Cuba tries to drag shadow economy into the light

Posted on Sunday, 07.03.11

Cuba tries to drag shadow economy into the light
By PAUL HAVEN
Associated Press

HAVANA -- Want some paprika-infused chorizo sausage? How about a bit of
buffalo mozzarella? Or maybe you just need more cooking oil this month,
or a homemade soft drink you can afford on paltry wages. Perhaps you are
looking for something more precious, such as an imported air conditioner
or some hand-rolled cigars at a fraction of the official price.

In a Marxist country where virtually all economic activity is regulated,
and where supermarkets and ration shops run out of such basics as sugar,
eggs and toilet paper, you can get nearly anything on Cuba's thriving
black market - if you have a "friend," or the right telephone number.

A raft of economic changes introduced over the past year by President
Raul Castro, including the right to work for oneself in 178 approved
jobs, has been billed as a wide new opening for entrepreneurship, on an
island of 11 million people where the state employs more than four in
five workers and controls virtually all means of production.

In reality, many of the new jobs, everything from food vendor to wedding
photographer, manicurist to construction worker, have existed for years
in the informal economy, and many of those seeking work licenses were
already offering the same services under the table.

And while the black market in developed countries might be dominated by
drugs, bootleg DVDs and prostitution, in Cuba it literally can cover
anything. One man drives his car into Havana each day with links of
handmade sausage stuffed under the passenger seat. A woman sells
skintight spandex miniskirts and gaudy, patterned blouses from behind a
flowery curtain in her ramshackle apartment.

Economists, and Cubans themselves, say nearly everyone on the island is
in on it.

"Everyone with a job robs something," said Marki, a chain-smoking
44-year-old transportation specialist. "The guy who works in the sugar
industry steals sugar so he can resell it. The women who work with
textiles steal thread so they can make their own clothes."

Marki makes his living as a "mule," ferrying clothes from Europe to
Havana for sale at three underground stores, and has spent time in jail
for his activities. Like several of the people interviewed for this
article, he agreed to speak on condition he not be further identified
for fear he could get into trouble.

Merchandise flows into the informal market from overseas, but also from
the river of goods that disappear in pockets, backpacks, even trucks
from state-owned warehouses, factories, supermarkets and offices.

There are no official government statistics on how much is stolen each
year, though petty thievery is routinely denounced in the official
press. On June 21, Communist party newspaper Granma reported that
efforts to stop theft at state-run enterprises in the capital had "taken
a step back" in recent months. It blamed managers for lax oversight
after an initial surge of compliance with Castro's exhortations to stop
the pilfering.

"Criminal and corrupt acts have gone up because of a lack of internal
control," the paper said.

An extensive study by Canadian economist Archibald Ritter in 2005
examined the myriad ways Cubans augment salaries of just $20 a month
through illegal trade - everything from a woman selling stolen spaghetti
door-to-door, to a bartender at a tourist hot spot replacing
high-quality rum with his own moonshine, to a bicycle repairman selling
spare parts out the back door. He and several others who study the Cuban
economy said it was impossible to estimate the dollar value of the black
market.

"You could probably say that 95 percent or more of the population
participates in the underground economy in one way or another. It's
tremendously widespread," Ritter, a professor at Carlton University in
Ottawa, told AP. "Stealing from the state, for Cubans, is like taking
firewood from the forest, or picking blueberries in the wild. It's
considered public property that wouldn't otherwise be used productively,
so one helps oneself."

Cubans even have a term for obtaining the things they need, legally or
illegally: "resolver," which loosely translates as solving a problem.
Over the decades it has lost its negative connotations and is now taken
as a necessity of survival.

"Turning to the black market and informal sector for nearly everything
is so common that it has become the norm, with little or no thought of
legality or morality," said Ted Henken, a professor at New York's Baruch
College who has spent years studying Cuba's economy. "When legal options
are limited or nonexistent, then everyone breaks the law, and when
everyone breaks the law, the law loses its legitimacy and essentially
ceases to exist."

There is evidence, however, that Castro is persuading at least some
black market operators to play by the rules and pay taxes.

In the last seven months, more than 220,000 Cubans have received
licenses to work for themselves, joining about 100,000 who have legally
worked independently since the 1990s. Of those, some 68 percent were
officially "unemployed" when they took out their license, 16 percent had
a state job and another 16 percent were listed as "retired," according
to statistics on the government Web site Cubadebate.

Many of these jobless and nominally retired people were likely making
ends meet by working in the informal market, and even the former
government workers were probably connected in one way or another.

"You have to find a way to survive," said Manuel Rodriguez, the former
head of a Cienfuegos medical center for children with disabilities.
Rodriguez said his monthly government ration card plus his and his
wife's meager salaries only covered two weeks' worth of food. "I sat in
the park one day and thought, 'What can I do?'"

He began bicycling around town on Sundays, renting out bootleg DVDs of
the latest Hollywood films, which others had downloaded from the
Internet. Rodriguez, who moved to Miami in 2009, defended his decision
to turn to the black market to put food on the table.

"I wasn't hurting anyone," he said. "It's not pornography. It's not drugs."

In fact, the sale and rental of pirated DVDs now is one of the 178 jobs
that can now be done legally in Cuba, which ignores U.S. intellectual
property rights in response to Washington's 49-year economic embargo.

New license holders complain the taxes and social security payments can
be well over 50 percent of sales, raw materials are hard to come by
because there is no wholesale market and government promises to provide
bank credits and retail space have been slow to develop.

But many say they jumped at the chance to go legit anyway, tired of
always looking over their shoulder.

"We started off illegally, years ago, but when they started to give out
licenses we got one because it means peace of mind," said Odalis Losano,
a 46-year-old single mother who got a license in December to sell
lunches she prepares on her home stove. "Now we don't have to be afraid
of the police or the inspectors."

Paradoxically, the expansion of a legal free market may be increasing
the size of the black market, particularly for the goods and services
the new entrepreneurs need to survive. Newly legalized pizzerias must
have a steady supply of cheese, flour and tomato paste, self-employed
construction workers must have building materials, manicurists must find
nail polish.

One man profiting off the legitimate economic opening, albeit illegally,
is Roberto, who uses stolen canisters of CO2 to make carbonated drinks
for sale to the scores of downmarket private cafes opening up all over
Havana. He charges just 7 pesos (28 cents) for a 1.5-liter bottle, a
sixth of what a bottle of state-made cola costs in the supermarket.

"This business is not totally legal," he said. "I can't get a license
for it because the state will not sell me the CO2. I need to get it on
the black market."

And then there are the many activities that by their nature must remain
hidden under Cuba's controlled system.

The Internet is strictly regulated in Cuba, so those who sell time on
accounts that belong to doctors, professors and computer technicians do
so on the sly. The government maintains a monopoly on that most
quintessential of Cuban products, the cigar, so the hundreds of
underground stogie-rolling factories will stay underground.

Likewise, the sale of gold is regulated, so those who melt it down for
false teeth won't get licenses anytime soon.

"Even if they legalize this, it wouldn't be worth getting a license,"
said one practitioner, who spoke on condition of anonymity for fear of
earning the ire of the state. He charges up to $40 per tooth, using gold
melted down from jewelry and trinkets he buys from secret suppliers.
"They would regulate it so much it would be impossible to get the gold
and other materials I need. The authorities would bother me so much it
would be worse than doing it in hiding."

Marki, the mule, said he would happily open an imported clothing
boutique if the island's leaders ever scrapped Cuba's Marxist economy
for capitalism. Until then, he said, he and many of his countrymen will
carry on living and working on the margins of the law - and no amount of
fines, seizures or jail time will dissuade them.

"Half of Cuba lives off the black market," he said with a gruff smile.
"And the other half depends on it. To me, it is unstoppable."

---

Associated Press writers Andrea Rodriguez in Havana and Laura
Wides-Munoz in Miami contributed to this report.

http://www.miamiherald.com/2011/07/03/v-fullstory/2297852/cuba-tries-to-drag-shadow-economy.html