New entrepreneurs in Cuba get mixed results

Posted on Saturday, 04.09.11

New entrepreneurs in Cuba get mixed results
By PAUL HAVEN
Associated Press

HAVANA -- There was no colorful bunting to mark the grand opening, and
no way to advertise in the local press. There was not even money to hand
out fliers in this decaying Havana neighborhood of potholed streets and
crumbling one-story homes.

So when the freshly painted front window of the tiny pizzeria swung open
on the most important afternoon in Julio Cesar Hidalgo's life, nobody
noticed at first.

Hidalgo and his girlfriend Gisselle de la Noval waited for half an hour,
then another, and another. Finally, 92-year-old Estrella Soto shuffled
up to the takeout counter and ordered a medium pizza with onion toppings.

"I love it," she declared, and Hidalgo and de la Noval have barely sat
down since.

They sold seven more pizzas in the next 15 minutes, and a total of 30 on
their March 8 opening day. The following Saturday they had their best
afternoon yet, churning out 60 pies from a used gas oven that looks too
narrow even for a small family's needs.

It has been six months since President Raul Castro opened the most
significant change to its economy in decades.

By March 8, according to state-run media, more than two-thirds of the
250,000 goal for all of 2011.

As Cuba's new business class journeys cautiously forth, some are
enjoying the first fruits of success. Others say the terrain has been
rockier than anticipated. Some have already closed the door on their
entrepreneurial dreams.

The Associated Press began following the fortunes of a group of would-be
small business owners in December. Four months later, their experiences
seem to reflect the sweep of Cuba's grand fiscal experiment, as well as
the sometimes cruel vicissitudes of the free market.

There is Javier Acosta, who is struggling to get customers into his
upscale Havana restaurant. And Yusdany Simpson, a young single mother
making a modest income selling coffee and sandwiches from her front
yard, a humble venture that resembles a child's lemonade stand.

Then there is Danilo Perez, a 21-year-old bookkeeper who got a license
to sell pirated DVDs, only to give up bitterly after authorities
suddenly quadrupled his taxes.

"Cubans are entrepreneurial people and to the extent they are allowed to
work and make some money, they will," said Lorenzo Perez, a former IMF
economist and member of the Association of the Study of the Cuban
Economy, a nonpartisan Washington, D.C.-based think tank.

But he added the new enterprises face stiff challenges in a country
where few have business acumen, raw materials are hard to find, tax
rates can be exorbitant and myriad government regulations still restrict
basic activities.

"All over the world, the percentage of small businesses that succeed is
very small, even in the United States," Perez said. "In Cuba, the
difficulties are enormous, because the environment is not very conducive
yet to business ... but that doesn't mean it can't be done."

Dozens of restaurants have opened, some of them remarkably chic for an
island of 11 million people where it can be hard to find such basics as
matching tables and chairs, and an explosion of private apartments have
been put on the rental market.

Those who have sought out licenses say the process is fast and
straightforward. Fears that government inspectors - some looking for
kickbacks - would undo the free market drive have not materialized,
perhaps because there are not yet enough to check in regularly on the
unexpectedly large number of new businesses.

Meanwhile, the government has pushed back indefinitely plans to lay off
500,000 state workers, acknowledging the move was extremely difficult
and had to be handled with the utmost delicacy. More details are likely
to be announced at a key Communist Party Congress slated to begin April 16.

But it has not all been smooth sailing for the entrepreneurs.

Perez, the DVD seller, threw in the towel two weeks ago. He said when he
went to get a license in December, officials told him he needed to pay
$2.50 a month to operate a streetside kiosk. But when he went back in
March, they told him the rates had gone up to $10.50 a month, with an
extra month's taxes in advance.

"There were many people protesting - some even crying - because they
didn't have the money to pay," said Perez, who is unemployed and getting
help from his parents to make ends meet.

Javier Acosta, the owner of a new restaurant in the Playa neighborhood,
said he did not make enough in his first month to even cover the monthly
tax of $458, and so had to dip into his savings to pay the government
and his employees. The next month Acosta did cover his costs, barely,
and he is hoping nervously the trend continues.

"There are days when nobody has come, absolutely nobody," Acosta said.
"Sometimes I've had one table, or two, but I know how this works. ...
One must go slowly, little by little, and build a reputation through
word of mouth."

Simpson, the single mother, has had more success, albeit with far more
modest goals. Before she opened her kiosk in Havana's Vedado
neighborhood, she was unemployed and dependent on remittances sent from
abroad to raise her 2-year-old son. Now, she makes about $25 a month
selling coffee, soft drinks and mayonnaise sandwiches for pennies
apiece, a little more than the average Cuban monthly salary.

"This isn't going to make me rich, but I make enough to get by," she said.

Back at Hidalgo's pizza parlor, the strains of business ownership were
evident. Hidalgo has spent more than $1,000 to get the pizzeria off the
ground, much of it a gift from a cousin in the United States.

Now that it is open, he spends hours standing up each day next to the
hot oven, and hours more each week lugging sacks of flour and large cans
of tomato sauce back on his bicycle. He has been able to find all the
ingredients he needs in official shops, a sign, he says, that the
government is making good on promises to increase access to raw materials.

Hidalgo said he has had no time to contemplate success because he falls
asleep at the end of each long day before his head hits the pillow.

He said his lowest moment came when a housing inspector turned up to
fine him because he did not have a permit for carving out the pizzeria
at the front of his house.

At first, it looked like he would have to pay the equivalent of $75, but
in the end he was told the fine would be forgiven if he got an architect
to retroactively draw up plans for the building work - something that
will cost him just $4.

Hidalgo said no inspectors have been by to check his books or demand
copies of his receipts, a major change from his experience opening
another pizzeria with his cousin in the 1990s. Then, inspectors paid
them weekly visits, and drove the venture out of business when they
discovered the pair were buying ingredients on the black market.

This time around, Hidalgo had planned to take a leave of absence from
his $11-a-month job at a state-owned bakery, but he quickly realized his
heart was in his new venture and quit outright.

He said there are still slow days, particularly at the end of the month
when many people run short of cash, but he reckoned he averages selling
20 pies a day. On a good afternoon, he can easily make more than in an
entire month at his old job, though profits are split with de la Noval
and Hidalgo's aunt, the owner of the house.

Hidalgo charges from 50 cents for a small cheese pizza to $3 for a
family-size pie piled high with toppings, a small fortune on an island
where the average salary is just $20 a month.

Some Cuban economists have warned that the fiscal changes might not work
in part because islanders won't have enough spending money to support
the new ventures. But many Cubans receive money from abroad, and almost
everyone makes cash on the side, either stealing items from their
government workplace or doing odd jobs.

When asked where his clients get the cash for his pizzas, Hidalgo smiled.

"There are people who live off their salary or pension, but there's
always money that comes in in other ways," he said, pulling another pie
out of the oven and wiping the sweat from his brow. "If it were only for
the salaries, people would be living on the street in loincloths."

Hidalgo and his girlfriend say the business has changed their outlook on
the country.

A year ago, both were looking to emigrate: her through a quickie
marriage to a Cuban-American, him to live in Atlanta with the cousin who
was once his business partner.

"We took a risk. We believed in the country and the changes they are
making," said de la Noval. "We are hoping that things are only going to
get better."

Associated Press writers Anne-Marie Garcia and Andrea Rodriguez
contributed to this report.

http://www.miamiherald.com/2011/04/09/v-fullstory/2159073/new-entrepreneurs-in-cuba-get.html