Berkley Center

When I decided to come to Cuba, I knew I would be arriving in the middle of a long and unique period of economic transition. Following the collapse of the Soviet Union in the 1990s, Cuba’s economy entered a severe downturn known as the “Special Period.” Faced with the loss of its largest trade partner, the Cuban economy underwent an arduous adjustment process. The most obvious manifestation of this change today is Cuba’s heavy reinvestment in the tourism sector. The old Havana Hilton now does booming business as Habana Libre hotel, tourists flock to Habana Vieja (the oldest colonial part of the city), and you are more likely than not to see fleets of double decker tourist buses wherever you travel in the city. For the most part, each aspect of the above tourist industry has been owned and operated by the state.

However, this appears to be changing as the tourism sector again demonstrates the newest stages of another transition—this time toward more liberal economic policies that establish the foundation for private enterprise/ownership. Some of the most prominent examples include the growth of privately owned restaurants called paladares that cater to tourists, casas particulares that give tourists the chance to stay in private Cuban homes, and debate over a resolution that would overturn the current 49 percent cap on foreign ownership of joint ventures in the tourism sector. Of course, the owners of paladares and casas particulares face heavy licensing fees and taxes, but enough of them continue to spring up to demonstrate that they are a profitable alternative to traditional state owned enterprises that pay the average Cuban $20 per month.

The increasing openness toward privately owned enterprises has also extended beyond the tourism sector. In 2010, the government passed a new resolution that legalized cuentas propias, small businesses like bakeries and street vendors that cater to Cubans rather than tourists. According to a recent special report published in Granma, the state-run newspaper, the number of people employed by officially licensed cuentas propias has grown from about 156,000 in October 2010 to over 440,000 as of November 2013. As large as this increase appears on paper, many of these businesses could have existed clandestino before the 2011 resolution. By bringing them into the public fold, the state has managed to more cohesively incorporate the revenues of a previously “black market” sector into its transitional economic model.

According to the Granma special report and a number of Cubans I have spoken to since arriving, the impact of cuentas propias seems to extend beyond additional revenues for the state. With more alternative options for Cubans to choose from, businesses have responded by increasing the quality of service and products. They have also begun to serve more niche markets (Granma gives the example of photographic film processing) that were not previously catered to by state owned businesses. Cuentas propias also provide a greater range of job opportunities that are increasingly popular for younger Cubans.

I hope to further explore this new balance between private ownership and public interest during the rest of my time in Cuba. The success of paladares, casas particulares, and cuentas propias has ensured that privatization will continue to be a part of the economic transition. However, restraints on the supply of certain intermediate goods/products and strict government regulations remain significant barriers to the growth of this sector. Whether or not this trend spreads to other sectors with heavier state involvement will also mark an important distinguishing factor of the new Cuban model. While the exact form of this new model remains nebulous, it will be fascinating to watch it unfold in the next few months.