Cuba and capitalism

HAVANA

Jose is an eager almost-entrepreneur with big plans for Cuban real estate. Right now he works illegally on trades, linking up families who want to swap homes and pay a little extra for an upgrade.

But when Cuba legalizes buying and selling by the end of the year — as the government promised again last week — Jose and many others expect a cascade of changes: higher prices, mass relocation, property taxes and a flood of money from Cubans in the United States and around the world.

"There's going to be huge demand," said Jose, 36, who declined to give his last name. "It's been prohibited for so long."

Private property is the nucleus of capitalism, of course, so the plan to legitimize it here in a country of slogans like "socialism or death" strikes many Cubans as jaw-dropping. Indeed, most people expect onerous regulations and, already, the plan outlined by the state media would suppress the market by limiting Cubans to one home or apartment and requiring full-time residency.

Yet even with some state control, experts say, property sales could transform Cuba more than any of the economic reforms announced by President Raul Castro's government, some of which were outlined in the National Assembly on Monday. Compared with the changes already passed (more self-employment and cell phone ownership), or proposed (car sales and looser emigration rules), "nothing is as big as this," said Philip Peters, an analyst with the Lexington Institute.

The opportunities for profits and loans would be far larger than what Cuba's small businesses offer, experts say, potentially creating the disparities of wealth that have accompanied property ownership in places like eastern Europe and China.

Havana in particular may be in for a move back in time, to when it was a city more segregated by class.

"There will be a huge rearrangement," said Mario Coyula, Havana's director of urbanism and architecture in the '70s and '80s. "Gentrification will happen."

Broader effects could follow. Sales would encourage much-needed renovation, creating jobs. Banking would expand because, under newly announced rules, payments would come from buyers' accounts. Meanwhile, the government, which owns all property now, would hand over homes and apartments to their occupants in exchange for taxes on sales — impossible in the current swapping market where money passes under the table.

And then there is the role of Cuban emigrants. While the plan seems to prohibit foreign ownership, Cuban-Americans could take advantage of Obama administration rules letting them send as much money as they like to relatives on the island, fueling purchases and giving them a stake in Cuba's economic success.

"That is politically an extremely powerful development," said Peters, arguing that it could spur policy changes by both nations.

The rate of change, however, will likely depend on complications peculiar to Cuba. The so-called Pearl of the Antilles struggled with poor housing even before the 1959 revolution, but deterioration, rigid rules and creative work-arounds have created today's warren of oddities.

There are no vacancies in Havana, Coyula, the urban designer, pointed out. Every dwelling has someone living in it. Most Cubans are essentially stuck where they are.

On the waterfront of central Havana, children peek out from buildings that should be condemned, with a third of the facade missing.

Just blocks inland, Cubans like Elena Acea, 40, have subdivided apartments to Alice in Wonderland proportions. Her two-bedroom is now a four-bedroom, with a plywood mezzanine where two stepsons live one atop another, barely able to stand in their own rooms.

Like many Cubans, she hopes to move — to trade her apartment for three smaller places so the elder son, 29, can start his own family. "He's getting married," she said. "He has to move out."

But despite reassurances — on Monday, Marino Murillo, the country's economic czar, said selling would not need prior government approval — Acea and many neighbors seemed wary of the government's promise to let go. Some Cubans expect rules forcing buyers to hold properties for five or 10 years. Others say the government will make it hard to take profits off the island, through exorbitant taxes or limits on currency exchange.

Still more, like Ernesto Benitez, 37, an artist, cannot imagine a real open market. "They're going to set one price, per square foot, and that's it," he said.

Of course, he added, Cubans would respond by setting their own prices. And that might be enough to stimulate movement, he said.

He certainly hopes so. Benitez and the woman he has lived with for nearly a decade broke up 18 months ago. Each is now dating someone new and there are nights, they admit, that get a little awkward. Only a narrow bathroom separates their bedrooms.

Katia Gonzalez, 48, whose parents passed down her apartment before they died (which Cuba allows), said she would consider selling for a fair price. What did she think her two-bedroom just blocks from the ocean, in Havana's best neighborhood, could command? "Oh, $25,000," she said. "A little more, maybe $30,000."

In Miami, a similar apartment might cost nearly 10 times that — which is what many Cuban-Americans seem to be thinking. Jose and several other brokers in Havana said real estate transactions on the black market routinely involved money from Cubans overseas, especially Florida.

"There's always money coming in from Miami," said Gerardo, a broker who withheld his full name. "The Cuban in Miami buys a house for his cousin in Cuba, and when he comes here in the summer for a couple of months, he stays in that house."

For now, Cubans are trying to grasp basic details. How will the mortgage system work? How high will taxes be? What's a fair price?

There is even a question of how buyers and sellers will come together. Classified listings are illegal in Cuba, which explains why brokers like Jose, known as corredores, spend their days moving through open-air bazaars with notebooks listing apartments offered or desired.

He already has two employees, and when the new law arrives, whether his services are legal or not, he expects to hire more.

"We have to get coordinated," he said. "It's coming."

© 2011 New York Times News Service

Cuba and capitalism 08/06/11 [Last modified: Saturday, August 6, 2011 5:31am]

    

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