Education that's bad for business?

Photo caption: A Cuban shoemaker in Havana in 2008. Washington has set aside $3 million in development funding to help Cuba’s emerging entrepreneurs, but the effort may backfire. (Getty Images)

HAVANA, Cuba — Clues to this country’s economic future are visible all around Havana, hanging outside homes and garages on little hand-painted placards that read “Mattress Repair,” “I Fix Stoves” or, simply, “Cake.”

The signs belong to Cuba’s self-employed entrepreneurs, an incipient business class that the United States would like to help, viewing its members as agents of change on the communist-run island. With the Obama administration shifting U.S. strategy away from a confrontational approach to Cuba in favor of greater engagement, Washington has set aside $3 million in development funding to help Cuba’s emerging entrepreneurs and other “civil society” groups.

The money will nurture grassroots economic development on the island, particularly among those “focused on promoting self-employment and entrepreneurial initiatives,” according to guidelines released by the U.S. Agency for International Development, or USAID, last month.

But some of the same Cubans who have spent years advocating for more market-style reforms say they have a better suggestion for what to do with the $3 million: leave it in Washington.

“It’s a misguided policy,” said one pro-reform Cuban economist, who wasn’t authorized to speak to foreign reporters without official permission. “Whenever the U.S. puts its support and money behind something, people here grow suspicious or slam on the brakes.”

The U.S. funding, he said, “is counterproductive.”

He and others say a behind-the-scenes struggle is underway within Cuba’s government and ruling communist party between those urging market-style reforms and hardliners eager to keep the status quo. U.S. policymakers fail to appreciate the sensitivity of that debate, and their ability to influence it by injecting American political goals, analysts here said.

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Others note that at $3 million over three years, the USAID funding is a largely symbolic amount that won’t make much of an impact on an island of 11 million people.

With Cuba’s economy cracking under the weight of debts, staggering inefficiencies, and nearly five decades of U.S. trade sanctions, President Raul Castro has pledged to allow more Cubans to start small businesses and even to hire employees, a measure that has long been taboo here. He insists the government isn’t turning toward capitalism, but modernizing its socialist system with a measure of common-sense economics.

“We have to erase forever the notion that Cuba is the only country in the world where one can live without working,” Castro told Cuba’s parliament on Aug. 1, even as Cuban economic officials played down the reforms as “adjustments” to the island’s state-controlled economic model.

Unknown ObjectCuba’s economic problems are so severe that Castro has little choice but to test new strategies. His government plans to reassign or lay off as much as 20 percent of the more than 5 million Cubans who work for the state. Some will be offered jobs in agriculture or construction, but few doubt the government will be able to create employment fast enough.

The solution, it seems, will be more private-sector jobs. But how far is the government willing to go?

In 1993, when Fidel Castro allowed Cubans to acquire self-employment licenses, some 200,000 Cubans went to work for themselves, in many instances by simply formalizing the services they were already providing on the black market, like auto repair, carpentry or hair care.

Today, many of those self-employed Cubans face burdensome taxes and niggling inspections from the island’s communist government, which still maintains controls over an estimated 90 percent of the country's economic activity.

Raul Castro now seems ready to relinquish some of that control. But many would-be entrepreneurs are waiting to see what the new policies will permit.

“Will they let us rent commercial space? Buy supplies at reasonable prices? Hire the employees we need? We’ll have to see,” said one Havana auto mechanic, now working out of a cramped one-car garage in a residential neighborhood.

Dissident economist Oscar Espinosa Chepe said he thought the United States was right to try to organize and support new Cuban entrepreneurs.

“If it’s done in an open, transparent way, it could be an important contribution,” he said. “I don’t think there’s any reason to reject it.”

But under Cuban law, anyone cooperating with a U.S.-funded effort to undermine the Cuban government can be sent to prison, so the help for Cuban entrepreneurs will have to be provided covertly — creating a major risk for all involved. An American subcontractor working under a similar USAID grant, Alan Gross, was arrested in December and has been held without charges in a maximum-security prison since then.

“Given the nature of the Cuban regime and the political sensitivity of the USAID program, USAID cannot be held responsible for any injury or inconvenience suffered by individuals traveling to the island under USAID grant funding,” the guidelines warn.

European nations and others also fund efforts to help Cuban farmers and other entrepreneurs on the island, experts here say, but generally do not frame the aid in terms of political and ideological foreign policy objectives.