Cuba Punishes Entrepreneurs Taking Free Enterprise Too Far

Cuba-Restaurant-300x200Cuban authorities are reportedly raiding several private restaurants on the island in what appears to be a government crackdown on entrepreneurs transgressing the Castro regime’s definition of free enterprise.

El Litoral, a high-end paladar known for its food and clientele, was the first to get raided by authorities. Officials from the Technical Department of Investigations reportedly carted off tables, chairs, plates, sound systems, and bottles of imported liquor.

Neighboring businesses told news sources that the owner of El Litoral got in trouble because of money laundering allegations. The liquor the restaurant served didn’t come from official government sources and some of its employees were allegedly being paid off the books. Servers also reportedly told clients that they accept dollars if they don’t have CUCs (Cuban convertible pesos). U.S. dollars are not legal tender on the island.

Two nearby restaurants—Dolce Vita and Lungo Mare—were also raided and shut down. Reports say several other paladares in Havana and at least two in another province have also been shut down.

Alejandro Marcel Mendivil, the owner of El Litoral, Dolce Vita, and Lungo Mare, has been arrested. Mendivil was reportedly just the public face of El Litoral. Sources say his mother’s name was on the restaurant’s license, but Nardis Francisca Mendivil denied ownership of Dolce Vita and Lungo Mare.

The raids were foreshadowed by Cuban President Raúl Castro’s July address to the National Assembly, where he said the rules on free enterprise will be enforced and anyone hoping to establish a business empire with several private businesses is mistaken. Although he didn’t name any names, it was clear that he was referring to private business owners believed to have crossed a line.

“Malfeasance has been committed; there is information about cases where the same person already has two, three, four and even five restaurants—not in one province, but in several,” Castro said.

He noted an entrepreneur who had traveled to different countries on more than 30 occasions and asked, “Where did he get the money? How did he do it?”

Castro said new regulations would be forthcoming, and the National Assembly has since passed new economic guidelines that prohibit the concentration of financial, material, and property wealth in sectors that are not controlled by the state.

The change is contrary to what Cubans had been expecting; entrepreneurs on the island had hoped the government would expand permissible business activities, but the recent restaurant raids and closures send a clear message to the self-employed working in the private sector.

Experts believe the crackdown is driven by fear and that the Cuban government does not want a successful entrepreneurial class that could challenge the status quo. The Labor and Social Security Ministry announced on Tuesday that it will no longer be issuing licenses for lucrative occupations like restaurants and B&Bs, but those who already have licenses can continue running their businesses as usual.The government has reportedly issued 568,000 licenses to entrepreneurs, who make up 12 percent of all Cuban workers.

It is unclear when the suspension on new licenses will be lifted, but many agree that the new measures are the government’s attempt to halt the growth of the private sector before the independent economic class could become a political rival for the Castro regime. How the change will affect Cuba’s tourism sector is yet to be seen, but it might result in more money for the government coffers as travelers will be forced to use government-operated entities.

Sources: 7.31.17 Cuba Reins in Entrepreneurs & 8.2.17 Fear is Driving Castro to Punish Cuban Entrepreneurs, Experts Say.pdf