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    Cuba: Economy In Motion

    Cuba: Economy In Motion

    By Latinamerica Press — (April 7, 2013)

    By Lídice Valenzuela

    Two years after the reforms to the Cuban socioeconomic model began, one

    must ask: have substantial changes to the life of this Caribbean nation

    of 11 million people been observed? What is missing for the economy to

    be able to advance in the accelerated manner that is demanded by a

    population mostly worn down by the U.S. economic, financial, and

    commercial embargo, internal errors, and the dependency on other nations?

    To avoid creating false expectations, President Raúl Castro warned at

    the Sixth Congress of the Communist Party of Cuba, or PCC, in April

    2011: "We will act with no hurry, but without pausing," which means that

    the period of improvising and economic chaos has ended — at least


    In that context, opening up to private initiative is directing national


    It is still recent history that during the so-called Special Period of

    the economy — established to face the crisis triggered after the fall of

    the socialism in Eastern Europe at the end of the 1980s — the return to

    private enterprise was sought, albeit having been limited to two

    sectors: home rentals and the opening of mini-restaurants called

    Paladares, most of which ended up closing because of state obstacles

    that indicated more of a political contradiction than an economic one.

    Now they once again proliferate in all cities.

    In 2011, following the Sixth Congress' guidelines, private work

    reappeared to drive the semi-paralyzed economy, although there are still

    inherent obstacles because of an internal resistance to change by some

    state officials.

    A year before, the Ministry of Labor and Social Security put into effect

    Resolution No. 35 that liberalized 181 activities, including careers and

    professions of different ranks that range from professors of different

    educational levels to barbers and domestic workers. Some 400,000 people

    take part in this strategy.

    Even with a small contribution to the gross domestic product — around 10

    percent — the private sector frees the state from providing small

    services and tries to reverse the tense agricultural situation, which

    offers no solution to the feeding of the people, an issue Castro

    considers "of national security."

    Currently, there are many forms of private businesses that stand out:

    home rentals, cargo and passenger transportation, food manufacturing,

    and mobile vendors of agricultural products. Land leasing with usufruct

    rights to some 176,000 farmers also has a vital role. These farmers

    still do not achieve high production levels for reasons attributed in

    large part to official deficiencies, such as the guarantee of work

    tools, transportation for the harvests, and low prices for the products.

    Tax obligations

    The national economy was the sole main issue discussed by the delegates

    to the Sixth Congress of the PCC. The debate resulted in the approval of

    the "Economic and social guidelines of the Party and the Revolution" –

    the guiding document for all of the changes, consisting of more than 300

    reforms and previously discussed and enriched by the people.

    However, Marino Murillo, vice president of the Council of Ministers,

    told the press in March 2012, "[We] must continue to perfect the

    implementation of the guidelines," given the previously identified


    Although the people understand the official needs, they are dissatisfied

    with the high prices imposed by the so-called "self-employers." There

    are very costly alternatives for the average state employees, who earn a

    daily average of 10 pesos (one of the two official currencies, along

    with the CUC, the Cuban convertible peso). Among them are the taxi

    services, the Paladares, the clothing industry, and home products.

    Another delicate situation occurs when wholesale providers cannot

    steadily deliver products to private businesses. The latter are forced

    to buy from the retail market which supplies to the population, thus

    hoarding products which are for family consumption. For almost three

    years now, basic food products are sold outside of the so-called ration

    card, such as eggs, pork meat, bread, cheese, or tomato puree.

    In the middle of this diverse landscape, some experts link the process

    of labor reorganization in the state sector, started in October 2011 and

    which left 340,000 workers as available labor force, with the emergence

    of private business.

    "The reappearance of private [enterprise] lacks a link to the labor

    reorganization, a process on its way to greater efficiency in the labor

    force, which considers the employment peculiarities, conditions, and

    alternatives of the different territories. The relocation of the

    available labor force happens in the state sector itself, and at a lower

    rate in the private sector," said Ariel Terrero, specialist in economic

    issues, to the Cuban television.

    Experiences in the private sector

    Karelia Sopena leases a room in her house in the Nuevo Vedado

    neighborhood since 1997, when the tax system took its first steps in Cuba.

    "Taxes were exceedingly high," she tells Latinamerica Press. "Then, they

    charged me more than 200 per month although I did not have clients. With

    the Tax System Law of this year," she comments; "now I pay 35 CUC each

    month, while I charge 35 CUC a day for my room."

    In the flower shop "Angélica," an establishment leased from the state in

    the municipality of Playa, six contracted individuals work 12 hours in

    alternating days. They pay two monthly taxes: a work license to be part

    of the private sector and social security for retirement. For vendor

    Indira García, this kind of job "is harsh but positive," for her salary

    is higher than that of a state employee's. Although she is not the owner

    of the shop, she understands the internal management and says that

    obstacles to their business come from lacking a state supplier.

    In the municipality of Central Havana, Manuel Pedroso owns a formal food

    and light food cafeteria. He pays some 1,000 pesos per month in taxes,

    but his daily income is about 2,000 pesos. His employers make 100 pesos

    a day in 10-hour alternating shifts. "Obtaining the supplies is

    difficult, but it's worth the sacrifice," he points out.

    In an informal analysis, it is observed that more adjustments to the

    state-private management relationship are still necessary, but the

    balance is positive if the essential economic movement is considered.

    2013 promises socioeconomic novelties. The Cuban first vice-president,

    Miguel Díaz Canel, informed last March that "the actualization process

    is starting its most important and complex stage because of the

    decisions to be taken and their importance in the future development of

    the country, seeking greater economic and productive efficiency within

    the socialist system with the ongoing transformations."