Cuba gives space to small businesses

Many workers are hoping to take advantage of the easing in restrictions to expand their businesses

The village of El Cano, on the outskirts of Havana, has been producing pottery since Spanish colonial times. It is surrounded by rich deposits of clay and today it remains a hive of activity.

Walk along its dusty streets and on every block there are houses selling flower pots and other unglazed ceramics from their front porches.

In the back yards, smoke from the wood-fired brick kilns drifts across sweaty workshops nestling between banana and palm trees and other lush, semi-tropical vegetation.

These small, family-run businesses are a rarity in Cuba, where 85% to 90% of the economy is state-owned.

Alberto Araguez has a licence, or permit, from the authorities to produce and sell roof tiles and pots.

His is one of about 60 such businesses in the village. Half are licensed, half are not.

Now that President Raul Castro has announced that he will expand the island's fledgling private sector, the potters of El Cano are hoping to become a village co-operative.

Alberto Araguez is head of a newly formed potter's association, which is negotiating with the authorities.

"It would be good for this community to legalise the situation. We could also provide jobs for those workers being laid off and everyone would be able to continue supporting their families," Mr Araguez explained.

This time, he believes, the government is serious about change.

Ideological divide

Cuba's centrally controlled, state-run economy was struggling even before the global financial crisis hit.

It can no longer afford its heavily subsidised, cradle-to-grave welfare state or the inefficiencies of a bloated workforce with jobs for life.

The number of self-employed workers had fallen since 1996

Borrowing is not an option. The United States trade embargo denies Cuba access to major lending institutions, such as the International Monetary Fund or the Inter-American Development Bank.

Instead, Raul Castro is now attempting to rationalise and overhaul the island's Soviet-era economic model.

Half-a-million underemployed state workers are due to lose their jobs in the coming months. To help take up the slack the government will permit about 250,000 people to become self-employed or start small businesses.

This is not a return to capitalism and it remains a long way short of the Chinese and Vietnamese market reforms.

In the introduction to a new 32-page report outlining the proposed economic changes the government made clear that "in updating the economy, model planning will be paramount, not the market".

However, it does cross some important ideological divides, including the right to hire labour, which is deemed as "exploitation" and banned under the constitution.

Yet few of the potteries in El Cano could survive without additional labour.

Changing attitudes

Nelson Alicia is learning the trade in another of the village workshops, doing everything from mixing clay into the right consistency to wheel-throwing techniques.

President Castro knows that improving the economy is critical if the socialist revolution is to survive

One of five apprentices, the 21-year-old is earning double what he would if he was working for the state. The new regulations are intended to formalise the arrangement but come at a hefty price.

Nelson will have to pay between 25% and 50% of his earnings in tax, plus an additional 25% in social security payments.

"It is a lot," he says. "But at least now we won't have to hide when the inspectors come. Before we used to turn everything off and keep quiet. Now if they give us licences we won't have to work in secret."

The government has published a list of 178 trades where Cubans can apply to become self employed or run small businesses. In about half of these cases they will be allowed to hire labour.

The list includes carpenters, plumbers and accountants, although many of the permitted jobs, such as party clowns, park attendants and parking wardens, will have little major impact on the economy.

Black economy

Almost 80,000 people have applied in the past month and about 30,000 have already been granted licences, according to the official newspaper Granma.

Many want to open cafes or other forms of catering. Others are seeking permission to rent spare rooms to these new fledgling entrepreneurs.

In a country where people are not allowed to buy or sell property, the new rules should enable a small private and commercial rental market to develop.

The largest number of applications has come from retirees looking to supplement their pension.

In many other cases they are people who are already working in the black economy and are looking to legalise their situation.

It is hoped the private sector will employ some of the state workers who lose their jobs

This isn't the first experiment with small businesses.

After the collapse of the island's main benefactor, the Soviet Union, some private enterprise was allowed. This was mainly in the much needed tourist sector, such as family-run guest houses and restaurants.

However, they were always treated as necessary evils and as soon as the economy improved, they were squeezed with red tape and punitive taxes, forcing many to close down.

From a peak of 208,000 self-employed in 1996 just 143,000 remained in business at the beginning of this year.

This time, though, the government has said that the self employed should "no longer be stigmatised", suggesting that these changes could be more permanent.

President Castro knows that improving the economy is critical if the socialist revolution is to survive once the ageing leadership which created it is gone.

"Today, more than ever before, the economic battle is the principal task and the focus of the cadres' ideological work, because the sustainability and the preservation of our social system depend on it," he said in a recent televised speech.

Mr Castro has now set a date in April 2011 for the first Communist Party Congress to be held in 14 years.

This should give the ideological stamp of approval to push ahead with these and other changes.

For the potters of El Cano it can't come a moment too soon.