Cuba’s private sector faces internal, external pressure

Cuba’s private sector faces internal, external pressure Courtesy Rey Cuba Photography

HAVANA, August 31th On Aug. 1, the Cuban government announced an abrupt halt to issuing licenses for 27 occupations in the island’s nascent private sector. After promising to advance economic reform “without haste, but without pause,” Raúl Castro’s government has now called for a break.

Over the last seven years, Cubans proved their capacity for ingenuity by building businesses catering largely to foreign visitors. Without easy access to capital and only cautious official toleration, owners needed creativity to become successful. Still, in a climate of political stalemate, the expansion of private enterprise generated significant optimism. With growing numbers of U.S. and other international visitors, many local enterprises and their employees thrived.

But with success came exposure. Even during President Obama’s visit to Cuba in 2016, conservative voices inside Cuba warned against “illegal enrichment.” Become “too” successful, and government inspectors were liable to knock at your door. By this summer, cuentapropistas’ (self-employed workers) accumulated “sins” attracted the attention of higher echelons of the Cuban state.

There were certainly problems in how some enterprises operated. In a cash economy where businesses could not operate their own bank accounts, tax evasion was to be expected. With no wholesale market, proprietors sourced inputs from “mules” from abroad or the domestic black market.

The spitefully narrow definitions of most self-employment categories made it inevitable that ambitious Cubans would find themselves operating in “alegal” spaces. Yet, it is preposterous to indict the emerging private sector alone. Who supplies the black market if not Cuban state employees?

The irony is that many Cubans would welcome changes to the private sector. In May, Cuba’s National Assembly approved recognizing small and medium-sized enterprises, hinting that they might finally receive legal status. Consolidating existing license categories to eliminate confusion and redundancy — as the government is reportedly now contemplating — is a welcome start. Furthermore, reports of hiring discrimination along racial lines in restaurants and nightclubs demand a robust public response.

However, the announced strategy for “perfecting” the sector makes no sense. By pausing the issuance of licenses, and not consulting business owners beforehand, regulatory authorities alienated potential allies in finding solutions to shared challenges. Instead of proposing a new regulatory framework and granting businesses time to comply, authorities simply stated that measures would be studied and implemented at an undetermined date.

This sent a shock though potential participants in the sector, while especially leaving those who had already invested money in creating a business, but had not yet applied for a license, out to dry.

Most worryingly, Cuban opponents of economic liberalization now have allies in the Trump administration. President Trump framed his partial rollback of President Barack Obama’s rapprochement as an effort to support Cuba’s private sector.

But by restricting individual travel to the island, he guaranteed that Cuban private business people, not government-owned hotels, will take the hardest hit. Precisely when the United States should be supporting the private sector from a Cuban government offensive, new regulations due this fall are slated to make the executive branch a co-perpetrator in its assault.

“Any time they ‘rectify’ something,” one Cuban recently complained of his own government’s actions, “they do 100 things worse.” The same fatalistic judgment can be applied to the purported course correction in U.S.-Cuba policy under President Trump. While the Cuban government takes steps to hamper grassroots economic growth, the Trump administration’s policies will deny Cuba’s private sector the resources and clout it needs to push back.

Andrew Otazo is the executive director of the Washington, D.C.-based Cuba Study Group. Otazo manages initiatives and helps educate policymakers on how to create more effective policies toward Cuba.