• A version of this post ran on the author's blog, cuba.foreignpolicyblogs.com. The views expressed are the author's own.
Ask a self-employed Cuban how she came to possess the goods she is selling, and she might tell you that they came from “Roberto.”
The euphemism indicates that the goods are stolen, and given the scarcity of many products and the unreliability of state retail stores in Cuba, many new entrepreneurs in Cuba are struggling to cobble together their businesses and turning to alternative – and under-the-table – economic strategies. In fact, the channel of goods coming into the country from family, friends, and mules is estimated to have ballooned recently to more than $1 billion per year. This should be no surprise to the state, since Cubans lack access to a wholesale market by design. But these informal imports, currently running under the radar, are about to face a 100 percent tax that will go into effect in September.
In the course of the ongoing economic overhaul by the Cuban state, new challenges are indeed arising every step of the way. The path in this case is easy to trace.
- The Cuban government lays off workers from the public sector in order to eliminate its inefficiencies and encourage a private sector to develop.
- The country does not have the mechanisms to support a new private sector, however, so those new entrepreneurs are forced to get creative. They start acquiring more goods through informal channels in order to maintain their supply.
- In this (true) scenario, the Cuban state misses out on any kind of revenue from those “imports”. So the government slaps a 100 percent tax on this kind of trade, which looks more like an effort to stifle the informal trade altogether than an attempt to get in on the spoils.
The problem is that Cuban small business owners will be left in a lurch if this is not coupled with the natural counterweight policy – that is, creating a clear way for entrepreneurs to get the goods they need through official channels – which would allow the Cuban state to earn some revenue from the private sector trade while still generating viable conditions for small businesses in the private sector to operate.
I suspect that sounds too much like capitalism.
But with 387,000 Cubans now self-employed (out of a total island population of 11 million) and a state goal to add another 240,000 private-sector jobs this year, policies that make the lives of private sector entrepreneurs and employees more difficult seem counterintuitive.
The Cuban National Assembly is set to meet on Monday. Here’s hoping we see a good plan.
– Melissa Lockhart Fortner is Senior External Affairs Officer at the Pacific Council on International Policy and Cuba blogger at the Foreign Policy Association. Read her blog, and follow her on Twitter @LockhartFortner.