Lobster is Too Rich for Regime

Cuba Puts Squeeze on Private Enterprise

By David Abel

The Houston Chronicle

SANTIAGO DE CUBA, Cuba -- The swarm of houseflies still buzz about Mireya Galan's small dining room, but there's no longer any food to nibble or patrons to pester. Cuba's government, once tepid to the rise of small, private businesses, has turned frigid again.

The 53-year-old former hairdresser watched four years of work cultivating a clientele and investing in home improvements go to waste as nearly a dozen police officers recently trooped into her house, slapped her with a stiff fine and declared her private restaurant closed.

Galan, whose 12-seat home restaurant, known as a paladar, was shut down in the first week of July for illegally selling seafood, is just one more victim of the communist government's campaign to rein in its nascent experiment with capitalism.

"We are part of a new class that has been able to earn money," Galan said. "The government doesn't like that. So they're putting us out of business." The government crackdown isn't personal or local.

The day before police compelled Galan remove the Paladar Mireya sign hanging in front of her narrow house on Padre Pico Street, the official government weekly newspaper Trabajadores outlined tougher rules for self-employed workers, whose numbers have dropped to around 154,000 from more than 200,000 three years ago.

The squeeze on private enterprise, which was legalized in 1993 as part of a response to the economic devastation caused by the collapse of Cuba's benefactor, the Soviet Union, has steadily tightened in the past couple of years: Inspections are more frequent, monthly license fees have increased and strict rules are more regularly enforced.

Government demanding dollars

When Galan first received authorization to open her restaurant in 1994, she had to pay the government 1,000 pesos (about $50) every month and abide by regulations that included limiting seating to 12, not serving expensive foods such as steak or seafood and purchasing cans of soda and beer from stores that only accept dollars.

Large bottles, which can have their contents divided, are banned because the way the drinks are sold can't be controlled.
A couple of years later, her two monthly payments were up to 1,600 pesos plus $600.

The rules issued in August force paladars and all other private businesses that accept hard currency to pay the government completely in dollars, making it more difficult to serve peso-paying Cubans.

Previously, paladars and other dollar-collecting businesses had to pay 75 percent of their monthly quota in dollars.

One measure of the crackdown on self-employed workers is the dwindling number of paladars here in Santiago, Cuba's second city.

Former paladar owners in downtown Santiago such as Hilda Ballesta, whose restaurant was closed in April because she couldn't provide inspectors with receipts for four sodas in her refrigerator, said there were as many as 16 paladars in the city's center. Now there are three.

"They think we're millionaires," said Ballesta, 47, who once peddled caramel candies on Santiago's closest beach. "But with all the taxes, we were lucky to still make a profit."

While state inspectors frequently drop in on paladars and other private enterprises to check the books and make sure business isn't too brisk, they do little to oversee the conditions of those in whose name the revolution was fought - the workers.

Workers get little help

State regulations usually prohibit self-employed workers from hiring help. In the case of paladars, which have to pay the government an additional monthly fee of $75 per worker, proprietors can hire family members as employees.
But the rules are routinely violated, and non-family members often work under the table.

That allows for shoddy working conditions. There is no union for employees of private enterprises nor is there much enforcement of labor laws to ensure that employers do not exploit their workers.

Caridad, 40, a former librarian who has worked for the past few months as a housekeeper in one of Santiago's remaining paladars, was dusting a shelf in tears one afternoon.

The single mother, who travels more than two hours on a packed, rickety bus every morning to arrive at the paladar by 7:30, said her employer has repeatedly threatened to fire her if she arrives late.

"I would quit if I could, but there's no other option," said Caridad, who makes 250 pesos ($12.50) a month at the paladar. She said she would make 100 pesos a month doing the same job for the state. "Sometimes I have to stay extra hours and my pay is the same. But there's nothing I can do. I have to accept what they tell me to do."

The government squeeze affects more than home restaurants. There are 157 categories of trades, crafts and services in which the government allows people to operate independently.

And the new regulations go beyond converting pesos into dollars. Government labor officials will now question aspiring self-employed workers about how they intend to obtain the raw materials to practice their trade, and where they will get the tools and equipment to do so.

'The enemy of private business'

Inspectors will also refuse self-employment licenses to jobless, able workers if state employment is available for them in their region.

The rules also specifically prohibit self-employed workers, such as carpenters, upholsterers and mattress makers, from forming associations for "production and commercialization."

Emilio de Los Angeles Hinojosa, 31, a former laboratory administrator now working on his own repairing shoes, wasn't sure how the new regulations would affect him. But he was certain the government was moving to hamper the new independent sector.

"Socialism is the enemy of private business," he said. "But the government's actions are filled with contradictions. If we disappear, the people have nowhere else to go."

The trade union newspaper, which is run by the Communist Party, said the new regulations were a correction to revise previous errors. The government defends the new guidelines by arguing that a socialist state must be vigilant against private enterprise so that state-resources are not illegally diverted.

Officials also claim that taxes on self-employed workers are justified to offset the greater income they have compared with state employees.

For Mireya Galan, who returned to independently cutting and setting hair to make a living, running a private restaurant was profitable. After costs, she said she earned about $500 a month, more than 50 times the average Cuban monthly income.

Several years ago the soft-spoken former maitre d' converted her bedroom into the paladar's cramped dining room. Now, hunching over one of the eatery's empty tables, Galan says she knows why the government is curtailing its previous opening.
"People with money have a voice," Galan said. "The government won't permit that."

Copyright, The Houston Chronicle