Cuba finds it's inner entrepreneur

Feb 04 2011 3:41pm EDT

Cuba Finds Its Inner Entrepreneur

An entrepreneurial spirit is taking hold in what seems like an unlikely place: Cuba.

To address government layoffs, Cuban President Raúl Castro has increased the number of licenses granted to those who would like to run their own businesses, according to a New York Times article that includes interviews with Cubans who are delightedly doing everything from running their own cafés to renting rooms.

Why the sudden change? Finances. Last year, Castro warned that the state was spending too much on government payrolls and that it would have to lay off half a million of about 4.3 million state workers by March, due to bloated payrolls. The government solution that took longtime observers of the socialist regime by surprise? Adding to Cuba's small private sector.

Raúl Castro's brother and predecessor Fidel Castro, who stepped down for health reasons in 2008, had nationalized all enterprises in Cuba in 1968, but reluctantly let the private sector take root in the early 1990s, after the Soviet Union's collapse shattered the Cuban economy.

Now, after years of making private enterprise difficult with taxes and rules, Raúl Castro has publicly said that such endeavors should not be "demonized."

Overall, about 600,000 Cubans are privately employed in some manner, with more than 100,000 of them working as cooperative farmers on land leased from the government, and Havana wants to increase those numbers too,Time magazine reported recently.

By the end of 2010, the government had awarded 75,000 new licenses to the self-employed, increasing their ranks by 50 percent, according to the New York Times story, which cites Granma, the Communist Party's official newspaper. The Cuban entrepreneurs are doing everything from selling coffee in their front yards to renting out houses to making rattan furniture to hawking bootleg DVDs.

The upside: The small-business owners are thrilled at the independence, the opportunity to openly sell goods and services that some were doing illegally, and perhaps the chance to make more money. About 85 percent of all employed Cubans work for the state, earning about $20 per month in exchange for services such as free health care and education, and a ration of subsidized goods.

The downside: The licenses are limited to only certain endeavors, and some would like to see a wholesale market so that businesses can get supplies, something that the government is working on. Those who would like to start small businesses are wary too, unsure how long all of the newfound openness toward private enterprise will last.

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Teresa Novellino writes for Portfolio.com