1138. Cuba Government Set to Exit Restaurant Business

By Marc Frank, Reuters, August 26, 2013

State-run restaurants often provide a poor dinning experience

More than 20 state restaurants in Cuba are about to become employee-run cooperatives as Raul Castro's communist government continues its retreat from running just about everything on the Caribbean island.

The restaurants will become cooperatives in October, with hundreds more likely to follow if the experiment succeeds.

All aspects of the business from buying the food to splitting the profits will be decided by the employees, not from on high in the government. A similar process is already under way in other sectors from construction and transportation to farmers' markets and light manufacturing.

The restaurants are the first to be ceded by the state since communist authorities took over all eateries in 1968.

Until 5 years ago, visitors venturing from their hotels had basically one option: state-run eateries, often with a reputation for poor quality.

Today, there are close to 2,000 private restaurants as local entrepreneurs take advantage of market-oriented reforms initiated by President Raul Castro, who took over for his ailing older brother Fidel in 2008.

"The government is hoping that cooperative owners, with pride in their establishments and motivated by profits, will offer much better service and higher quality goods to customers, both to tourists and fellow Cubans," said Richard Feinberg, a nonresident senior fellow of the Washington-based Brookings Institution and author of a number of studies on Cuba's economic reforms.

Some of the restaurants slated to become coops are off the beaten track and cater to a mainly Cuban clientele using the local peso currency.

Others - for example La Casona de 17 and La Divina Pastora, both in Havana - operate in a dollar equivalent, called the convertible peso or CUC, and serve mainly tourists.

The Divina Pastora, nestled under Moro Castle at the narrow entrance to the Bay of Havana, sits on some of the city's most valuable real estate, owned by the military-run Gaviota tourism corporation.

La Casona de 17 is part of the tourism ministry's entertainment and restaurant chain, Palmares, which operates upscale establishments across the island.

"We are a pilot project, but in the future I think all Palmares restaurants will become cooperatives," said Marylin Herrera, 25, as she waited on tables at La Casona de 17, located in the busy Vedado district in the city center.

Herrera said it would be quite a challenge for the 50-odd workers to run the restaurant, which they will lease from the state, but looked forward to having "much more flexibility in how we operate and what we offer."

A DIFFICULT BUSINESS CLIMATE

Castro, speaking at a Communist Party congress in 2011 where a sweeping plan to revamp the Soviet-style economy was approved, outlined efforts to create a "non-state" sector of private and cooperative businesses.

"The growth of the non-public sector of the economy ... will allow the state to focus on raising the efficiency of the basic means of production ... while relieving itself from those management activities that are not strategic for the country," he said.

Castro has already taken steps to deregulate small private businesses in the retail service sector. Thousands of smaller state shops and taxis have been leased to individual employees, and fallow state lands have been leased to would-be small farmers in search of improved production and efficiency.

"We are in an experimental phase with a group of cooperatives in certain sectors of the economy. This allows us to follow each project, learning as we go along before they become generalized," Grisell Trista Albasu, a member of the Communist Party commission charged with implementing the reform plan for state businesses, told official media last week.

The cooperatives function independently of state entities and businesses, set prices according to the market in most cases, and receive better tax treatment than individually owned businesses, according to a decree published in December.

The law allows for an unlimited number of members and use of contracted employees on a three-month basis.

While it is difficult to find any local experts who oppose the state getting out of secondary economic activity such as the restaurant business, it is relatively easy to find critics of the process.

In the case of cooperatives, which are supposedly being formed on a voluntary basis, the vast majority to date have been the result of decisions made at the highest level of government and imposed on the employees, who must accept their fate or be laid off.

"This was not a spontaneous process ... at least in the vast majority of cases," a Cuban economist said, requesting anonymity due to restrictions on talking with foreign journalists.

The cooperatives "face a difficult business environment where a decrepit infrastructure, obsolete equipment and banking practices, high taxes and restrictions on trade will make success difficult," he said.