Cuba squeezes private business as economy grows

By Havana Bureau Chief Lucia Newman

HAVANA, Cuba (CNN) -- Cuba is scaling back years of experimenting with private enterprise as government officials put a squeeze on small entrepreneurs.

As Cuba's economy collapsed in the early 1990s, private business was allowed as a "necessary evil." Now, as the economy improves, Cuba has made clear that socialist control is here to stay.

"We believe there's no reason for the self-employed sector not to exist if it follows certain regulations," Economy Minister Jose Luis Rodriguez said. "But we don't stimulate it because we don't think it's the solution to our economic problems."

Three years ago, Cuba had about 170,000 people listed as self-employed. Now, the number has shrunk to 150,000. Rodriguez said Cuba is not going to do away with Cubans' right to self-employment. But the state, which has been investing millions in tourism, apparently does not want competition in areas that bring dollars.

Hardest hit by the government crackdown have been the paladares, or family-run restaurants. Havana used to boast 600 such eateries: Cuban authorities have stopped issuing licenses for new ones, and fewer than 200 have survived high government taxes and restrictions.

In the restaurant business, for example, government mandates require that each eatery employ at least three other people, either relatives or residents of the building that houses it. The license fees and taxes are $800 in U.S. currency, in a country where the average monthly wage is $10.

As a result, said Henrique Nunez, owner of the popular Havana restaurant La Guarida, is that private restaurateurs are forced to raise prices -- making them less competitive than state businesses.

The moves have upset bicycle taxi drivers, who are now forbidden to carry tourists -- the state wants the hard currency those tourists pay.

The Ministry of Culture ordered Eduardo de la Cruz's art gallery in old Havana to close in February: Dozens of up-and-coming artists, who depend on the gallery to promote and sell their work for hard currency to tourists, believe the state wants to run the show and have a bigger cut in the profits.

"Some inspectors came saying there was a ministerial resolution that canceled our permission to operate and that of the other private galleries in old Havana," de la Cruz said.

Officials of Cuba's Tourism Ministry say it's unfair for the state to spend millions to attract international visitors only to be undercut by smaller, private firms. Activities that don't compete with the state, such as selling snacks or fixing bicycles -- all conducted with Cuban currency -- are less restricted, though hardly encouraged.

Rodriguez downplayed the owners' concerns, saying Cuba's private economy is in "a stage of stabilization." But the state's acceptance of the industry, he said, "does not mean that we believe that this is the main way that we will recover the economy."

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