Cuba reauthorises private sector, but with tighter controls

HAVANA, CUBA: Cuba on Tuesday reauthorised private businesses after a year-long freeze, but with tighter controls than before on a segment of the economy that now makes up 13 per cent of the Communist island’s workforce.

The freeze had led to jitters among would-be entrepreneurs in Cuba’s budding private sector, and Tuesday’s announcement brought some measure of relief.

The official daily Granma said the new, stricter measures were necessary because of numerous breaches by private entrepreneurs, such as tax evasion, under-declaring the number of people they employed and failure to pay employer contributions.

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The government suspended the issuing of business licenses in August 2017 for around 30 of the island’s most profitable business activities, in particular the restaurant trade, in order to review regulations.

“We are not going to go backwards, nor slow down, nor allow prejudice against the non-state sector, but it is essential that people respect the law, in order to consolidate the gains,” said then-president Raul Castro, who was succeeded in April by Miguel Diaz-Canel.

As a result of the new restrictions, the number of trade categories to be authorised will be reduced from 201 to 123.

“No activity has been eliminated but they have been regrouped,” the deputy minister for labor, Marta Feito, was quoted as saying by Granma.

On the other hand, some new categories of private entrepreneur have been introduced, including “confectionary baker” and “renter of transportation.”

Former president Raul Castro introduced reforms in 2011 to open the top-heavy, centralised economy to foreign investment and small private businesses, which have since boomed.

But Cuba remains under a United States trade embargo and state firms still account for 85 per cent of the economy.

A dollar a day is roughly the average monthly wage for a government worker, but those in private enterprises can make far more.

The private sector employed more than 590,000 people by May this year, official figures showed, equivalent to 13 per cent of the working population.

“I think it’s a good thing,” Eduardo García, a private watchmaker, said of Tuesday’s announcement.

“Lots of people were left on the hook with their money, hoping to get a license. They had invested a lot of money. Lots of landlords had bought properties or houses. They had the money and the goods there, and then all of a sudden they went and froze it,” he said.

“I hope this is good news for a lot of people,” he said. One of the main illicit activities the government of Diaz-Canel has tried to crack down on is the theft of fuel by state employees for re-sale on the black market.

Within 150 days, when the new rules kick in, private taxi drivers will be required to account for their fuel consumption, using a card that allows them to purchase gas at a cheaper rate than on the retail market.

“I see it as a positive and important step, as it will help to improve our work to a certain extent and put a stop to the illegal stuff,” said Pablo Jauger, a 47-year-old taxi driver.

Another new restriction will be that only one license will be issued per person.

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“There are jobs that by their very nature cannot be performed at the same time,” said Freito, the deputy minister. “How can someone at the same time take on the role of restaurant worker, manicurist and car-washer?”

According to the treasury, private sector workers only contribute five per cent of revenues, while state-run companies bring in 86 per cent. The rest is made up by small-hold farmers and other sectors.

That has put Cuba on track to approve more small and medium-sized businesses, a move which could eventually be reflected in constitutional reforms for the Communist state.

“Micro- and small private enterprises have already been recognised politically as necessary. But steps to legalise them have not so far been taken,” said Cuban economist Pedro Monreal on his blog.

“How long will it be before necessity and choice coincide?” he asked.

Cuban officials have denied any involvement or any knowledge of what was behind it

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