Cuba opening to private enterprise spurs service sector start-ups

They began with a hose and a few rags when Amilcar Santa Cruz and his 30 siblings and cousins set up a carwash in Havana’s Miramar district, a little family business to help make ends meet.

And that’s all it was for several years.

But in the last few months, the business has exploded. The carwash today is a bustling piece of new Cuban enterprise, complete with metal roofing, fluorescent lighting, a cafe and a full line of air fresheners to hang from the rearview mirror.

“Everyone here is real hardworking,” Santa Cruz said. “It’s all about quality.”

Cuba has embarked on a far-reaching experiment to salvage its depleted and, until now, tightly regulated Marxist economy. By significantly expanding permits for Cubans to open their own businesses and hire workers, the Communist government has launched the island on its most remarkable change in years, an expansion of free enterprise that was unthinkable when Fidel Castro was in full control.

But his more pragmatic younger brother, Raul, who formally took over in 2008, has ordered a long list of reforms that include slashing the state workforce by up to 1 million people, eliminating many of the subsidies that dominated life here and, most recently, promising to ease travel off the island by Cubans.

Change, of course, comes in fits and starts. Most Cubans probably have yet to feel much in the way of new prosperity, and many among the emerging crop of fledgling entrepreneurs continue to complain of burdensome red tape and the taxes they are required to pay. With credit virtually nonexistent, most must scramble for other sources of capital, such as remittances from relatives in the United States or Europe.

Still, a walk along the seafront Malecon, or through graceful Old Havana, or in any residential neighborhood, down a street of crumbling facades or past freshly painted colonial homes reveals a buzz of activity. Hand-lettered signs have popped up, seemingly every few yards, announcing a new restaurant, hair salon or cellular telephone repair shop.

At Santa Cruz’s carwash, business the other day was brisk. Customers pulled in one after another, from a boxy old white Lada to a fancy ice-blue Peugeot.

Juan Formell, the conductor of the iconic Cuban band Los Van Van, was there having his car washed, the interior swept, the tires fortified with a silicone mixture. It all costs up to 5 pesos, or roughly $5, a fortune for most Cubans but worth every cent, Formell said. (Waxing costs extra.)

“We need a lot more places like this,” Formell said. “The private business pays a lot more attention to detail and is a lot more careful than the state. This is good for society and, in a few years, the economy will really take off.”

Santa Cruz said his family has gradually been able to move out of the tiny house shared by so many. And last month they added the cafe, with its fresh coat of sea-green paint and Italian-style tile, where cousin Yelena Ponce was dishing out thick pork chops into little cardboard boxes for hungry customers.

“The business gives us enough to live and then to do a little more,” Santa Cruz said.

Cuba’s economic experiment has the potential to transform its society. The new policy creates jobs, circulates money and stirs a new mentality that values quality and competition. It will not completely remake the economy, however, because for the most part the new work involves services and not production. But it’s an important beginning.

As of July 19, according to Deputy Labor Minister Carlos Mateu, more than 325,900 Cubans had taken out licenses to open, run or work at private businesses involving nearly 200 designated activities, including hairstyling, carpentry, shoemaking and dance instruction.

Another important change is that proprietors no longer have to hire only relatives; with the proper license, they can employ any Cuban.

Nowhere is the boom bigger than in restaurants. The Cuban government first permitted privately run eateries, known as paladares, from the Spanish word for “palate,” in the difficult 1990s, when the nation was reeling from the collapse of the Soviet empire and the loss of its major sponsor. But the paladares operated with crippling restrictions, and only the hardiest survived.

Today you can easily find choices varying from the simplest pizza to true gourmet dining. By a rough estimate, more than 100 restaurants have opened in recent months.

Roberto Robaina, unceremoniously dumped as foreign minister in 1999, has just opened the doors on his Chaplain Cafe, where customers sit on white wrought-iron furniture and nibble salmon-stuffed cucumber rolls on black china.

“I wanted to do something different,” Robaina said. Dedicated to painting after leaving government (and being expelled from the Communist Party), Robaina has decorated the restaurant in a former mansion with some of his artworks.

One of the waiters, a young Brad Pitt look-alike named Carlos, said he had been laid off from a job at a state-run cafeteria as part of the government’s effort to trim its payroll, but he quickly found new employment. “There’s a lot of competition now,” said Carlos, 21, with gelled blond-tipped curls.

Bom Apetite is a restaurant that has been around since the ‘90s but is now expanding in leaps and bounds to accommodate a growing clientele, said manager Adrian Riera. The menu includes items once prohibited, such as shrimp and lobster, he said, and they are adding on a bar with capacity for 40 people that will serve wine and tapas until 3 a.m.

“We are now something really professional,” Riera said, pausing from a meeting with the president of the Cuban Sommeliers Assn. (yes, there is such a thing). “Private businesses are no longer just a family matter. We are moving into another category.”

Willians Vivanco, a 30-year-old computer programmer, has taken advantage of the boom and also taken a gamble that Internet access is inevitably going to grow on the island, where government censorship keeps Internet penetration among the lowest in the world.

Vivanco and a group of friends in May launched a website dedicated to the restaurant scene, sort of a Cuban opentable.com (which he said was an inspiration). They will profile a restaurant for free but charge if the establishment wants extra information or a photo gallery posted. So far alamesacuba.com (“to the Cuban table”) lists nearly 70 restaurants. This may sound elementary to the technologically savvy world, but in Cuba it’s a first.

As soon as Raul Castro announced the economic reforms, “we started looking for ways to earn money,” said Vivanco, who has never traveled off the island and rarely eats out. “We didn’t have the money to start a cafe, and we’re not going to start driving taxis. But we knew computers.”

Vivanco wants his main audience to be Cubans, though the majority have no computer access and probably can’t afford many of the restaurants. He has started an email newsletter about restaurants and bargains in hope of widening exposure. There are about 300 subscribers to the newsletter (half Cuban), and the website averages 250 daily visits. So far, he figures, he’s earned about $22.

When Cuba’s economy finally takes off, he said, “the key is to be prepared.”

There is possibly more change on the horizon.

The Castro government has said it plans by the end of the year to begin allowing Cubans to buy and sell residential real estate. In keeping with one of the pillars of the revolution, Cubans have been allowed only to swap property in an informal street-corner transaction called a permuta, and no money can change hands. The goal was to prevent fat-cat speculation by absentee landlords who fled to Miami, and the result has been a critical housing shortage.

Under the new rules, Cubans on the island and permanent residents will be permitted to own homes, though no more than one per individual; both sellers and buyers will pay taxes.

Raul Castro, whose economic program was endorsed in June by the Cabinet, has indicated that he has been encouraged by initial results, including 1.9% growth in the gross domestic product for the first six months of the year.

“We must continue to gradually recover international credibility for our economy,” Castro said in a speech this month. “The biggest obstacle that we face … is the psychological barrier formed by inertia, indifference and insensitivity.... Without changing our mentality, we will not be able to carry out the changes necessary to sustain [Cuba’s] irrevocable socialist character.”

wilkinson@latimes.com