New import fees to hammer Cuba’s small businesses
Cuban small businesses, most of which work with goods that arrive with travelers or in shipments from the United States, are experiencing higher import fees from the government, which the businesses intend to pass along to customers.
07/17/2012 5:00 AM
07/17/2012 7:19 PM
The Havana manicurist gets her nail polish from a sister in Tampa, and a restaurant owner says he gets his Goya seasonings through a Miami mule — someone who flies to Cuba just to deliver packed suitcases.
A Miami woman ships packages averaging 20 pounds of food and clothes for resale to her widowed mother in Cuba, and teacher in Havana says he bought his new jeans from a friend who resells clothes brought in by relatives in Hialeah.
In many different ways, Cubans benefit abundantly from the torrent of U.S. goods flowing in since President Barack Obama lifted virtually all restrictions on Cuban Americans who travel or send packages to the island in 2009.
But now Raúl Castro’s government is hiking the import fees on those goods, apparently trying to force émigrés to send badly needed cash instead, to control the trade in imported items and counter the drop in sales of those types of goods at state-owned stores.
The hikes will fall especially hard on the thousands of mini-businesses, from corner pizza stands to beauty parlors, that blossomed across the island as Castro tries to encourage private enterprise and slash spending by the communist-run government.
“This is going to be a big hit in Cuba. A strong, strong, strong hit,” said Alberto Dieguez, owner of Caribe Express in Miami, who estimated he will have to raise the price of the packages he ships to Cuba to $5.50 per pound, from $3.50 per pound.
The goods flowing to Cuba — from computers to TVs, video games, tools, DVDs and perfume to spare parts for cars and motorcycles — were valued at $2 billion to $2.5 billion in 2011 alone by Emilio Morales, president of the Havana Consulting Group in Miami. About 90 percent of the goods left from the United States, he added.
Dieguez said the new fees — one enacted June 18 and others taking effect Aug. 2 and Sept. 3 — fall hardest on the larger batches of goods arriving because of suspicions that they are destined for commercial use. Residents returning from abroad will more often pay in Cuban pesos, while U.S. visitors will pay in CUCs, worth 26 pesos.
More than 400,000 Cubans living in the United States visited the island last year. Others who live in third countries, especially Ecuador and Mexico, as well as Cubans returning home from trips abroad, also jam-pack their bags for their flights to Havana.
With no wholesale stores on the island, the goods arriving with travelers and in packages supply many of the new businesses, including leather for shoe repair shops, balloons for party clowns, and the clothes and costume jewelry sold in street kiosks.
Jose Antonio, who owns a paladar in Old Havana, complained he already must pay fixed taxes and fees, regardless of his actual income, and now will have to pay more to the “mule” who brings in his Goya seasonings and Coffeemate.
Nelly, a Havana manicurist, said she prefers to get her nail polished abroad because those in state-owned stores are more expensive and often run out. Enrique says he paid a mule $19 for jeans of much better quality than those sold in state stores for $25.
“If you want something of quality at a good price, you go to your friends, never to the state stores,” said Nelly, who, like other island residents interviewed for this story, asked to remain anonymous because their business activities are not always legal.
The increase in import duties and fees has raised questions about why the Cuban government would cast such a dark cloud over the small private enterprises that Castro has been trying to promote since he succeeded brother Fidel Castro in 2008.
Morales said he believed the hikes are part of a drive by Communist hardliners to regain a measure of control over the private businesses and force émigrés abroad to send less goods and more cash — which Cubans must then spend on state stores.
“This is the fear of an (economic) opening that they have always had,” he told El Nuevo Herald. “They don’t like too much money floating on the street.”
Some of the new businesses have complained of increasing state controls, such as more and tighter inspections, and government officials have reportedly called for forcing the “self-employed” to join neighborhood activities such as cleaning streets.
Miami economist Marzo Fernandez said Havana “needs cash with extreme urgency” and noted that Cuban bank assets abroad reported by the Bank for International Settlement plunged from $5.65 billion to $4.1 billion in the last three months of 2011.
Dissident Havana journalist Ivan García wrote recently that the government is trying to “milk more cash out of Cubans living abroad” because “deep down they hate the émigrés. They see them as traitors who fled … and took refuge in the land of their No. 1 enemy.”
The Cuban government is expected to soon approve changes in migration regulations that would make it more attractive for émigrés to invest in and return to the island.
Castro opened a window to private enterprise as part of a drive to energize the economy by slashing nearly one million workers from state payrolls, cutting state spending on health, education and food imports, handing out millions of acres of state lands to private farmers and attracting increased foreign investments.
But he has taken a slow and steady approach, warning over the past two years that while Cuba stands on the edge of economic chaos, his economic reforms must be carried out “without hurry but without delay.”
Few changes have been visible since a crucial Communist Party Congress in April of last year endorsed Castro’s reform package, while complaints have mounted against bureaucrats and corrupt officials who oppose the reforms.
Paladar owner Jose Antonio recalled that he opened his doors in the early 1990s, when the collapse of Soviet subsidies to Cuba forced Fidel Castro, who nationalized all island businesses in 1968, to approve a limited reopening of private enterprise.
But as Cuba recovered from the shock in the last half of the 1990s, Castro began to row back on the opening, with tax and health inspectors tightening the controls on the small businesses until many of them closed their doors.
“I’ve had some years of experience, and that’s why I worry,” said Jose Antonio. In the early 19990s, “we were 30 paladares in Old Havana, and at one point we were only five. Today, I just don’t know if I will be able to continue, with these rising costs.”
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