Cuba’s private enterprise frozen

Country’s economic future now in doubt

HAVANA (AP) — Two years after taking office, President Raul Castro widened the niche for private enterprise in Cuba’s state-dominated economy. Capitalism came pouring in.

Slowly, then gaining speed, spare rooms for rent became rental homes, which became boutique hotels. Backyard cafes became restaurants and bustling nightclubs, backed with millions in capital from the prosperous Cuban diaspora in Miami, Latin America and Spain. English tutors started citywide private after-school programs.

The booming private economy reached into the Communist-led bureaucracy — paying off inspectors, buying stolen state goods and recruiting talented employees with salaries dwarfing the public sector.

Eight years later, on the verge of leaving office, Castro has thrown the brakes on private enterprise in Cuba again, warning of the rapid pace of change and criminal activity. The decision has raised fundamental questions about the nation’s economic path.

The Cuban government proclaimed in August that it was putting a temporary halt on new licenses for bed-and-breakfasts, restaurants and other businesses until it could issue new regulations to control illegality.

Entrepreneurs whispered about new regulations coming in a month, maybe two. But summer stretched into fall, fall into the new year, and six months later, Cuba’s economy remains frozen.

The state-run economy responsible for 70 percent to 80 percent of GDP is stagnant. A once-promising worker-owned cooperative sector has shown little recent growth.

The freeze has led to a slowdown in private investment in Cuba at a time of economic fragility and uncertainty.

Castro told assembly members that self-employment would remain part of the economic picture, but “there’s been a heavy dose of superficiality and an excess of enthusiasm and desire to advance faster than we’re really capable of.”

A month later, licenses were frozen. During the fall, six private restaurants were closed after police raids. No information has been released about the seizures but such operations typically occur in cases where officials suspect serious crimes like drug use, money laundering and large-scale buying of stolen goods.

The government has

also gone on the offensive against pervasive

tax evasion, pressuring foreign-owned employers to report their Cuban employees’ incomes and conducting government assessments of taxes on property sales instead of depending on buyers and sellers to report prices, a notorious source of tax evasion.

Vice President Marino Murillo, who oversees Cuba’s economic reforms, told the assembly in December that Cubans would no longer be able to hold more than one self-employment license, meaning Condis could no longer rent out an apartment and work in a restaurant.

“There’s great uncertainty,” economist Omar Everleny Perez said. “They announced that there’d be a new law, but it hasn’t come out and no one dares to start a new enterprise without knowing what it will say.”