. In other words, despite your current struggles, you are still better off in the US.

          • February 1, 2016 at 3:08 pm
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            Dude, really? Why even bother.

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