Free-market makeover

HAVANA, Cuba — The Cuban government keeps close tabs on its citizens, but at least it’s getting out of their hair.

Starting this month, in a small but significant nod to market economics, the Castro government has begun handing over state-run barbershops and beauty salons to their employees, marking the first time communist authorities have ceded control of retail-level small businesses that were nationalized in 1968.

The government still owns the physical properties, but not the businesses. And since Cuba’s cosmetologists will no longer be employees of the state, they’ll set their own hours and prices, keeping whatever profits they earn after paying taxes and fees.

“We’ll have to see what happens,” said Robin Corso, a barber who has been cutting hair for 15 years in a tiny, rundown shop in Old Havana. “So far it’s too early to tell if it’ll be a change for the better.”

If Corso sounds cautious about the change, one reason is that he’ll be paying the government nearly $40 a month in taxes and fees, which, at Cuban prices, is equivalent to about 40 or 50 haircuts. Utilities, supplies and maintenance costs will also eat into his earnings.

Havana’s other new entrepreneurs were just as ambivalent.

“The taxes are too high,” said one barber, who didn’t want to give his name while criticizing the new arrangement. “And you don’t pay, you can’t work.”

Such grumblings are a reminder that in Cuban hair care, as in many other aspects of the economy, the distinction between state and private ownership isn’t always clean-cut.

Cuba’s economy is about 90 percent state-controlled, but workers at many government-owned stores, factories and restaurants have devised elaborate schemes to skim cash off the state to supplement their woeful salaries — about $20 a month on average. The moral and economic toll of such practices has been acknowledged with unusual candor lately in Cuba’s state-run media.

Some workers steal to sell goods on the black market, but others get by with lesser forms of deception. Thus, many here don’t necessarily view being independent — and paying taxes — as a better deal.

Under the old system at state-run barber shops, for instance, official prices have remained essentially the same for decades — about 7 cents for a haircut. But to get good service and an appointment with their favorite barber, most Cubans paid 10 to 20 times that. The barbers simply pocketed the difference.

“That was the tip,” said barber Rene Navarro.

Now, with the new system, Navarro said he feels like he’ll be starting each month in a deep, $40 hole.

“In the past, you worked, reported your hours, earned a salary and took vacations,” he explained. “Now you don't have any of that. You just work and work.”

One older barber who’s been cutting hair for 35 years said he’s struggling to pay his taxes because most of his clientele is elderly and had been coming to him for decades. “I can’t double my prices on them overnight,” he said. “They can’t afford it.”

For the Cuban government, meanwhile, the benefits are clear. President Raul Castro wants to winnow Cuba’s notorious bureaucracy, saying in a recent speech that the government may have a million excess workers on its payrolls. The island’s reform advocates have been pushing to get the state out of the small-scale service sector by turning over things like cafeterias, repair shops and garages to employees who could work independently or in cooperatives.

The changes are being promoted in the name of efficiency and cost reduction, not capitalism.

For instance, the government used to assign teams of inspectors to police the state-run barbers and beauticians, sending them to sniff out bookkeeping irregularities or other infractions. But that just invited corruption and abuse.

One barber said that April 1, the day the new measures were announced, was “the happiest day of my life” because he would no longer have to stomach the regular shakedowns from government inspectors.

“We were at a meeting with all the old inspectors,” he said. “And afterward, one of them came up to me, put her hand on my shoulder, leaned in, and said ‘you’ll still cut my kids’ hair, right?’”

“Sure, I told her,” he said. “And I’ll charge you $7 (seven times the standard rate). Her jaw dropped.”

Whatever they think of the new arrangement, Cuba’s barbers and beauticians now face the kinds of decisions that entrepreneurs all over the world contend with. How much can they charge? And should they invest in fixing up the shops? Some said they didn’t have any money saved, while others complained it wouldn’t be worth the investment since the state still owned the building.

But Corso, the barber in Old Havana, said he was already thinking about sprucing things up a bit. “I’d love to a have a sink here, in order to wash customers’ hair,” he said. But he wasn’t contemplating anything too ambitious.

“I love the old-fashioned look of this place,” he said, “and I wouldn’t want that to change.”