Saturday, November 27, 2010

As Fidel Castro and his Cuban revolution fade, is Cuba rising?

As Fidel Castro and his Cuban revolution fade, is Cuba rising?

Seismic changes in the communist economy built by Fidel Castro are
enriching some Cubans, scaring others, and sparking imaginations: Will
the Caribbean gem shine again?

As Fidel Castro and his Cuban revolution fade, a revolution of reform is
afoot in Cuba. Manuel Fernandez is a retired state employee who won a
rare private business license 20 years ago to operate a repair shop on
his front porch in Havana. The government is now pushing as much as 10
percent of its employees into such entrepreneurial work.

By Sara Miller Llana / Staff writer, with a correspondent, Photos by
Alfredo Sosa, / Staff Photographer
posted November 27, 2010 at 12:17 pm EST

Antonio Santana and Marina Suarez are children of Fidel Castro's
revolution – born into the communism that swept across this island of
mambo and mob ties in 1959.

Now thin and graying, with government-issue glasses, Mr. Santana – a
pseudonym he asked the Monitor to use out of concern he should not talk
to foreign journalists – has had a long career as a state barber.
Snipping no-nonsense cuts in a society that overthrew the glamour and
glitz of the corrupt Batista dictatorship for social egalitarianism, he
and his wife were able to raise twins, a boy and a girl now grown, on
his paltry $12-a month salary.

Ms. Suarez, who manages a tidy, crisp look in Cuba's tropical heat, had
a career as a government secretary and raised two sons – now 15 and 24 –
on her own. Though her $14-a-month salary was pitifully small, she
valued the job security.

IN PICTURES: Cuba Economy

Like all of their contemporaries who have been housed, fed, and employed
by the state, Santana and Suarez grew up as pawns in Mr. Castro's trial
of free health care and education, state-owned industry, and
collectivized agriculture.

As waves of their fellow countrymen fled, and as Castro raged against
the sea of capitalism that isolates this island – even providing the
stage for cold-war nuclear brinkmanship – the lives of people like
Santana and Suarez have been calm if grindingly poor. Never forced to
fret over college funds and health-care copays or contend with gaping
divides between rich and poor, they've never faced the dramas of
market-driven economies. Like most Cubans, they've earned little in
their lives – because they have needed little.

But now these children of the revolution have awoken to the hint of a
new revolution: In the waning days of Castro's power, a decided tilt
toward a market economy has shifted the paternalistic burden from the
struggling government onto individual citizens.

Ever since the 1991 fall of the Soviet Union and the decline of support
from Cuba's communist brethren, steady tinkering with the economy has
given way to the biggest economic upheaval the island has faced since
the revolution – the layoff of half a million workers and a push toward
private entrepreneurial activity.

The bottom line for Suarez, for example, was a pink slip and a sense of
betrayal: "I never thought Cuba could do this, because the government
always protected us."

But for Santana, being kicked off the government payroll has been
dazzling. Told to start his own business, he has to pay rent; and if his
scissors dull or clippers break, he shoulders the expense. But he's also
pocketing the pesos he earns – the equivalent of $40 a month, more than
three times his previous income.

"I am not a millionaire, but I am better off than others," says Santana.
"[I have] the liberty to have my own schedule, prices, and services. I
am the boss of myself. Everything that happens is my responsibility, and
that is a good feeling."

When The Atlantic magazine journalist Jeffrey Goldberg asked Castro in
September if the Cuban economic model was still worth exporting, Castro
answered: "The Cuban model doesn't even work for us anymore."

Castro later cast it as a misunderstood offhand comment, but just a few
days later, his younger brother, Raúl Castro, who now runs the
government, announced layoffs of 500,000 state employees and programs to
encourage many of them to become part of a new retail business sector.
It is a radical step in this country where nearly 9 out of 10 people
work for the government.

Some believe it represents the largest crack in the communist structure
yet. Imagine, they say, Havana with billboards advertising competitive
prices on repairs for cars. Imagine those cars are not 1950s Chevys but
the newest models off a US assembly line. Imagine those same cars lining
up at a McDonalds takeout window.

For many Cubans who have lived their entire lives "making do" in a
nation without industry and entrepreneurial opportunity, this latest
fissure of reform is seismic – for better or worse.

But most observers say any opening, even after the 84-year-old Castro is
gone, would most probably follow a Chinese model that tolerates a degree
of free market with a heavy government hand.

No one expects a radical new landscape overnight. Other postcommunist
transitions have been slow evolutions. Reforms in China, which today has
one of the most dynamic economies in the world, were 30 years in the
making. In Vietnam, change was measured in decades, as the country
experimented first with opening the agricultural sector and later access
to microcredit, before making significant changes to the way the economy

Nor would Cuba probably follow closely any of those precedents. After
all, it is surrounded by market economies, and just 90 miles south of
the US, it is much more likely to be influenced by American investment
than other postcommunist nations have been. While Russia today has a
market economy, it is natural resources as much as any reform that have
buoyed its transition. Cuba and its flailing sugar industry are in no
such position. The denouement of the revolution would probably feature
the deep pockets of American tourists sunbathing and sipping cocktails
on Cuba's Caribbean shores.

Actual and anticipated change have Suarez reeling: Her days of typing
and filing in the halls of the communist bureaucracy are over. Without a
paycheck she has started to take in mending work.

"I have a lot of uncertainty about my future and that of my children,"
she says. "The state says that they will give us the opportunity to work
on our own but they do not say anything definitive about how that will
happen. Everything is up in the air."

The details of the September announcement of a layoff of 10 percent of
the 5 million workforce in Cuba are still not fully known. Layoffs will
not be completed until the spring and could eventually include a million
workers or more. New private cooperatives will be formed.
Self-employment licenses will be issued to 250,000 individuals in 178
new categories, from stonemasons to sports trainers. All will be
required to pay taxes.

It is a huge shift in a country that nationalized small businesses in 1968.

"The growth of this entrepreneur sector isn't just some insignificant
marginal issue in Cuban economics, it's linked to a central strategy of
Raúl's economic policy, which is to dump a million people off the
payroll that aren't producing anything," says Philip Peters, a Cuba
expert at the Virginia-based Lexington Institute. "They are also talking
about establishing cooperatives not in agriculture but in the service
sector and the retail sector. Pull this all together and the government
is completely envisioning the development of a small and medium business
sector in a communist economy, and that's significant."

So the normally languid streets of Havana are now on edge, as a new
notion – unemployment – is being felt by many for the first time.

Paternalistic egalitarianism is a cornerstone of the Cuban revolution.
Education and health care are provided and housing is highly subsidized.
Cubans are given rations of sugar and rice and other basic foodstuffs
listed in their monthly libretas, or coupon books. But state salaries
averaging $20 a month and food rations together are barely enough to
cover people's caloric necessities. Class divides have grown as Cubans
with access to remittances and jobs in dollar-dominated tourism outpace
those without access to either.

And so Cubans are forced to "get by" on the thriving black market. Walk
down the streets of Havana with any Cuban and you are bound to run into
a friend or "associate" who puts some kind of offer on the table.
Example: A box of toilet paper rolls – usually taken illegally from the
workplace – offered in exchange for the equivalent value of gasoline,
often also obtained clandestinely.

Still, black-market trade and barter doesn't directly translate into
successful entrepreneurialism, says Ted Henken, a professor at Baruch
College at The City University of New York who has studied earlier Cuban
ventures in private enterprise. He says the state must give more liberty
if it demands more economic independence. Cubans need training,
microcredit, and access to wholesale goods. "If they're going to require
more responsibility of the Cuban people, they have a lot they have to do
in terms of giving people more rights."

The whole situation mystifies Amaury Restrepo, a 24-year-old welder for
a railway repair factory in Havana who has suddenly found himself
unemployed. The Monitor interviewed him on a Havana Street in
mid-October when he said: "I never thought I'd be the one left
unemployed The directors said there would be possibilities to open up
our own business, but it is not so easy to open one.... To open a
business you need funds, and that is what I don't have right now. I
don't know what to do."

But apparently Mr. Restrepo decided there was only one thing to do: The
Monitor discovered, in an attempt at a follow-up interview, that he'd
left Cuba on a motorboat bound for Florida in early November.

These sorts of doubts and questions might be just the beginning of an
entirely new way of thinking here. Under Raúl Castro – who took over the
presidency from his brother in 2008 and has made clear that economic
adjustments are needed – limited but clearly defined reform has already

The new president privatized barbershops and beauty salons, allowed
taxis to obtain private licenses, and redistributed government land for
farmers. He has not minced words. Cubans, he said this summer, have "to
erase forever the notion that Cuba is the only country in the world
where one can live without working."

But Cuban observers, especially those in Miami, the heart of the
Cuban-American community in the United States, say this is driven by
necessity, not new thinking. The economy, struggling for decades, has
been battered in the past few years – hit by devastating hurricanes and
the global financial crisis, a drop in nickel prices, and the worst
sugar harvest this year since 1905. The state payrolls are filled with
staff who might show up for work – or not.

So long as Fidel Castro, who still heads the nation's Communist Party,
is in the picture, few expect Cuba to forge too far down a radical path.
"We have to wait and see – and I don't think this will happen until
Fidel Castro is completely out of the picture," says Andy Gomez, senior
fellow at the University of Florida Center for Cuban and Cuban-American
Studies. "Fidel Castro remains a powerful symbolic figure."

And that is why US policy on Cuba hasn't budged. The US embargo, imposed
nearly 50 years ago, has been supported by 11 American presidents. And
while the Obama administration has relaxed some rules, such as
remittances and travel to Cuba for Cuban-Americans, the president has
barely responded to both Cuba's release of political prisoners this
summer – the largest in more than a decade – and the more recent
announcement that some free markets will be tolerated. Despite growing
pressure from some lawmakers, the US maintains its longstanding demand
that free and fair elections and freedom of expression be implemented
before American policy will shift radically.

If the past is any indication, Cubans, analysts, and US officials are
right to be skeptical about the staying power of experimentation in
Cuba. In the early 1990s, known as the "special period," after the
collapse of the Soviet Union, which in turn took down the Cuban economy,
the Castro government grudgingly allowed some small businesses to
emerge. Many of those reforms were rolled back in the late 1990s and
early 2000s, after other players such as Venezuelan President Hugo
Chávez stepped in with subsidies.

During the "special period," more than 200,000 Cubans were registered as
self-employed; today Cuba counts 143,000 such licenses. Many of the new
establishments, such as paladares, small restaurants usually off the
side of a private house, were so tightly controlled that many never had
a chance to survive. Part of the problem was that the very concept was
anathema in a country whose motto, sprayed across billboards, is
"socialism or death."

In a scathing piece last year, Cuban blogger Yoani Sánchez, whose blog
Generacion Y openly criticizes the government, detailed the case of
Huron Azul – a well-known restaurant shut down, she wrote, for: "Selling
prohibited food such as lobster and beef; having more than twelve seats
in the restaurant; giving credit to the painters to eat there; becoming
a patron of the arts; paying a huge electricity bill; having a lot of
cash; and – what nerve – wanting to open a restaurant in Milan."

But many suspect Raúl Castro is finally fully exercising his reputation
as a pragmatist, ready to usher in change. "There was drive [in earlier
reforms of the 1990s] done out of necessity and mostly against will,"
says Paulo Spadoni, an expert on the Cuban economy at Augusta State
University in Georgia. "What differs from previous attempts is the guy
pushing reforms [now] isn't the same guy pushing reforms [during the
'special period' of the early 1990s]. Now they're pushing for reforms
because it's exactly what they want to do. It is a signal that those
reforms are here to stay."

Many Cubans, like Santana, the barber, are ready for change, to be their
own boss. His shop sits in the middle of a bustling office complex. No
sign advertises the shop – such investments are still prohibitive. The
tiny space, 20 feet by 13 feet, is simple: white walls, with a
floor-length mirror in front of a single barber's chair. A cement table
in the back holds all of his cutting tools.

Santana says that, except for the $40 in rent and tax he pays to the
government, he gets to keep the full 50 cents he charges for a cut. "It
gives me a better margin of earnings to feed my family," he says, noting
that his grown twins still live with him. This, he says, is "the best
thing that could have happened."

Yet Santana knows he is limited as a business owner. He can't invest in
his company – from putting up a new sign to hiring more staff to
renovating the space – because he simply has no capital.

That is where many see a role for the Cuban community in the US,
estimated at about 1.5 million. At least 1 million households in Cuba
receive remittances totaling $1.4 billion annually. The average amount
sent is $200 a month – 10 times the average monthly salary in Cuba.

Manuel Orozco, a remittances expert at the Inter-American Dialogue in
Washington, estimates that 10 percent of Cubans receiving remittances
could eventually use that to invest in small business – to upgrade tool
sets, fix car motors, or build extra bedrooms to rent to tourists.

But it depends on how far the government is willing to take reform.
Optimists point to positive change, including proposed access to
microcredit and hiring rules that allow Cubans to employ more than just
family members, so that they can form enterprises, says Mr. Spadoni.

Yet questions abound: Where will they buy their products? Who will be
able to pay for services? Will high taxes undermine businesses before
they even get off the ground? Will taxes dissuade many from taking legal
routes and drive entrepreneurs into the black market? Even the
government plan for private enterprise, leaked and circulating in a PDF
document, acknowledges that many new businesses "could fail within a
year" because of a lack of expertise and training, among other factors.

The Cuban exile community, once dedicated to the overthrow of Castro and
the triumphant return of capitalistic investment to its homeland, has
aged. And younger Cuban-Americans are more wary of investing too heavily.

"The Cuban-American community will help, but nobody here is going to
take out half a million dollars and plunk it into a business in Cuba
with the system as it is," observes Jaime Suchliki, director of the
Institute for Cuban and Cuban American Studies at the University of
Miami. "There's no equipment, so any business is going to be very
rudimentary, and who will buy their services? They are going to have a
high rate of failure."

Mr. Suchliki offers this example: "If you were an inspector of schools
in the Ministry of Education [and] they throw you on the street, you
don't know anything about business, you have no business planning. You
only have dollars if you have relatives in the US. There's a limit to
how much anyone will lend."

But if Havana hair stylist Zoraida Bustos is any example of the national
sentiment, Cubans will have no problem proving they have embraced their
newfound freedoms and are ready to prosper the capitalistic way.

True, her store just has a simple wooden sign with one word written in
red: "Hairdresser." She uses supplies sent from family and others
abroad. If she had her way, she'd hire two more women so that she could
offer pedicures and apply acrylic nails without clients facing endless

An electric sign, new supplies, and added staff, she says, are a long
way off. But she feels a momentum that could be hard to rein in: "I was
crazy to free myself. Even if the state begins to pressure me, this way
I will always be freer.

• Jacqui Goddard contributed from Miami. The Monitor's correspondent in
Cuba could not be named for security reasons.

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