Mon | Feb 19, 2018

Growth & Jobs | Castro freezes Cuban private sector, throws future in doubt

Published:Tuesday | February 6, 2018 | 12:00 AM
A client waits his turn to get his hair cut at a private barber shop, which is part of a cooperative, in Havana, Cuba, on Wednesday, January 31. (AP)

HAVANA (AP):

Two years after taking office, President Ra?l Castro widened the niche for private enterprise in Cuba's state-dominated economy. Capitalism came pouring in.

Slowly at first, then gaining speed, spare rooms for rent became rental homes, which became boutique hotels. Backyard cafÈs became elegant restaurants and bustling nightclubs, backed with millions in capital from the prosperous Cuban Diaspora in Miami, Latin America and Spain. English tutors started citywide private after-school programmes. And the booming private economy reached into the Communist-led bureaucracy - paying off inspectors, buying stolen state goods and recruiting talented employees with salaries dwarfing those in the public sector.

 

RAPID PACE OF CHANGE

 

Eight years later, on the verge of leaving office, Castro has thrown the brakes on private enterprise in Cuba again, warning of the rapid pace of change and criminal activity. The decision has raised fundamental questions about the nation's economic path.

The Cuban government proclaimed in August that it was putting a temporary halt on new licences for bed-and-breakfasts, restaurants and other businesses until it could issue new regulations to control illegality. Entrepreneurs whispered about new regulations coming in a month, maybe two. But summer stretched into fall, fall into the new year, and six months later, Cuba's private economy remains frozen.

The state-run economy responsible for 70 per cent to 80 per cent of GDP is stagnant. A once-promising worker-owned cooperative sector has shown little recent growth. Cubans are increasingly wondering when the private economy will be allowed to grow again, and, more broadly, how their government intends to deliver on promises of a sustainable, prosperous socialist system.

"We've already been this way several times before," economist and Communist Party member Esteban Morales wrote on his blog last week. "Many of us think that these measures aren't just to organise private enterprise better, as they've said, but to restrict it. Self-employment generates jobs that the state can't. That's something that hasn't been taken advantage of before, and would be very smart to do."

The number of self-employed Cubans has grown from 157,000 in 2010, the year of Castro's reforms, to 567,000 at the start of last year, roughly 12 per cent of the workforce.