Cuba opens banks to small business loans

HAVANA, Nov. 28 (UPI) -- Cuba is opening its state-run banking and financial sector to another small dose of capitalism -- loans to help individuals get going with private enterprise.

Many of the individual hopefuls for the latest installment of President Raul Castro's phasing in of a market economy are former state employees who lost jobs as the government, Cuba's biggest employer, began its heavy retrenchment program.

Tens of thousands of Cubans affected by the cutbacks in government payroll were told to become self-employed and self-sufficient and not expect any more cash largess from the state.

Farmers can apply and qualify for the small loans program and, in another nod to a nascent real estate sector, homeowners can get cash to renovate housing. Rules for rental and sale of real estate were relaxed earlier.

Cuba's gradual shift toward experimentation with a market economy is reminiscent of the economic rethink that marked the period after the 1991 collapse of the Soviet Union and freeing of former Soviet bloc states in Eastern Europe, Central Asia and the Caucasus. More than 10 years on, that transformation continues, with varying degrees of success, while communist China has transformed itself into an economy and a state defined by the free market.

Cuba has the added challenge of circumventing U.S. embargoes and sanctions, even though it has thriving trade, not only with the United States, but with other not-so-communist members of the former Soviet bloc.

Castro is banking -- rightly, say Cuba watchers -- on firing up the imagination of Cubans abroad, drawing new capital and introducing new money making ideals into the Cuban economy. Cuba's fast liberalizing tourism sector has given the communist citizens a foretaste of possibilities in a more relaxed economic environment.

An official decree said the new loans scheme would help promote productivity, especially in the agriculture sector, and enable more trips abroad by specialist groups like doctors and musicians.

The small loans facility for Cubans comes at a time of critical changes in Cuban economy and society. Many of the newly emerging entrepreneurs are able to earn well beyond a monthly average of $20 but the government reforms are also meant to gradually do away with subsidies on basic amenities and living. The state covers the costs of education and healthcare but has hinted a phased withdrawal of many of those perks over the coming months.

Cubans who are finding their spending power increase with economic relaxation face higher costs in the coming months as the subsidies are stripped away. The government has said it is spending too much on importing commodities and food and wants farmers and other small businesses to do more to help reduce its $2 billion annual food imports bill.