As Cuba gives capitalism a try, experts ponder future

By William Booth
Washington Post Staff Writer
Thursday, September 16, 2010; 10:43 PM

MEXICO CITY - As Cuba embarks on a bold new experiment - firing 500,000 state workers and letting them plunge into freer markets - experts in the region are watching to see whether the communist government and its baby entrepreneurs can salvage the economy without sacrificing the nation's "socialism or death" model.

The government layoffs, amounting to 10 percent of the 5 million state employees in Cuba, represent the most significant economic changes since President Raul Castro took over from his ailing older brother, the semi-retired maximum leader Fidel, in summer 2006.

"It is a major step forward," said Wayne Smith, former chief of the U.S. Interests Section in Cuba and a senior fellow at the Center for International Policy. "But they have little choice but to try something because the economy is going down the tubes."

Since assuming power, the younger Castro, 79, has pointedly complained that the Cuban state can longer employ its bloated workforce. "We must erase forever the notion that Cuba is the only country in the world where you can live without working," he said.

Many workers in Cuba barely show up and do very little productive work when they do. In government offices in Havana, coffee and cigarette breaks last hours, sometimes days. State-run cafeterias open for a few hours, suddenly run out of bad food and close as lines of customers wait.

It is not that Cubans are lazy - just the opposite, economists say. But even with their food ration cards, the average Cuban government salary of $20 a month barely provides enough to live on, though the state provides housing, education and medical care.

As Cubans like to say, "The government pretends to pay us and we pretend to work."

The island is suffering a brutal economy crisis in which its official gross national product has plummeted from 12 percent growth to 1 percent, as nickel prices, tourism and international investment all slump. The Cubans were so desperate that they froze the accounts of foreign investors on the island earlier this year. Independent economists say that without subsidies of Venezuelan oil from Hugo Chavez, the Cuban economy would flat-line.

Whether the state-run Cuban economy can really make space for a more robust private sector remains unknown. According to a government PowerPoint presentation, first published by the Associated Press, state economists envision that the least productive, least disciplined workers should be laid off, followed by others who perform unnecessary jobs. All 500,000 workers are scheduled to be pink-slipped by March 2011, the government announced in Communist Party newspapers and on state television Monday.

"It's a big deal, a big breakthrough, because for the first time the government acknowledges that the private sector, the small-business operators, are not bit players but a strategic part of the Cuban economy, that they are the solution, that they will help save Cuba," said Philip Peters, a scholar at the Lexington Institute and adviser to the Cuba Working Group in the U.S. Congress.

About 823,000 Cubans already have jobs in the private sector, most of them working in government-approved cooperatives. But the state still employs about 85 percent of the workforce.

What will the hundreds of thousands of Cubans who suddenly have no day job do? The document suggests they will have to hustle for themselves. No plans have been announced for capital injections, small business loans, retraining or more opportunities for foreign investment. No large, relatively successful state enterprises are for sale or lease.

"Ideas for cooperative enterprises" include raising pigs or rabbits, opening bars and cafes, and working as trash collectors, gardeners, car mechanics, carpenters and taxi drivers. Also on the list: massage therapists, wedding planners and wine makers.

The document warns that many workers lack initiative, skills and experience. Many of the new enterprises "could fail within a year."

An economist who covers the region, who spoke on the condition of anonymity because of his work in Cuba, said that "it looks like they are giving people a shovel and telling them to find work."

The state pays workers in Cuban pesos, but foreigners and lucky Cubans spend a convertible currency that is good in the shops that sell things such as cellular phones, which have been available only for the last year.

"They are moving forward, they are discussing these things in a public forum; that is a good thing. But the question remains how will this provide for real, sustainable economic growth," said Rafael Romeu, president of the Association for the Study of Cuban Economy, a nonpartisan group.

Cuba recently allowed beauticians and barbers to work for themselves, renting parlors but keeping profits. Drivers can operate their own taxis. Farmers have been given the opportunity to take over fallow state lands - though they are struggling to get seed, fertilizer, tractors and transport for their crops.

"The Cuban model doesn't even work for us anymore," Fidel Castro told the American journalist Jeffrey Goldberg and Julia Sweig of the Council on Foreign Relations earlier this month. By this, Sweig thought Fidel meant not that the revolution was a failure or that Cuba would rush to adopt capitalism, but that the Cuban economic model was sputtering and needed a serious tuneup.

Fidel Castro, however, said at a speech at the University of Havana on Friday that he was quoted correctly but misinterpreted.

"In reality, my answer meant exactly the opposite of what both American journalists interpreted regarding the Cuban model. My idea, as the whole world knows, is that the capitalist system no longer works for the United States or the world," he said. "How could such a system work for a socialist country like Cuba?"

Three days later, Raul Castro's government announced it was going to give a little capitalism a try.

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