March 11, 2001

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

                  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

                  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

                  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