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Posted March 11, 2010 by publisher in Business In Cuba

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By Marc Frank | Reuters

Cuba nationalized all retail business in 1968, down to the shoe-shine shops, but in an attempt to stimulate the stagnant economy and reduce bureaucracy, it is experimenting with giving some of it back in a form of legal private enterprise.

By leasing some retail services to state employees, the government is testing cautious change in how the communist country operates small-scale business.

“We have begun experiments and are working on others to ease the burden on the state of some services it provides,” Economy Minister Marino Murillo told the National Assembly at the close of 2009, without elaborating further.

Authorities have remained mum about their efforts, but a number of experiments are under way or about to be launched in Havana, a source with knowledge of local government activities, said.

The CubaTaxi office on Palatino Street in the Cerro municipality of the capital is home to one such experiment.

Thirty of the more than 2,000 state taxi drivers in the capital are leasing their vehicles rather than working for a wage, a small percentage of the tips and whatever they can pocket on the sly.

“You pay 595 convertible pesos for the car and then after a month 39 convertible pesos plus 40 pesos a day,” said Elio, one of the drivers.

“You are responsible for maintaining the taxi and gas, but can buy parts and services from the state,” he said.

The government pegs the convertible peso at $1.08 or 24 pesos.

“Overall the drivers are happy. There is still control over what we charge, but we are freer and earning more,” Elio, who began driving a cab in 1986, said.

“I think this system is also better for the state which is guaranteed a net income with few headaches,” he added.

The project will be evaluated in June, before being applied to other dispatch offices.

President Raul Castro has fostered debate on what to do with the retail sector since taking over from brother Fidel Castro two years ago, but has ruled out a shift back to capitalism.

The debate has spilled over into the official media with exposes over irregular supplies, low wages, employees jacking up prices and pocketing proceeds, all the while delivering poor service despite layers of bureaucracy designed to control such activities.

“The government is simply accepting what already exists, adopting new structures to legalize what was before viewed as theft and instead of spending a fortune on useless bureaucrats has begun collecting taxes,” a local economist said, asking his name not be used.

In Central Havana and 10 de Octubre municipalities, beauty parlor employees were recently called to meetings and informed they would be leased their shops as cooperatives on an experimental basis.

“They said the hairdressers would be leased the premises without the administration and service employees,” a participant said.

“You have to pay rent for the shop, costs such as water, electricity, materials and the wages of anyone you contract, for example a receptionist or to clean up,” she said.

“You can charge whatever on the basis of supply and demand and have to pay taxes on your profits,” she added.

The project was scheduled to begin this month but was postponed in part to consider objections and proposals put forward by the beauticians, she said.

State-subsidized materials arrive sporadically at the parlors and services cost anywhere from the equivalent of $0.20 (five pesos) for a shampoo to between $1 and $2 (25 pesos to 50 pesos) for hair-dyeing.

“We buy shampoo, conditioner, dye or what have you at state foreign exchange shops with a 240 percent mark up, or get our friends to bring it in from Miami or Madrid,” another beautician, who also asked her name not be used, said.

“Then we tell our clients there are no state supplies, but we bought them ourselves and will have to charge accordingly,” she said.

  1. Follow up post #1 added on March 12, 2010 by jmw1 with 62 total posts

    Communism; the shortest economic ‘experiment’ in the history of the world.

    Capitalism; not perfect, but successful, rewarding, productive and sustaining.

    Business, trade and commerce create jobs, security and growth.

    Communism creates devastation.

    Communisum under dictatorship is death

  2. Follow up post #2 added on March 21, 2010 by jmw1 with 62 total posts

    Has anyone paid attention to the focus on the so-called ‘experiments’ of free market economy?

    Hair salons
    Retail stores

    Tourist based income businesses by large.
    Zero impact or benefit to the ordinary Cuban (aside of slightly better wages)
    Castro inc takes the lion’s share, again.

  3. Follow up post #3 added on March 22, 2010 by manfredz with 464 total posts

    actually jmw1 I have to disagree.
    Tourists generally use the hair salons on the resorts.
    Comapred to locals using taxis, tourists are just a drop in the bucket.
    Retail stores - again other than souvenir shops, tourists arent inclined to use them much.

    But it is a start and am sure that the govt is watching closely to see the effect.

  4. Follow up post #4 added on March 23, 2010 by Yeyo with 411 total posts

    Interesting experiment, hope it last.

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