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Posted June 16, 2003 by publisher in Business In Cuba

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By Anthony Boadle | Reuters

HAVANA - Wherever you turn in Cuba, one of the world’s five remaining communist societies, someone is trying to earn a buck to make ends meet.

At farmers’ markets, vendors whisper in your ear offering black-market potatoes, fish, cheese or frozen Canadian steak for dollars. “It’s not allowed but tolerated as long as we are not too obvious,” said milkman Jorge, who motors into Havana everyday to sell milk from his father’s farm on the side.

As the Caribbean island continues to struggle from the economic collapse that followed the fall of the Soviet Union more than a decade ago, Cubans confront shortages, low wages and restrictions on private initiative.

Middle-level managers of state companies say privately that the only way forward for Cuba is to follow the example of China and Vietnam and fully open a stagnating economy to private enterprise in services, bars and restaurants.

Having suppressed capitalism for four decades, President Fidel Castro, 76, is not about to admit failure and insists that Cuba’s social achievements in free universal health care and education are pillars of a model egalitarian society.

In the mid-1980s, Cuba allowed farmers to sell their surplus for private gain to improve the food supply but then clamped down when they got too rich.

The demise of the Soviet bloc forced Castro to legalize the U.S. dollar, the currency of his Cold War arch foe, invite foreign capitalists to invest in Cuba and allow limited private enterprise for farms, restaurants, home rentals and taxis.

But as soon as the worst of the crisis was over, his government suffocated many of the small businesses with taxes and red tape and stopped giving out new licenses.


In the mid-1990s, after authorities allowed family dining rooms with no more than 12 seats to open in an effort to ease severe food shortages, Havana had more than 600 private restaurants called “paladares.” Today, only about 150 paladares have survived.

“There was a natural selection process,” said Enrique Nunez, owner of the city’s best known paladar, La Guarida, where Jack Nicholson, Steven Spielberg and the Spanish queen have dined.

Many could not survive higher taxes and health inspections, or were caught breaking the law and were closed down, he said.

Earlier this year, Cuba cracked down on a growing black market just weeks before jailing 75 members of a dissident movement that had petitioned for democratic reforms to the one-party state including permission to own small businesses.

But a government think tank has said that the best way to save the social gains of Castro’s revolution is to allow more private incentives to Cubans and foreign investors.

The Center for the Study of the Cuban Economy said in a recent report that self-employment measures taken in the 1990s crisis were “exhausted” and new steps were needed to spur growth and reduce bureaucratic regulation.


Cuban economists do not expect the island’s economy to grow this year after the worst sugar harvest in 70 years and the closure of half its sugar mills that were producing at loss.

Farmers lack incentives to produce more food because they have nowhere to spend their savings in a country where buying a car requires a permit signed by a high-level government official and Cubans are banned from buying video players and computers or from staying at beach-resort hotels.

For economists, China and Vietnam are proof that some capitalism can bring growth without losing political control.

In February, Castro visited the two countries—the other remaining communist regimes are Laos and North Korea—and was astounded by their capitalist transformation under Communist Party rule.

“Fidel will never agree to that because it would mean recognizing failure,” a veteran Cuban journalist said. “He is like a Don Quixote, fighting internal and external windmills.”

Cuban officials rule out the Chinese or Vietnamese roads. They say Cuba is too close to the world’s only superpower and capitalist giant, the United States, which lies 90 miles (140 km) away across the Florida Straits, and any opening would soon turn to a flood, with American backing to undermine Castro.

Insiders say a Communist Party Congress, due last year, has been put off to avoid tackling a difficult and inevitable debate on Cuba’s best economic options.

“Within the leadership there are people who see that the policies are exhausted and new ones are needed, but they don’t propose anything for fear of losing their jobs,” a Havana University economist said.

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