October 6, 2010 / 6:05 PM / 9 years ago

UPDATE 1-Cubans face risks in state layoffs, private work

* Key details about labor reforms not yet disclosed

* Worries about taxes, lack of business experience, money

* Miami seen as an example of natural Cuban enterprise (Updates with street actor being detained by police)

By Rosa Tania Valdes

HAVANA, Oct 6 (Reuters) - After 20 years of making his living unlawfully by dressing up like a Cuban revolutionary and posing for tips for tourist photos in Old Havana, 64-year-old Omar has been hoping he can now make a legal career of it.

He wants to get one of 250,000 licenses for small businesses the Cuban government plans to start issuing this month so he can work without fear of official reprisals.

The move is part of a bold reform by Cuban President Raul Castro in which the government will slash 500,000 state jobs in the next six months and triple the size of the communist-led island’s private sector in pursuit of financial stability.

But like many Cubans, Omar, who did not give his full name, did not know where to apply or what the regulations will be.

“I hope I can get legalized but that is not very clear,” said the bearded amateur street actor, who wears a beret like guerrilla legend Ernesto “Che” Guevara” and pretends to smoke a big, papier mache cigar.

His illicit income up to now, all tips, had been tax free, although not without a price.

Omar, who had been in trouble before with authorities for “harassing tourists,” may now have to wait for his license.

Witnesses saw him being taken away in handcuffs by uniformed police on Wednesday after he again ventured out in his revolutionary guise in Old Havana, illustrating the still existing risks of such personal enterprise.

The possibility of losing state jobs guaranteed in Cuba’s socialist system is a shock for many Cubans and there is much uncertainty about going into business for themselves.

Many questions have not been answered by the government, which has not disclosed key details on how much the new businesses will be taxed or how tightly regulated.

“We don’t have any idea when or how (the process) is going to begin,” a Ministry of Labor and Social Security official told Reuters.

Employees at the Economy Ministry and the National Office of Tax Administration said the same thing.

If they are forthcoming, the self-employment licenses will bring tranquillity to Omar and thousands who currently work illegally. It will allow laid-off public employees to try out 178 activities ranging from small restaurants to card reading.

“MORE CONCERN THAN EXCITEMENT”

Amid the uncertainty, there will be the chance to make more money and improve livelihoods, which many Cubans yearn for.

“The philosophy in Cuba has been that it’s bad to get rich and that is something we need to get rid of,” said Ernesto, a Havana restaurant worker.

A Communist Party document leaked to the press last month indicated job cuts in the public sector would start this week.

The coming changes have dominated local conversation as Cubans ponder whether opportunity is preferable to security.

Many have expressed interest in starting a business but they also see a potential minefield of problems, most starting with the government.

“Everybody worries about how much taxes will be and whether they’ll have to do a lot of paperwork for the government bureaucrats,” said a Cuban working in a foreign embassy. “At this point, there is more concern than excitement.”

The Communist Party document said taxes would range from 10 percent to 40 percent of gross income, plus 25 percent for the country’s social security system.

Cuba allowed an expansion of self-employment when its economy sank after the island’s top benefactor, the Soviet Union, collapsed in 1991. But the government looked askance at the spread of what it viewed as capitalism and later clamped down on the program as the economy improved.

From a peak of 209,000 self-employed in 1996, the number has dropped to 143,000, according to government figures.

NEED FOR “NEW SOURCES OF INCOME”

The concept was being embraced again because, according to a story in the state-run press on Tuesday, the cash-strapped government needs “new sources of income.”

While Cubans are wary of the heavy hand of the state, they also fear that after years of depending on it, they will not have the skills or financial wherewithal to run a business.

“People are saying they don’t know how to make a business work and that they don’t have any money to invest in starting it up. How are they going to survive without the government?” said the embassy employee.

Others are more optimistic, saying Cubans have been successful everywhere when given a chance. Many point to modern Miami, heart of the Cuban exile community that fled after the 1959 Revolution, as an example of natural Cuban enterprise.

In a country where the average salary is equivalent to $20 a month, availability of money is an issue but the government is considering offering bank credits to the new entrepreneurs and there is a general assumption some will receive seed money send by relatives abroad, especially from the United States.

Cubans also have long been inventive about finding supplemental sources of money, often through illegal activities such as the black market and informal businesses, which have helped coin the popular phrase of “resolviendo” — getting by. (Additional reporting by Esteban Israel, Jeff Franks and Desmond Boylan; Editing by Jeff Franks, Pascal Fletcher and Bill Trott)

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