Saturday, August 11, 2012

A Test for Economic Reforms in Cuba and a Challenge to Raúl Castro's Vision?: The Cabildo Affair in Broader Context

I have been writing about recent efforts by Raúl Castro and his supporters to reshape the Cuban economy, focusing on the development of the cooperative as a substitute for the corporate form in the non-state sector of Marxist Leninist economies that must succeed in a globalized economic system.  Backer, Larry Catá, The Proletarian Corporation: Organizing Cuban Economic Enterprises in the Wake of the Lineamientos — Property Rights between Corporation, Cooperatives and Globalization (August 3, 2012). 

 (Pix from Marc Franck,  In Cuba an Opera Singer Builds anEmpire, Reuters, July 11, 2012 )

In my paper, I suggested the possibilities and limitations of the current approach to economic reorganization in Cuba.  I suggested both the potential of the cooperative as a means of shifting Cuba from a Marxist Leninist state-control model to a state-directed model with a managed non-state sector.  I also suggested the resistance to even a narrow opening in this direction by a state bureaucracy and rank and file Party cadres raised on a different model. These theoretical and technical  discussions of tensions and challenges were recently illustrated by the rise and closure of an informal cooperative operating in the non-state sector by a Cuban citizen committed to the national project of revolutionary Cuba. This individual operated a night club for locals and foreigners in Havana that was shut down after international news stories spotlighted its success.  This post considers some of the implications of the Cabildo  Affair.

(Pix of Ulises Aquino, from Nick Miroff, Opera Unfolds When a Cuban Cabaret is Closed Down, NPR News, July 31, 2012 ("Ulises Aquino, a prominent Cuban singer, is the owner of the caberat and restaurant. He describes himself as a strong supporter of Cuba's socialist system and split the earnings among his 130 employees."))
The case of the Cabildo nightclub[1] is in this respect quite telling, both for the difficulties of regularizing the private sector activities of individuals and for what it portends for rule systems managing cooperatives.

El Cabildo is the product of one man's moxie and of changes in government policy aimed at improving Cuba's struggling economy. Ulises Aquino, a 50-year-old opera singer who founded Opera in the Street in 2006, was looking for a home for the company, so when President Castro announced a series of reforms two years ago promoting private businesses he decided to seize the opportunity. . . . In 2011, Aquino, whose performers were accustomed to playing in rudimentary conditions, including in the street, convinced authorities in Havana's upscale Playa district to let him use the remnants of one of the city's many collapsed buildings.[2]

By July 2012, the enterprise had about 130 employees operating a 150 seat venue. But to get to this size, Aquino ran up against the complex system of rules for the licensing of private activity in the non-state sector. His solution illustrated both the objective of those regulations—to ensure that private enterprises remain small and local, to avoid a threat to the economic dominance of the state sector-- had to bend the rules. “The new entrepreneurs had to get a license for their business and private restaurants were limited to a maximum of 50 seats. Aquino got around the limit by taking out three restaurant licenses, which enabled him to put in 150 seats, and then another as an "organizer of events and other activities."”[3] No sooner had the Cabildo nightclub garnered international attention than it was closed buy state authorities.

A week ago government inspectors burst into the El Cabildo cultural center to the shock of patrons, artists and staff attending musical performed by its theater company, the "Opera in the Street." The local authorities, citing a recent Reuters story on the center that mentioned a cover charge for customers, took away El Cabildo's license on the grounds of "illicit enrichment." The vast majority of El Cabildo's clients were Cuban, paying a 50-peso cover charge, the equivalent of $2, while foreigners paid more. The inspectors searched El Cabildo for hours and interrogated its young artists and restaurant staff, but found nothing more amiss than two cooks working on a trial basis without proper papers, employees said.[4]

The original international news story peeked the interest of state bureaucrats, who called Aquino to discuss his operations.[5] What he described suggested a cooperative, in which all workers shared in the revenues of the enterprise.[6] There was a sense that the operations were allowed to continue in the absence of publicity, but were shut down when news stories revealed no merely the extent of the operation but more significantly, that the workers in that enterprise were able to make substantially more money than in the state sector, even after the payment of all state tax and other obligations. Rather than use this as a means of challenging the state sector to do better, the bureaucracy appeared to take the operations as a challenge to the system itself. If success is interpreted as a threat, then it is unlikely, at least with this generation of party and state cadres, for the reforms developed at the elite level will be successfully implemented on the ground. Even if the operations violated rules, or their interpretation, the decision to shut it down rather than to fine it, and the lack of the appearance of process, suggested the possibility of arbitrariness that will impede other risk takers seeking to take the state up on its offer to invigorate the non-state sector. And the solution?: the government announced that it would allow the presentation of the artistic part of the operations only as a state sector subsidized activity.  As reported in Diario de Cuba, "Un comunicado del Consejo Nacional de las Artes Escénicas, dependiente del Ministerio de Cultura, señala que la Compañía de Teatro Lírico y Espectáculos Ópera de la Calle 'mantiene sus actividades como proyecto cultural comunitario subvencionado'." It seems that in this case, the consequence of private sector success is incorporation into the state sector.

In this story we see the scope of the challenges facing Cuba—a bureaucracy that may be resisting changes proposed at the top of the state and Party hierarchies, limited ability to manage implementation of economic reforms for lack of deep cultures of non-state sector management, limited rule structures for determining conformity to the new economic model, and the lack of a set of procedures for challenging government action. In a sense the closure is as much a challenge to senior Party leaders as it is to the emerging non-state sector.[7] It also illustrates the determination of Cuban authorities to maintain the division of economic activities within which the private sector always occupies a small part.  It is clear that, whatever the shape of the reforms, the state sector will not be challenged, and challenge, for the moment appears to be quite broadly construed.  But the Cabilido affair also suggests the power of Raúl Castro’s efforts to move from a state-controlled to a state-directed economic model. These enterprises can operate successfully as cooperatives; Mr. Aquino was creating the sort of proletarian corporation the success of which suggests that reform might have been on the right path. The Cabildo appeared to provide a substantial boost to the Cuban economy by providing a local service through a collective enterprise in which the workers shared in the proceeds and met local needs. The Cabildo paid its taxes and generated income for the state. It operated in a sector that posed little danger to the integrity of the national economy. If the Cabildo poses a threat to the organization of the Cuban economy, then it is not clear that there will be much space for the non-state sector or that effective reform will be possible soon. The cooperative, like the rest of the reform agenda, will remain an elegant theory with powerful insights into the operation of a Marxist Leninist economy, with no possibility of effective implementation.[8]


[1] Marc Franck, In Cuba an Opera Singer Builds an Empire, Reuters, July 11, 2012. Available

[2] Ibid.

[3] Ibid. (“Using the latter, he plans to expand the business by offering boat rides on the Almendares River, which flows beside El Cabildo just before opening into the Straits of Florida.”).

[4] Marc Franck, Cuban opera singer challenges "jealous" bureaucrats over closed theater, Reuters, Aug. 1, 2012. Available (“A Cuban economist said El Cabildo's cover charge may have fallen into a gray area in Cuban law. Though private establishments were not prohibited from having cover charges, establishments associated with the Culture Ministry, such as such as El Cabildo, might be more restricted in what they can charge.” Ibid.). El Gobierno prefiere subvencionar la Ópera de laCalle antes que permitir su gestión privada, Diario de Cuba, Agust 2, 2012, available

[5] Ibid.

[6] Ibid (“Reuters also had reported that El Cabildo's proceeds were shared after expenses, taxes, and investments, resulting in monthly wages four times greater than the country's 450 pesos average, or around $19. "The earnings of the Opera of the Street are divided among everyone ... including me ... All the artists perform with a subsidy from the Culture Ministry, but as our president has said, salaries do not correspond with the cost of living," Aquino said in his letter.”).

[7] “Raul Castro himself told Cubans in a recent speech that bureaucrats who stand in the way of change will be swept aside. He's laid out plans to resuscitate Cuba's state-run economy by creating millions of jobs in new small businesses and cooperatives. But the process is dragging. Closing El Cabildo has eliminated 130 of the jobs created for Cubans like Angel Basterrechea, who fears he may have lost the highest-paying job he'll ever have.” Nick Miroff, Opera Unfolds When a Cuban Cabaret is Closed Down, NPR News, July 31, 2012. Available

[8] “A staunch advocate of socialism, Aquino charged in his letter that the forces behind the closing of his center were "jealous" of its success. "Those who fear that the worker, the intellectual and the artist might find their own productive road are not revolutionaries, they are conservatives," he wrote. "They enjoy the benefits of power that gives them the ability, as in this case, to decide the destiny of human works, not to help them flourish, but to destroy them," Aquino charged.” Marc Franck, Cuban opera singer challenges "jealous" bureaucrats over closed theater, Reuters, Aug. 1, 2012. Available

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