Lobster Is Too Rich For Cuba's Communists

Small businesses reined in five years after government allowed them to flourish.

The houseflies still buzz about Mireya Galan's small dining room, but they no longer have any food to nibble or patrons to pester.

This month the restaurateur watched four years of cultivating a clientele and investing in home improvements go to waste. Nearly a dozen special police officers trooped into her house, slapped her with a stiff fine, and closed her 12-seat home restaurant, known as a paladar. The charge: illegally selling seafood.

Ms. Galan's paladar is one recent victim of the government's campaign to rein in its nascent experiment with capitalism.

The clampdown affects 157 categories of trades, crafts, and services in which the government allows people to operate independently. But the squeeze on private enterprise, legalized in 1993 as a response to the devastation caused by the collapse of Cuba's benefactor, the Soviet Union, has steadily increased.

"We are part of a new class that has been able to earn money," Galan says. "The government doesn't like that. So they're putting us out of business."

Galan has returned to independently cutting hair to make a living. But running a private restaurant was a profitable venture. After costs, she says, she made about $500 a month, more than 50 times the average Cuban monthly income.

One day the government's weekly newspaper, Trabajadores, outlined beefed-up rules for self-employed workers, whose numbers have dropped to some 154,000 from more than 200,000 three years ago. The next day the police had Galan remove the Paladar Mireya sign in front of her simple house on Padre Pico Street.

When Galan first opened her paladar in 1994, she had to pay the government 1,000 pesos (about $50) every month and abide by regulations such as limiting seating to 12 and not serving expensive foods like steak or seafood. By the time her business was shuttered, Galan's monthly payments to the government had increased dramatically. The new rules force private businesses that accept hard currency to pay the government all in US dollars - up from 75 percent - making it more difficult to serve peso-paying Cuban customers.

The new regulations go beyond converting pesos into dollars. Government labor officials will now question aspiring self-employed workers about how they intend to obtain the raw materials to practice their trade, and where they will get the tools and equipment to do so. Inspectors will refuse self-employment licenses to jobless, able workers if state employment is available in their region. The rules also prohibit self-employed workers, such as carpenters, upholsterers, and mattressmakers, from forming associations for "production and commercialization."

Inspectors often drop in on private enterprises to check the accounting books and make sure business isn't too brisk. But they do little to oversee the conditions of those in whose name the communist revolution was fought - the workers. There is no union for employees of private enterprises.

The government defends the new rules, arguing that a socialist state must be vigilant toward private enterprise so that state resources are not illegally diverted. Officials also claim taxes on self-employed workers are justified to offset their income advantage over state employees.

"They think we're millionaires," says Hilda Ballesta, whose paladar was closed in April because she couldn't provide inspectors with receipts for four sodas in her refrigerator. "With all the taxes, we were lucky to still make a profit."

Emilio de Los Angeles Hinojosa, a former laboratory administrator, now repairs shoes. He wasn't sure how the new regulations would affect him. But he was certain the government was moving to hamper the new independent sector.

"Socialism is the enemy of private business," he says. "But the government's actions are filled with contradictions. If we disappear, the people have nowhere else to go."