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Posted June 28, 2005 by publisher in Business In Cuba

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Vanessa Bauza | Sun Sentinel

Business is booming at Cesar Gallardo’s sandwich stand. His food is fast, tasty and cheap, the perfect combination for hundreds of students, truck drivers and commuters who eat their lunch on the run every day at the busy intersection where Gallardo set up shop a decade ago.

A former mechanic, Gallardo left his government job in the early 1990s during Cuba’s bruising post-Soviet recession, when the government reluctantly legalized self-employment to compensate for large-scale factory closings and a shortage of services.

He started small, selling sandwiches, milkshakes, sodas and sweets from a moving snack cart. As he outgrew the cart, Gallardo built up a stand made from corrugated zinc sheeting and added plumbing and electricity. Today he makes almost 10 times more money each month than the average government worker and employs six of his relatives to help him keep up with the noontime rush of hungry customers.

So why does Gallardo fear going out of business? The Cuban government is moving in on his territory.

As part of an ongoing initiative aimed at rolling back the modest reforms of the 1990s and re-centralizing the economy, the Cuban government plans to replace all privately owned food stalls along bustling avenues and centrally located areas with state-run eateries. Gallardo and all other private entrepreneurs located outside hospitals, universities and other crowded spots must relocate their businesses and run them out of their homes by the end of August. Many say the move could put them out of business because they will not attract as many customers in the barrios as they do along Havana’s thoroughfares.

“What can we do? Adapt? Start over? After the `special period’ we were given the opportunity to start our own business,” Gallardo, 39, said using the popular euphemism for Cuba’s economic crisis in the 1990s. “It’s no secret that we make more money here than by working for the state. But no one gets rich here.”

So far this year, the licenses of 2,000 private entrepreneurs across Cuba have been revoked because they were violating rules that govern self-employment. Cuban authorities last year eliminated 40 of the approximately 150 categories of self-employment, including mousetrap makers, masseurs and magicians. Overall, the number of licensed private entrepreneurs has declined from a high of 200,000 in 1996 to 150,000 today.

The changes facing Cuba’s small private sector are part of an incremental but steady shift across the island where the government is reasserting its control over the economy in a bid to fight corruption and retrench socialist ideals.

“You have problems [in Cuba] with inequality, inefficiency and corruption. The way to deal with those problems, according to them [the Cuban government] is to increase control and make more efficient use of resources,” said Paolo Spadoni, a researcher at the University of Florida who has written extensively on Cuba’s economy.

“Cuba has opened up, but very cautiously,” Spadoni said. “They have stimulated the economy with certain measures, being cautious enough not to reach the point where there is no turning back.”

The Cuban government has reduced the autonomy of state-run businesses by requiring them to deposit foreign currency and convertible Cuban pesos into a single bank account. The number of small and medium-sized foreign joint ventures has dropped and lucrative tourism businesses are being reorganized with greater oversight from the Tourism Ministry.

The Cuban government’s trend toward re-centralizing the economy comes as it gradually recovers from the post-Soviet recession with help from two important partners: Venezuela, which provides Cuba with about 90,000 barrels of oil daily on preferential terms, and China, which plans to invest $500 million in Cuba’s nickel production to boost exports.

“I think the retrenchment we see goes hand in hand with a feeling Cuban officials have expressed that the economy is revived and their heads are above water,” said Phil Peters, a Cuba expert at the Virginia-based Lexington Institute. “It is clear now that every step of the way Fidel Castro was holding his nose at the use of all these market mechanisms.”

As Cuba has moved away from the market reforms of the 1990s, it has taken steps to try to close the significant income gap and inequalities that emerged between those with access to hard currency and those without.

Earlier this year, the Cuban government instituted a 10 percent tax on U.S. dollar remittances, raised pensions by 50 percent for 1.5 million Cubans and increased average worker wages to about $12 a month.

On Thursday, Castro announced another modest salary increase, this time focusing on two pillars of his socialist revolution, health care and education. As of July, workers in those fields will earn an average of 40 to 50 additional Cuban pesos a month, or about $2.

After more than a decade of shortages and belt-tightening, Castro’s recent optimism is a welcome change. But for those Cuban workers who embarked on the government’s tentative experiment with market reforms, the shift away from self-employment is a crushing blow.

“I like working for myself, I see the results of my work,” said Juan Herreria, 51, of his lunch stall on a crowded Havana avenue. Like Gallardo, he is not sure his business will withstand the move away from the busy intersection.

“It’ll be painful to leave,” Herreria said. “After 10 years this is like our second home. If I had to turn in my license my lifestyle would change completely.”

Vanessa Bauz can be reached at .(JavaScript must be enabled to view this email address)

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