The Private Sector Consolidates Its Presence in Gastronomy and Services / 14ymedio, Marcelo Hernandez

La Herradura Paladar (private restaurant). (Ignacio de la Paz / 14ymedio)

14ymedio bigger14ymedio, Marcelo Hernandez, Havana, 1 March 2017 — The corner of Galiano and Zanja is a hive of people at noon. The area’s private cafes sell everything from bread with croquettes to a complex meat lasagna, but the nearest state places only sell cigarettes. A third of the food services in Cuba are managed privately or by cooperatives, a sector that is attracting a larger and larger clientele.

According to public statements in Monday’s official press from Interior Minister Mari Blanca Ortega, 32% of food, personal and technical services operating on the island “have moved to non-state forms of management.” This formula now seeks to “achieve more quality and efficiency,” says the official.

In the last two decades, the scene in the nation’s streets has been transformed with the appearance of timbiriches – tiny private businesses – sales counters in the doorways of houses, all the way to restaurant complexes serving Creole and international food. But the sector is still burdened by the absence of a wholesale market and a strong tax policy.

32% of the food, personal and technical services operating on the Island “have moved to forms of non-state management”

“The taxes are very high,” says Dario, who manages a small fruit and snack store near the Military Hospital in Havana. “The account doesn’t balance because the products have gone up a lot of price and I have to pay the Office of the Tax Administration (ONAT) almost half of what I earn in a year,” he complains.

Right now, more than 200,000 workers, of whom at least 170,000 are self-employed, must submit their formal declarations of accounts. Those who have annual incomes in excess of 50,000 Cuban pesos (about US $2,000) must pay the Treasury up to 50% of the total earned.

Darío says that in the area where he works “many small businesses have closed because they have not been able to maintain a stable supply.” However, at the national level the numbers have grown, albeit slowly in recent years. By the end of 2016, the country had 535,000 self-employed workers, according to data from the Ministry of Labor and Social Security.

The most common activities are the preparation and sale of food, the transport of cargo and passengers, the rental of dwellings, rooms or spaces and telecommunications agents.

Cases of tax evasion are common. Recently ONAT indicted 223 of these entrepreneurs in court. If found guilty they could face sentences of up to eight years in prison, ONAT’s legal director, Sonia Fernández, told the official media.

Outside a bakery on Carlos III Avenue, several of the self-employed were waiting Monday to supply their businesses. “I come every day and buy about 30 flautas, but sometimes I have to wait up to two hours to get goods,” says Migdalia, a cafeteria employee at nearby Calle Reina.

The bakery belongs to the retail network and the line alternates entrepreneurs and customers who only want to buy for home consumption. “If behind me someone buys wholesale, I’m left with nothing,” protests a retiree who considers that “the normal consumer is affected” when he must stand in line with small businesspeople.

Due to shortages affecting domestic markets, other products must be imported directly from abroad. “All the olive oil and Parmesan cheese we use we have to bring in from the outside,” said the administrator of a busy Italian restaurant in Havana’s Chinatown, insisting on anonymity.

In September 2014, new resolutions of the General Customs of the Republic attempted to restrict shipments of goods for commercial purposes by air, sea or postal. But the flow of products to the private sector has not stopped.

“I can not tell a customer that we are not making a dish because there is no nutmeg in the country or because I ran out of sesame”

“I cannot tell a customer that we are not making a dish because there is no nutmeg in the country or because I ran out of sesame,” complains the manager of the Italian restaurant. “When people come here they want to see that everything on the menu is being served; to guarantee that, you have to import many ingredients,” he says.

A report published a few days ago from the Economic and Trade Office of Spain in Havana says “the lack of stable access to raw materials and supplies necessary for their activity” as one of the greatest difficulties that the self-employed and cooperatives must face.

The lack of legal status is also at the root of most of the problems in this sector.

In spite of the rapid growth in numbers, and the contribution to the gross domestic product made by entrepreneurs and cooperatives, these forms of management have not been able “to squeeze into the productive fabric with sufficient force, due to the strong regulation and legal obstacles they encounter.”