Communist Cuba turns to private enterprise

Since swallowing the news that 500,000 state workers will be laid off in Cuba in an effort to raise productivity and fix the ailing economy, construction worker Antonio Charadán says he is experiencing the rare feeling of "going it alone" in this communist-run nation.

"My job might not be considered necessary," says Mr. Charadán, a father of two. "I do not know where I will be in a few months; I feel secure about nothing."

Adriana Robles feels the economic shift under way, too, but says it is precisely what Cuba needs to survive in today's global economy.

"Everywhere in the world, work is something that you have to fight for," says the secretary, who has worked in Havana for 25 years. "Here we are used to having everything easy."

Cuba's Sept. 13 announcement that it will cut workers from the government payroll and encourage them to join private cooperatives or start their own businesses has generated much concern across the island nation, but also hope that a more liberal economic policy is in sight. As Cuban residents adjust to their new work prospects, observers say this is the first step in creating a radically new Cuban economy.

"This is moving toward the creation of a small and medium business sector, even though they are not going to call it that," says Philip Peters, a Cuba expert at the Lexington Institute, a think tank in Virginia. "If they carry this thing through, Cuba will look very different a year from now."

The government, according to local media, has begun calling meetings across the nation to explain the layoffs and options ahead.

Raúl Castro, who has led the nation since his older brother, Fidel, fell ill in 2006, has long been seen as a pragmatist who is open to economic changes – and this move bolsters that reputation.

Under Raúl Castro's leadership, Cubans have been given the right to buy cellphones and own other electronics. Private taxi drivers have been granted state licenses and private farmers have been granted state land. But the changes announced this month are the most far-reaching to date.

The layoffs will affect 10 percent of the 5.1 million workforce. The plan is an attempt to scale back a bloated, inefficient state payroll and is expected to be completed by spring 2011 and affect all government ministries.

"The Cuban government is coming to terms with reality; they have to cede ground to private enterprise," says Ted Henken, a professor at Baruch College at The City University of New York, who has studied private enterprise in Cuba.

The government began to tolerate a degree of private enterprise in the 1990s, after the collapse of the Soviet Union left Cuba without its main benefactor. Today, nearly 1 million Cubans work in the private sector – and several thousand (the exact number is unknown) engage in the black market economy. A doctor, for example, who earns just a little more than the average monthly national salary of $20, might rent out a room on the side to earn extra money.

The purging of the government payroll goes much further than the small degree of privatization that followed the Soviet downfall when thousands of Cubans began running their own businesses legally for the first time.

"[The Cuban government] always downplayed it; it was not a major initiative in any way," says Mr. Peters. In fact, much of that opening was later rolled back when new benefactors, including Venezuelan President Hugo Chávez, began supporting Cuba in the early part of the decade.

The most recent change will also require a shift in the Cuban psyche. After all, this is a country that provides free health care and university education, and heavily subsidizes everything from housing to food.

Raúl Castro said it best recently: "We have to erase forever the notion that Cuba is the only country in the world where one can live without working."

Some Havana residents expressed doubt that Cuba is capable of such a significant shift – something the government hinted at as a possibility in a 26-page report outlining the changes. It warned that many small businesses could fail within a year because of a lack of expertise, training, and local support.

Raudel Hernández, a university student in Havana, says he doubts all those left unemployed can be absorbed by the private sector. "There would have to be an explosion of private businesses, and I do not believe the quantity of licenses nor the variety of them will be sufficient," he says.

• A Monitor correspondent in Havana who contributed reporting for this article could not be named because of government restrictions on reporters in Cuba.

WATCH VIDEO:  How Cubans hustle to make ends meet