By Mimi Whitefield The Miami Herald

WWR Article Summary (tl;dr) Entrepreneurs in Cuba are making adjustments to their businesses this week as many grapple with a number of new regulations.


As his partner works on a customer's fade haircut, barber Ahmed Raul Pérez pauses to discuss his apprehensions about the new rules for Cuba's private sector that go into effect Friday.

Cuban entrepreneurs like Perez will face a brave new world of regulations, restrictions and potential penalties.

Many aren't happy about the new measures that will limit the private sector's ability to expand and diversify their businesses.

"The impact will probably be very negative," said Pérez, a 24-year-old hipster with orange hair and tatoos festooning his arms. He and partner Alberto Carlos Bosch Rosquete, 30 opened their Barber Color shop last year with high hopes of bringing the latest in international cuts and colors to Cuban customers.

But in an 11th hour reprieve, the Cuban government announced several big changes Wednesday night in the new laws that should make them somewhat more palatable to cuentapropistas (self-employed workers). It explained the shift as a "better application" of the measures and said it responded to requests from those who work in the private sector.

The biggest change is the ability for Cubans to work in more than one of the 123 approved self-employment activities. The cuentapropista must, however, participate daily in the multiple jobs and they can't be carried out in the same space or time frame.

The rule change that would have gone into effect Friday allowed a Cuban to run only one private business. If an entrepreneur had a license to rent a room in his home, for example, and also was a private taxi driver, he would have had to give up one of the licenses. Now he'll be able to keep doing both things.

Gone too is a limit of 50 seats for private bars, restaurants and cafeterias. Previously, entrepreneurs had tried to get around that requirement and boost their seats by taking out licenses for both a restaurant and cafeteria at the same address, something the new rules don't allow.

Government officials also clarified that Cubans who rent out rooms and homes can offer meals as long as they get sanitary licenses.

On the Mesa Redonda television program, Minister of Laborand Social Security Margarita González Fernández said the modifications, which were also published in the Gaceta Oficial, represented the will of the government to keep the self-employment process going as part of Cuba's goal to update its economy.

"The new regulations are a step backwards and no one is happy about it," said Carlos Alzugaray, a retired Cuban diplomat and academic, before the modifications were announced. "It's almost like there are two countries -- one that wants change and one that doesn't."

But on Wednesday, González insisted that "there is no backward motion." Other changes are being analyzed as well and could come in future stages, she said.

Cuba had more than 593,000 self-employed workers when the new measures were first announced in the Gaceta Oficial in July, giving them time to learn about the multitude of new regulations and make adjustments in their businesses.

For some the response was simply to turn in their cuentapropista licenses because they viewed the new rules as too onerous.

González said at the end of October, Cuba had 588,000 self-employed workers, or 13 percent of the workforce.

Although there were small-scale experiments with self-employment in Cuba dating back to the 1970s, it wasn't until 2009-2010 when Raul Castro embraced cuentapropismo as a way to move Cubans off bloated state payrolls and make more goods and services available to the Cuban people that it really began to take off.

Some Cubans have taken to capitalism a bit more than the Cuban government expected, opening multiple businesses, hiring many workers and often buying supplies on the black market because there are hardly any wholesale outlets on the island.

Others evaded taxes. The new rules are not only an attempt to rein in abuses, analysts say, but also a way to make sure cuentapropistas don't get too wealthy or provide too much competition to state-run businesses.

Outside the National Office of Tax Administration on 17th Street in Havana's Plaza de Revolucion neighborhood, the highlights of some of the new laws have been posted on the facade of the old mansion and workers have been trying to explain the changes.

One measure generating much disstress is a requirement that entrepreneurs who have high-grossing businesses -- bread and breakfasts, private restaurants, cafeterias, bars, construction services or transportation services for 4 to 14 passengers -- maintain special bank accounts in which they must keep a minimum deposit equivalent to three months taxes in Cuban pesos.

However, the government said Wednesday that the deposit requirement would be modified, so that the minimum deposit will be reduced from three to two monthly tax payments

One taxi driver who stopped by the tax administration office recently explained why his days of transporting foreign visitors around were numbered. He said his planned to give up this self-employment license because the numbers no longer add up. Adding to the angst of private taxi drivers recently is a government decision to move up the dates for vehicle inspections that check brakes, windshield wipers and other equipment. Some private taxis on the roads are in poor repair and it's difficult to come by spare parts.

"I would have to keep 869 pesos minimum on deposit in a bank account. That is too much money so I am turning in my license," said the taxi driver. "The price of the license has gone up a lot too." It's unclear whether the new, lower deposit amount will change his mind.

Some taxi drivers are talking of staging a strike on Friday, but already there are noticeably fewer private taxis on the roads. "I was working recently but I had to come home to take my wife to visit her sister in the hospital because there weren't any taxis in the street," said the Havana cab driver.

As Bosch styled his hair, Ernesto González, the customer in his chair at the Barber Color, began to get worked up about the new bank deposit requirement.

"I guess it's a form of guaranteeing the taxes will get paid every month," said Pérez, Bosch's partner.

"We have ideas about doing things differently, doing things better and then no one wants to help us," complained González, 31, the proprietor of Bar Limbo in Havana's Playa neighborhood, as he climbed out of the barber chair and began striding around the shop.

One of the biggest complaints has been that with all the new regulations and tax requirements, entrepreneurs expect something in return from the government. Chief on their wish list is a viable wholesale network where they can buy what they need to supply their businesses at more reasonable prices, rather than resorting to the black market or buying at retail stores where other shoppers complain they are creating shortages.

Pérez said the barber shop in Havana's Vedado section faces an ongoing struggle to find everything from scissors to hair coloring. "Now they are going to want us to show receipts for all our materials. How are we going to do that? We get our supplies from people from the U.S., Panama, Mexico, the Dominican Republic. Of course, we don't have these receipts."

"We can't find Cristal or Sol (Cuban beers) so we're selling Miller Light that we get from Panama. so we're saying 'It's Miller Time,'" said González, the bar owner.

A new 30-day Panamanian tourist card that will make it easier for Cuban entrepreneurs to shop in the Central American country is a welcome alternative for wealthier entrepreneurs, but with airfare, food and lodging a Panama trip is too expensive for many small cuentapropistas.

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