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Wrap up of 2011 Cuban economy and business in Cuba - Miami Herald

Posted January 02, 2012 by publisher in Cuba Business.
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By MIMI WHITEFIELD | The Miami Herald  

It has been nearly four years since Cuban leader Rául Castro announced plans for a series of reforms to raise Cubans’ living standards and tie personal gain to individual work and initiative.

Change came at a glacial rate for the first few years.But in the months since the Communist Party of Cuba held its Congress in April, the pace of economic reforms designed to wean workers from their dependence on state employment and create their own jobs has quickened.

Castro has said he wants to furlough more than 1 million superfluous state workers, although that is proving more difficult than anticipated. Still, the economic reforms and new decree laws kept coming in 2011. In December, Cuban authorities announced the government would rent out state-owned workshops where jewelers, carpenters, locksmiths and other budding entrepreneurs could set up shop, and 500 bank branches across the Communist island began processing business loans for cuentapropistas — the term for self-employed workers, and those who want to build or repair their homes.

While Cuba has fallen far short of its original goal of removing 500,000 excess workers from state payrolls by last year and despite miscues along the road to reform, the changes are starting to reach critical mass. More than 357,000 Cubans have applied for licenses to start businesses, and the signs of change are everywhere: mom-and-pop pizzerias, stands near the University of Havana selling pork sandwiches, bed-and-breakfasts appear on Internet booking sites, former state-run beauty shops now operated by erstwhile employees, garage shops offering clothes and housewares, and new business placards touting services from shoe repair to home repairs to homes for sale.

“It does start to give meaning to government claims that they want the private sector to grow,” said Phil Peters, a vice president at the Lexington Institute who has followed the reforms. “They have broken down barriers”.

But the question remains: Are enough building blocks in place so a mom-and-pop operation can be transformed into a successful small business?One of the more significant reforms is Cubans’ new ability to buy and sell homes, rather than to swap dwellings of supposedly equal value. Not only does the move cut down on under-the-table dealings but it could allow Cubans to free up significant capital, and unleash a wave of home building, renovation and other entrepreneurial activity.But analysts say Cuba must still deal with severe shortages of building materials as well as address financing and mortgages before the reform can really bear fruit.“The economy is still capital-starved,” said Ted Piccone, a senior fellow at Brookings Institution.

New economic freedoms in Cuba

This year, the government removed a number of other obstacles to doing business as well as steps to encourage the development of small businesses and increase food production. Among the measures:

Soon government offices in need of repairs, transportation, cleaning and other services will be able to contract with small businesses instead of relying on government work brigades that often experienced long delays in getting tasks done.

In addition to applying for loans, small businesses and small farmers can now open commercial accounts — a necessary step in doing business with the government.

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