Cuba unveils a capitalist revolution

Cuba unveils a capitalist revolution
By Marc Frank in Havana
Published: November 1 2010 19:25

Cuba has moved to shake up its complacent labour force, with President
Raul Castro putting in place the framework for a rudimentary jobs market
and a small-business sector.

By publishing laws governing layoffs, drastic cuts in unemployment
benefits and the development of small businesses, the reform-minded
president has taken the biggest steps to date to modernise the economy.

"It is the law now, there is no turning back. I think it is positive and
gives me hope reform has begun in earnest," a local economist said,
asking his name not be used due to prohibitions on talking with foreign
journalists.

However, the development of small businesses will take place within a
state-dominated system and is expected to be slow and messy as
bureaucrats stall and seek bribes, financing and supplies go lacking and
people manoeuvre for position as they adjust to new circumstances.

The self-employed, often a euphemism for small business, can now hire
labour, rent store fronts, do business with the state and seek bank
credits, among other novelties. Granma, the Communist party newspaper,
said the new freedoms would "distance ourselves from those conceptions
that condemned self-employment almost to extinction and stigmatised
those who decided to join it, legally, in the 1990s".

However, the number of reports required and monthly quotas and taxes
remain onerous in a country where most people have no car or telephone.
Regulations on the types of businesses allowed are also restrictive.
Self-employment, first authorised in 1994, was called a "temporary
concession to capitalism" by then President Fidel Castro who limited
licences and regulated and taxed the self-employed almost to extinction.

The term covers everything from the building trade, clowns, nannies,
barbers, beauticians, private taxi and truck drivers to small businesses
such as home-based bed and breakfasts and restaurants, pizzerias and
garages.

Christina, a licensed hair stylist said she welcomed the chance to start
a beauty parlour for her clientele, many of whom are diplomats, their
wives and better-off Cubans. "I'm already planning to rent a store front
and hire staff, though I bet it will be a lot of work and time before it
all comes together," she said – like others asking her full name not be
used.

Christina said she had to fight for a copy of the rules and regulations
last week, as Cubans snatched them up as quickly as they appeared at
news-stands.

The reforms aim to legitimise and tax illegal small businesses and
provide jobs for government employees due to be sacked as the state
trims bloated payrolls and retreats from some secondary activities in
favour of private business, cooperatives and leasing arrangements. The
first round of a total 500,000 layoffs will take place in March.

Pedro, a carpenter, who has worked for years without a licence, gave up
trying to get a copy of the regulations. "I'll hear about it and then
decide what to do. As long as the taxes are not too bad I'll get a
licence to avoid all the hassles with police and inspectors," he said.

Granma warned in a recent article: "Those who continue working on their
own without papers, or do not pay the required taxes, will feel the
weight of the law imposed upon them by those mandated to enforce it, the
National Tax Office."

Pedro said he and two carpenter friends shared four machine tools sent
by relatives in Miami. "Who knows? Maybe we will get a bit more help
from over there, rent a place and go into business some day." he mused.
The new tax code for small enterprises, published last week, increases
deductibles for business expenses from 10 per cent to up to 40 per cent.
It includes a new 10 per cent sales tax and 25 per cent social security
tax, also deductible before payment of a graduated income tax that
ranges from 25 per cent to 50 per cent of earnings.

But most striking is the new payroll tax on a sliding scale from one to
"more than 15 employees", along with regulations governing the hiring of
labour by private farmers. This represents a small revolution in a
country where article 21 of the constitution states one's property and
instruments of work "cannot be used to obtain earnings from the
exploitation of the labour of others".

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