Cuba

Complaints from private entrepreneurs in Cuba lead to unusual about-face on new regulations

Carlos Ignacio Romero fixes watches at the Virgen del Camino market on the outskirts of Havana, Cuba, on Nov. 16, 2018. New regulations that put more restrictions on Cuba’s self-employed sector are going into effect Dec. 7, 2018.
Carlos Ignacio Romero fixes watches at the Virgen del Camino market on the outskirts of Havana, Cuba, on Nov. 16, 2018. New regulations that put more restrictions on Cuba’s self-employed sector are going into effect Dec. 7, 2018. mocner@miamiherald.com

In an 11th-hour reprieve, the Cuban government has announced several big changes that should make new rules scheduled to go into effect Friday more palatable to the island’s cuentapropistas (self-employed workers).

The government explained Wednesday night on the Mesa Redonda television program that its shift represented a “better application” of the measures and said it responded to feedback from those who work in the private sector.

The biggest change is the ability for Cubans to work in more than one of the 123 approved self-employment activities. But the government doesn’t want any double-dipping. It said the cuentapropista must participate daily in the multiple jobs and the activities can’t be carried out in the same space or time frame.

Under the previously proposed rule change, Cubans would have been allowed to operate just a single private business. If an entrepreneur had a license to rent a room in his home, for example, and also was a private taxi driver, he would have had to give up one of the licenses. Now he’ll be able to keep doing both things.

Gone, too, is a limit of 50 seats for private bars, restaurants and cafeterias. Previously, entrepreneurs had tried to get around that requirement and boost their seats by taking out licenses for both a restaurant and cafeteria at the same address, something the new rules don’t allow.

Government officials also clarified that Cubans who rent out rooms and homes can offer meals as long as they get sanitary licenses.

Just days ago, cuentapropistas like barber Ahmed Raúl Pérez were viewing the new rules with apprehension. A multitude of restrictions will still limit a private business’ ability to grow — despite the government’s last-minute loosening of some of the most unpopular measures.

The impact will probably be very negative,” said Pérez, a 24-year-old hipster with orange hair and tattoos festooning his arms. He and partner Alberto Carlos Bosch Rosquete, 30, opened their Barber Color shop last year with high hopes of bringing the latest in international cuts and colors to Cuban customers.

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Alberto Carlos Bosch Rosquete, 30, a part-owner of the Barber Color shop, cuts a customer’s hair in Havana. MATIAS J. OCNER mocner@miamiherald.com

On the Mesa Redonda program, Minister of Labor and Social Security Margarita González Fernández said the modifications, which were also published in the government’s Gaceta Oficial, represented the will of the government to keep the self-employment process going as part of Cuba’s goal to update its economy.

“The new regulations are a step backwards and no one is happy about it,” said Carlos Alzugaray, a retired Cuban diplomat and academic. “It’s almost like there are two countries — one that wants change and one that doesn’t.”

While his comments were made prior to the slight modifications, most of the new restrictions that go into effect on Friday remain intact.

On Wednesday, González insisted that “there is no backward motion.” Other changes are being analyzed as well and could come in future stages, she said.

Cuba had more than 593,000 self-employed workers when the new measures were first announced in the Gaceta Oficial in July, giving independent workers time to learn about the multitude of new regulations and make adjustments in their businesses. For some, the response was simply to turn in their cuentapropista licenses because they viewed the new rules as too onerous.

González said at the end of October that Cuba had 588,000 self-employed workers, a drop of more than 5,000.

Although there were small-scale experiments with self-employment in Cuba dating back to the 1970s, it wasn’t until 2009-2010 when Raúl Castro embraced cuentapropismo as a way to move Cubans off bloated state payrolls and make more goods and services available to the Cuban people that it really began to take off.

Some Cubans have taken to capitalism a bit more than the Cuban government expected, opening multiple businesses, hiring many workers and often buying supplies on the black market because there are hardly any wholesale outlets on the island. Others evaded taxes.

The new rules are not only an attempt to rein in abuses, analysts say, but also a way to make sure cuentapropistas don’t get too wealthy or provide too much competition to state-run businesses.

Outside the National Office of Tax Administration in Havana’s Plaza de la Revolución neighborhood, the highlights of some of the new laws have been posted on the facade of the old mansion.

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On the facade of the National Office of Tax Administration in Havana’s Plaza de la Revolucion, notices about Cuba’s new self-employment law are posted. MATIAS J. OCNER mocner@miamiherald.com

One measure that has caused much distress is a requirement that entrepreneurs who have high-grossing businesses — bed and breakfasts, private restaurants, cafeterias, bars, construction services or transportation services for 4 to 14 passengers — maintain special bank accounts in which they must keep a minimum deposit equivalent to three months taxes in Cuban pesos.

However, the government said Wednesday that the requirement would be modified so that the minimum deposit in the bank accounts is reduced to two monthly tax payments instead of three.

One taxi driver who stopped by the tax administration office recently explained why his days of transporting foreign visitors were numbered. He said he planned to give up his self-employment license because the numbers no longer add up.

“I would have to keep 869 pesos minimum on deposit in a bank account. That is too much money so I am turning in my license,” said the taxi driver. “The price of the license has gone up a lot too.” It’s unclear whether the new, lower deposit amount will change his mind.

Adding to the angst of private taxi drivers is a government decision to move up the dates for vehicle inspections that check brakes, windshield wipers and other equipment. Some private taxis on the roads are in poor condition. Obtaining spare parts on the islands for repairs is a difficult task.

Some taxi drivers are talking of staging a strike on Friday, but already there are noticeably fewer private taxis on the roads. “I was working recently but I had to come home to take my wife to visit her sister in the hospital because there weren’t any taxis in the street,” said the Havana cab driver.

At Barber Color, as 31-year-old Ernesto González got his hair trimmed and styled, he complained about the new bank deposit requirement.

“We have ideas about doing things differently, doing things better and then no one wants to help us,” said González, the proprietor of Bar Limbo in Havana’s Playa neighborhood.

One of the biggest gripes has been that with all the new regulations and tax requirements, entrepreneurs expect something in return from the government. Chief on their wish list is a viable wholesale network where they can buy what they need to supply their businesses at more reasonable prices, rather than resorting to the black market or buying at retail stores where other shoppers complain they are creating shortages.

Pérez said the barber shop in Havana’s Vedado section faces an ongoing struggle to find everything from scissors to hair coloring. “Now they are going to want us to show receipts for all our materials. How are we going to do that? We get our supplies from people from the U.S., Panama, Mexico, the Dominican Republic. Of course, we don’t have these receipts.”

“We can’t find Cristal or Sol (Cuban beers) so we’re selling Miller Light that we get from Panama,’” said González, the bar owner.

Armando Silvera Rodriguez waits outside of the Panamanian Consulate in Havana, Cuba to get information about a tourist card that would allow him to buy spare parts and equipments for his business. The fee is equivalent to 20 dollars USD.

A new 30-day Panamanian tourist card that will make it easier for Cuban entrepreneurs to shop in the Central American country is a welcome alternative for wealthier entrepreneurs, but with the cost of airfare, food and lodging a Panama trip is too expensive for many small cuentapropistas.

“There’s no cloth, no nothing, There’s a lot of demand and not much cloth,” complained Marilin García Franco, a seamstress and vendor at the Virgen del Camino outdoor market in the San Miguel del Padron municipality on the outskirts of Havana. She sells tiny dresses and brocaded costumes for statues of Santeria deities such as Chango and Yemaya.

García also sells full-size clothing for religious festivals and general use.

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Marilin Garcia Franco sells dresses for Santeria statues and religious festivals at the Virgen del Camino market on the outskirts of Havana, Cuba. MATIAS J. OCNER mocner@miamiherald.com

There are a few items of imported clothing on her racks. “After Dec. 7, we will have to get rid of these,” she said. Those who have licenses to make or tailor clothes aren’t supposed to resell manufactured clothes and with the new rules, she expects stricter enforcement.

Over at a nearby booth offering baby clothes and shoes, Raida Santiesteban says some days she barely sells anything but she still has to pay her monthly license and social security fees.

But she is philosophical: “I’ve had good times; I’ve had bad times,” she said. “There are going to be more requirements, but overall I think this might help me.” For one thing, she’ll no longer face competition from Cubans who take out tailor licenses and then just buy and resell imported clothes.

At a nearby booth, 72-year-old Jorge V. Castillo emphasized that all the dresses and blouses “are made by the hands of my wife. All this is original.“ He holds a license as a self-employed ayudante or helper.

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Jorge V. Castillo, 72, sells dresses sewn by his wife at the Virgen del Camino market. MATIAS J. OCNER mocner@miamiherald.com

“What we need here is free commerce and we don’t have it. We don’t have any free zones here,” said Castillo. “We’d like to negotiate directly with private companies abroad.”

He admitted that he’s still in the dark about the new regulations: “They haven’t communicated to us about how this is going to work. I imagine there will be more inspections, but we already have a lot of inspections.”

Over at a tin-roofed shed, Carlos Ignacio Romero paused from staring through a magnifying eyepiece at minute watch parts to discuss the new regulations.

“For this type of place, one that doesn’t take in any great riches, I don’t think that much will change, but for other cuentapropistas, I imagine there will be an impact,” he said.

Follow Mimi Whitefield on Twitter: @HeraldMimi

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