Business, Finance & Economics

Cuba: pirates with permits

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HAVANA, Cuba — It might take years for Raul Castro's economic reforms to significantly alter Cuba's state-dominated retail and commercial landscape.

But at least one set of small-time entrepreneurs has surfaced on Havana's streets in recent weeks, freshly licensed to sell their wares as openly as if they were in Cairo or Kabul: DVD pirates.

A month after the communist government began issuing new legal permits for 178 forms of self-employment, vendors hawking bootlegged movies and music have begun setting up outside markets, at bus stops and even along sidewalks around the city. No longer forced to sell their goods in secret, they now carry laminated ID cards recognizing them as authorized, tax-paying professionals.

“I'm making money for my family, and I'm making money for the state,” said Lupe Gonzalez, who now runs four separate licensed businesses from her front patio in Havana's Vedado neighborhood, conveniently located opposite one of the city's biggest fruit-and-vegetable markets.

On one table, she laid out cheap trinkets, household cleaning supplies and various decorative knickknacks, while on another stand, she displayed a colorful array of women's shoes, careful to keep each business separate, as the law requires. A few feet away, another relative offered eyeglass repair services.

Most prominent of all, though, was the big rack of bootlegged CDs and DVDs, priced at the equivalent of $1 to $2, with everything from Shakira and Michael Jackson to Dora the Explorer and the Incredible Hulk.

Gonzalez said she paid 1,100 pesos (about $50) a month in taxes, license fees and social security contributions. Did she think that was fair?

“Don't ask,” she said.

At least she didn't have to worry about copyright laws. The Castro government isn’t likely to crack down any time soon, given that the Cuban state is arguably the country's biggest pirate of all, filling the island's airwaves and cinemas with unlicensed American movies and television shows.

Street-level vendors and government television programmers generally copy their material from the same sources: illegal hookups to U.S. satellite providers like Direct TV, or discs brought in from Miami or elsewhere.

In the Cuban government’s view, that's only fair, since U.S. trade sanctions prevent the country from acquiring such materials legally. And individual sellers struggling to make ends meet aren’t especially sympathetic to arguments about the intellectual property rights of foreign media conglomerates.

“There's nothing in the constitution against this,” said Hansal Vargas, who had just lined up his offerings along the sidewalk outside the Vedado market. Each of his DVDs came loaded with five or six American movies, organized according to themes like romance, action and baseball. Pornography and any political materials are taboo, but otherwise, it was a wide-open marketplace.

“I used to have to hide these,” explained Vargas, who pays the government about $2.50 a month for his license and profits roughly $1 on every DVD sold, after production costs. “Now I can do this openly, with more freedom. It’s great.”

With Cuba in the process of shedding 500,000 state workers, the government is looking to move employees off the public payrolls and capture new revenue from the island’s large informal sector. By licensing these off-the-books occupations — like selling DVDs and CDs — the government can attempt to bring some degree of regulation, even if it could care less about copyright protections.

What is less visible at this stage of the reform process are private establishments that resemble small businesses elsewhere in the world. There’s little advertising or signage, and the city remains full of empty storefronts and other under-utilized state-owned property that could be more productive in private hands. Further liberalization measures are likely forthcoming in 2011, when Cuba’s Communist Party will hold its first congress in 14 years.

Government officials say they’ve issued more than 46,000 new self-employment licenses, with another 20,000 in the pipeline. The average processing time for the permits is a mere five days — a light-speed pace by the standards of Cuban bureaucracy. In recent weeks, Cuba’s state-run newspapers and television programs have devoted extensive coverage to the permitting process and the new tax structures.

Still, it’s not clear how Cuba can possibly generate enough jobs to absorb the 500,000 workers — one-tenth of the country’s labor force — who are due to be laid off by April. And deeper cuts are soon to follow.

In formal meetings held at Cuban workplaces to discuss the economic changes in preparation for the congress, employees have consistently asked for further liberalization measures, while government officials take great pains to insist the country isn’t embracing capitalism, but “perfecting” socialism.

Ordinary Cubans on the streets say they’re looking for more variety and better services — and the newly licensed entrepreneurs are delivering.

“I’d like to see them legalize more things,” said Humberto Davila, having just purchased a CD of salsa music for 30 Cuban pesos ($1.25). “This country needs to change a lot.”