September 14, 2010 / 8:48 PM / 8 years ago

Analysis: Cuba jobs reform brings opportunity and uncertainty

HAVANA (Reuters) - Cuba’s plan to move hundreds of thousands of workers off state payrolls will create new opportunities for Cubans, but also uncertainties as President Raul Castro tries to modernize Cuban communism by chipping away at decades of paternalism.

The plan, analysts said, likely signals that the pace of reform will quicken on the Caribbean island, where leaders are grappling with a stagnant economy while trying to preserve the socialism installed after Fidel Castro took power in a 1959 revolution.

The jobs plan, announced on Monday, was the most significant step so far in a series of reforms by President Raul Castro and the biggest shift toward private enterprise since the 1960s.

It calls for cutting 500,000 state jobs, while at the same time issuing 250,000 licenses for self-employment and creating 200,000 non-state jobs largely by converting state businesses into employee-run cooperatives.

The self-employed will be able to hire additional workers.

Cubans, accustomed to government handouts and guaranteed jobs, embraced the idea of working for themselves, but some also admitted to trepidation.

In a 2006 paper, the Lexington Institute think tank in Arlington, Virginia said the island’s self-employed earned three times the average Cuban salary equivalent of about $20 a month.

“I have worked in a company for 20 years. If they come to me now and say ‘you are an engineer, but you’re not needed because there are four engineers,’ I don’t think that should happen,” said Vladimir Escalona, 49.

“There’s a very big paternalism by the government and (the layoffs are) going to create chaos,” he said.

But Pablo Gavilla, who has sells handicrafts on his own, said his fellow Cubans should take the plunge and work for themselves.

GET TO WORK

“I’ve done this for 15 years and I have done well,” he said. “I urge anyone that can to get the (self-employment) license and get to work.”

More than 85 percent of the Cuban labor force, or over 5 million people, worked for the state at the close of 2009, according to government figures.

The changes should help the finances of the government, as it collects more taxes and get new revenues from the self-employed.

In a pilot project, the government earlier began leasing cars to some Havana taxi drivers and found that productivity increased 55 times, Cuban press reported this week.

Annual state income per cab rose from the equivalent of $582 to $18,360, the reports said.

An administrator for the program told Reuters the dramatic increases were correct, which she attributed to cuts in personnel and greater productivity.

“Garages have three employees for every cab and here we have 4 employees for 30 cabs, and drivers have to work to pay the rent and not just steal,” she said.

Bert Hoffman, a Latin American expert at the German Institute of Global and Area Studies, said more economic reforms to reduce the hand of the state, which controls 90 percent of Cuba’s economy, should soon follow.

“As the state retreats it has to cede ground to the private sector,” he said.

Christopher Sabatini at the Council of the Americas think tank in Washington agreed, saying Castro has “taken a step that, with momentum, can lead to the unraveling of many of the elements of state control.”

Government insiders say the jobs reform is part of a five-year plan by Castro that includes more foreign investment, bank credits for small business and farmers, measures to improve efficiency, a mixed retail sector and the lifting of many regulations on the supply of inputs to farmers and sale of what they produce.

NO CAPITALISM

But experts warn that constructing a private sector from scratch will not be easy, especially since Castro has no intention of establishing capitalism to make it easier.

“Don’t expect Cuba’s streets to turn into Broadway or some kind of Asian communism overnight; we are just beginning and based on Cuban reality,” a local economist said.

“That means funds, supplies and markets will be tight,” he said.

But Cubans found a way to overcome similar obstacles in the 1990s when the government allowed a large increase in self-employment to help people survive after the 1991 collapse of the Soviet Union, the island’s biggest benefactor, sank Cuba’s economy.

In 1996, the Lexington Institute said in its paper, the number of self-employed peaked at 209,000.

When things began to improve, the government reduced the number of licenses and currently there are 143,000 self-employed, according to the National Statistics Office.

Additional reporting by Esteban Israel; Editing by Cynthia Osterman

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