Cuban Economy Is Still Stagnant Despite Reforms: Cuban National
"The United States is the ceiling of heaven," says Cuban national.
Starting a Business: Try Something in Tourism
[The increased number of Cubans leaving is] due to the continuing economic downturn in Cuba, which is leading a large number of people outside of Cuba. Short-term reasons for this rise could be that there are a number of people who are unemployed and looking for a job in the small private sector in Cuba who were laid off by the government and have doubts about future prospects.
All citizens are allowed to start a small business in Cuba. Whether or not fellow citizens -- many of whom earn $20 per month -- can afford the goods and services from these enterprises is a different matter.
Our source explained how one would start a business:
To put this in perspective, a $15,000 fee would be the equivalent of 50+ years' worth of earning for the average citizen.
In order to start a business, you need to acquire a permit from the government, but first you need to give a "contribution" to the government. The government does not question from where you receive the money. It could even be from relatives in the US. You could start a brick-and-mortar business with 10,000 to 15,000 Cuban convertible pesos, which equals $10,000 to $15,000 in Cuba, but many Cubans need money from family members living abroad in order to launch the business. Afterwards, the government does not care if you continue to receive money from outside sources [though it must be in limited amounts] and you conduct your commerce. Business owners also have to pay taxes.
The government outlawed the US dollar in 2004 after former Cuban President Fidel Castro had legalized its use in 1993. Our source said that when Cubans receive US dollars from family members, they have to pay a 10% fee at banks and convert them to the Cuban convertible peso, informally called chavito. The convertible peso has an official 1-to-1 parity with the US dollar, but the conversion fee results in Cubans only receiving 0.90 convertible pesos for every US dollar. The Cuban peso, or national peso, constitutes the other form of official currency used in Cuba. One convertible peso or US dollar equals 25 national pesos.
The interviewee named the restaurant and tourism industries as two sectors doing relatively well when asked which businesses benefited the most from the small business reforms. The interviewee added later, "The best job in Cuba is tourism. The tips alone will allow you to make it."
By all accounts, including the Cuban Oficina Nacional De Estadística E Información, a little over 2.7 million tourists visited the island in 2011, and the number has steadily increased since 2007. The vast majority -- more than two million -- come from Canada and Europe. US citizens can even get a so-called "people-to-people" license (essentially claiming the trip is educational).
Tourism's pay is so strong that it has attracted individuals from unexpected sectors of the economy. Our source told us about two surgeons who left their positions to become taxi drivers because the tips earned from tourists exceeded their salaries as surgeons. A musician earned significantly more from his tips working at a hotel than a dentist earned from his salary. Many medical professionals only earn 625 national pesos, or $25, per month.
Food: Small Entrepreneurs Have the Edge
Once in Cuba, not surprisingly, tourists need to eat. In this area, the small business owner is at an advantage and many privately run restaurants have done well largely because of their connection to the tourism industry.
According to our source, a Cuban national would have to pay the equivalent of a month's salary or more to eat a single meal at one of these establishments. A meal can cost 4 convertible pesos, and many Cubans only eat at restaurants when relatives from abroad visit and pay for their meals. (The situation was similar with other goods, not just food. Our source talked of living in a town with only one store carrying clothing virtually inaccessible to the average Cuban as purchasers needed convertible pesos to afford them.)
Daily Recap Newsletter