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Capitalism, God, and a Good Cigar
CUBA ENTERS THE TWENTY-FIRST CENTURY
DUKE UNIVERSITY PRESS
Copyright © 2005 Duke University Press
All right reserved. ISBN: 978-0-8223-3482-8
Chapter One
The New Cuban Capitalist
JULIANA BARBASSA
Heat waves rising from the cracked pavement make the red flower print on a plastic bag shimmer. A bored teenager, the third in line for a public phone, shifts impatiently, her lemon yellow Lycra top glaring bright in the sun. Second in line, a man in a baseball cap checks her out, but settles his glance on the tourist fumbling in her huge American backpack for change, a credit card, or whatever these Cuban phones take.
"Where are you from? Spain?" he asks, without waiting for an answer. "Where are you staying?" When he finds out where, and that I'm paying fifteen dollars a night, he laughs and rolls his eyes. "I can offer you a room for much less.... Close by, a block and half, maybe two. Come see."
Welcome to Cuba. The public phone takes only dollars, and the portly, hot dog vendor nearby prefers them too. So do the neighborhood kids, who give a lost tourist directions for a dollar fee, and the cab driver, who won't take Cuban pesos from a foreigner-even as a tip. He wants dollars. So does the Cuban government.
This may still be Castro's Cuba, but the evils the revolution came to vanquish-the dollar,tourism, private enterprise, and inequality-are pushing through. Described by Castro as necessary evils, these small allowances to capitalism are taking root and seeding change at every level of Cuban society. The advent of the dollar and private enterprise means that the worker's paradise now has winners and losers. Staying close to the party line and putting in hours in a state-owned company for a peso salary no longer guarantee a good living. This is a new game, and the one with the most dollars wins, whether the money comes from hard work or relatives abroad.
Surprised Cubans are seeing the other face of government. In addition to providing public service, which in Cuba includes health and education, the government also taxes the entrepreneur and competes against businesses for tourist dollars. Still, even with tight regulations, a little taste of economic freedom goes a long way. "It was like giving an asphyxiating patient a breath of oxygen," says Marta, who rents rooms in her house. "First, he recovers. Then he wants more."
To get more, Cubans everywhere, in legal businesses and in underground markets, tweak the rules and cheat the state. Highly educated Cubans have dumped low-paying professional jobs to work in tourism for dollar tips. In the race for dollars that followed economic reforms in the 1990s, Cubans use what they have: they rent their houses, sell the country's communist appeal (Che berets and T-shirts), and invent a thousand ways to stretch what little income they have.
The Special Period, first introduced in early 1990, had its origins in the November 1989 fall of the Berlin Wall. And it became an enduring concept of economic hardship when the Soviet Union dissolved in 1991. Easy credit and cheap oil were gone. Cuban sugar, which had been sold at artificially high prices, found no buyers, and the island's fragile economy, fed on subsidies and barely standing on its old sugar and tobacco legs, collapsed. "With the demise of the Soviet Union, we had to change, says Antonio Ravelo Nariño, a Cuban economist. "It was like a wedding; if one person dies, you can't expect the other to go on living with the dead. We were trying to live with the dead."
The government opened the island to tourists and their dollars, but that was not enough. To control spiraling inflation, the threat of unemployment, and a grinding depression, Castro gave in to what was already happening in black markets and inside homes all over the island: he legalized the possession of dollars. He also allowed small private enterprises to flourish under tight regulations and permitted foreigners to invest in mixed ventures. "If we hadn't been allowed to fend for ourselves, put up our businesses, things would have exploded," Alejandro, the hot dog vendor by the payphone explains as he polishes the shiny aluminum countertop.
If Cubans had to scramble for hard currency to survive, so did the government. When tourist dollars were not enough to pay expenses, the government looked for ways to cash in on the remittances that relatives abroad sent to Cubans on the island. The answer came in the form of government-owned dollar stores. These quickly appeared on every corner, selling everything from Italian biscotti to television sets. The majority of Cubans, however, still lived on pesos, and with an average wage of 240 pesos, about 12 dollars in 2001 (9 dollars in 2004), families shared what they had to squeeze by on the basics. But for anything more, Cubans everywhere went and go into the streets to make up the difference between their peso salary and the dollar reality. "This is the land of magical realism," Fernando explains on the way to showing me the room he has for rent. "Incredible things happen every day so that people can go on. People invent."
Inventing a living is how engineers like Fernando end up on a Havana sidewalk convincing a tourist to follow him home. His is the story they all tell: his peso salary in a management position with a state-owned company was never enough, and since the legalization of dollars in1993, he has been earning his dollars any way he can-selling instant photographs that he takes of couples in restaurants, renting pirated videos, and sometimes renting a room in the home he shares with his sister. Inventing.
He has no license for renting rooms, but like many other Cubans, Fernando has mastered the tightrope walk between punishable illegalities and everyday infringements that most officials ignore. Renting videos was not one of the categories of self-employment that the government legalized, but from the second floor in one of Havana's old mansions with soaring twenty-foot ceilings, peeling paint, and faulty plumbing, Fernando makes his own rules. One tape goes for twenty-five cents, a bargain next to the official government rate-five dollars a membership and one dollar per tape. What is really priceless is the selection: while state-owned video rentals limit the movies available to those that have been officially sanctioned, Fernando's solid wood china cabinet offers a range of new releases that rivals Blockbuster's shelves: Terminator; Crouching Tiger, Hidden Dragon; and three hundred others. Cubans, he explains, as he flips from channel to channel through a pirated satellite hookup, prefer action and violence. He stops at the Playboy Channel. "I don't record this stuff. A government official might look the other way if his kids are watching rented movies, but if they start watching pornography, then he might want to find out where it is coming from," he says, shrugging off the question about what would happen if he were caught. "When ordinary things become crimes, then you make an ordinary man a criminal," he says. The television set flickers. Urban Legends, a popular series, comes on. He starts recording.
Not all private businesses on the island are outside the law. In 2001, there were 150,000 legal, licensed businesses in Cuba, ranging from shoe shiners and plumbers to small restaurants and private homes that rent rooms to tourists. A few chosen occupations-initially 110, and later 157 -opened up for private enterprise in fits and starts. The number varies according to governmental whim, and in 2004, new meetings were underway to determine if the number would change. "The government tries to limit this sector as much as possible," says Roberto Orro, a Cuban economist living in Puerto Rico. "It had to accept it because there was no other option, but it was certainly against its will. There are people who are not politically faithful to the government, and now those people have the possibility of obtaining a certain economic independence."
Paladares, for example, the tiny restaurants named after a canteen in a Brazilian soap opera, were ordered shut in February1994, with Castro accusing the owners of the still tax-free establishments of illicit enrichment. The need to create employment and jump-start the economy forced the restaurants open again weeks later, and the paladares were finally legalized on June 8,1995, in Resolution 4/95, according to professor Joseph L. Scarpaci at Virgina Polytechnic Institute and State University. The informal restaurants operate under tight rules and close inspections by several government agencies that have the right-if not the manpower-to check everything from hygiene to tax compliance. These regulations squeeze many legal businesses underground. Once they disappear from government lists, the businesses that give street life in Cuba its flair-1950s taxi cabs and food vendors-flourish without taxes or regulations, making enough money to pay the occasional fines and still make a comfortable living.
Meanwhile, legal paladares can only serve food bought at government-owned dollar stores at retail prices. The rules say receipts must be kept handy for frequent monthly inspections that can come any time between 5:00 a.m. and 10:00 p.m. The establishments are forbidden from having live entertainment and must stay away from main streets and popular tourist hubs. But it is difficult to know to what extent these rules are respected since even legal businesses seem to follow some of the rules while ignoring others.
Take Fernando's favorite paladar in Santa Fe, forty minutes west of Vedado, past the upscale oceanside neighborhood of Miramar and far from where most tourists stray. We get to the seating area in the backyard by walking under the front hedge, along the house, and through the patio where dozens of caged parakeets hang amid ferns. When we emerge from the ferns, we run into the restaurant owner, who stands elbow deep in blood, dissecting fresh chicken. She prefers not to give her name.
"Our advertisement are our clients," she says, explaining why no visible sign hangs out front. Her sister, who is squatting on the floor inspecting buckets of chicken parts, is more direct: "Unnoticed, we do much better than by calling attention to ourselves." A quick glance around shows why the two sisters want to keep their secret: the first rule for paladares, no more than twelve customers at a time, is disregarded. This place has twelve tables. A restaurant this busy also needs many employees, which according to rules, should all be family members. Are they? "Well," says the owner, laughing with her knife in hand. "It is as if we were all a big family. Everyone puts this address in their identity booklets, so that when inspectors come ... you know."
I wonder if all that chicken was bought from a government dollar store, as mandated by the law. These are fresh, not frozen, and in residential areas like this, a quick stroll is long enough to spot chickens scratching in the backyard, or to catch the unmistakable whiff of a homegrown pig.
A few feet away from the owner, on white plastic tables facing the ocean, the guests enjoy fried chicken and the breeze for just a handful of dollars. Far from tourist-heavy Havana, this place caters to Cubans who have thrived in the changing economy. The prices are lower than downtown-$2.50 for rice, beans, fried bananas, and fried chicken-but still in dollars. The owners have also done well, and the temptation to do even better is hard to resist.
To attract business to state-owned restaurants, the government does not allow paladares to serve seafood, although some of course do. With the ocean a few feet away, and family members working as fishermen, the two sisters are proud to point out that this is one rule they respect. "There are those who take the risk, but we try to stay safe," the owner says. "So many of them have been shut down, but we are still here."
As with Fernando's video business, the secret of surviving is in knowing which rules to respect and in having a friendly relationship with your inspectors. Watching the sisters, Fernando tells me about a friend who rents rooms without a license and pays his neighborhood inspector fifty dollars a month to get away with it. "One month, he didn't have enough. He told the inspector, and immediately the man started naming the infractions he was committing: renting a room, serving food to foreigners without the proper sanitary precautions.... My friend ran out and borrowed the money really quick."
At an open-air market by El Malecón, Havana's main seaside walk, William, a sculptor, echoes these concerns. As he talks, he whittles ebony into the slender figures of Cuban guajiros, peasants, and naked mulatas (mulattas) he sells to tourists. "They didn't tell you to close down, but when they saw people were getting ahead in life, they started to force you to close: taxes went up all the time, until you were barely making a living, and the inspectors came at any time of the day to see if all the people working have licenses." William and his brothers make a handsome living, finishing the month with more than one hundred dollars each in a country where the average wage is a fraction of that. However, like other Cubans who first experimented with profit a few years ago, he found taxes and regulations to be an unpleasant yoke. In 1992, when he and his brothers first started selling the sculptures they made as a hobby, they paid nothing to the state, since what they did was illegal. In 1993, selling arts and crafts became legalized-and soon the tax hikes began, from 2 dollars a month in 1993 to 159 a month, plus a daily fee of 3 dollars for using the market. The monthly tax is fixed, independent of earnings, and another year-end tax is based on revenue.
Other businesses also pay taxes unheard of a few years ago: to rent a room to tourists in Vedado, the home owner pays a monthly tax of 250 dollars per room; to run a private cab that charges in dollars, the taxi driver pays 225 dollars every month. "Nowhere do people pay taxes like this," William says, shaking his head in frustration. It is hard to tell whether William is really overtaxed, or just unfamiliar with the way capitalist countries work. But even if the legal businesses pay over half their income in taxes, Cuba's budding entrepreneurs are still making a killing relative to others on the island. William's complaints about taxes have a familiar ring: he sounds like small business owners everywhere. He just doesn't know it.
"There is no small business culture in Cuba," says Mayra Espina, a sociologist with a prominent research center in Havana, the Centro de Investigaciones Psicólogicas y Sociológicas (Center for Psychological and Sociological Research). "They don't know how it works in other countries, and they feel they are being strangled by taxes and rules. When small businesses sprang up in Cuba illegally, they had profit margins of 500 percent. With 200 percent gains, they think they are suffering. This doesn't mean the government isn't tightening the screws, but of course they also have to contribute to the state, and follow rules like everyone else."
In spite of their ingenuity and flexible understanding of regulations, Cuba's entrepreneurs are "a sector on the defensive," says Gillian Gunn Clissold, a professor at Georgetown University. "The Cuban government has become much more fierce about self-employment. It definitely is tightening restrictions and imposing new ones." Santa Fe alone had twenty-two paladares in the mid 1990s, when self-employment had just been authorized, and Cuban families began to dream in dollars. By 2001, there were only two, and since then, the government has stopped issuing any more licenses for room rentals or paladares. This neighborhood is no exception.
(Continues...)
Excerpted from Capitalism, God, and a Good Cigar Copyright © 2005 by Duke University Press. Excerpted by permission.
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