Cuban State to Shed Thousands of Eateries, Eliminate Subsidies

Communist-run Cuba plans to convert most state-run eateries into cooperatives and private-run businesses in the coming months and stop subsidizing them as soon as next year, according to local reports and a government source.

The move is seen as a sign the country is moving toward market-style socialism with increased private business, such as Vietnam or China, and away from the old Soviet-style system it has clung to since its former benefactor's demise.

The country has been all but bankrupted by fierce U.S. sanctions, the COVID-19 pandemic, and its own inefficiencies, and faces mounting foreign debt and budget deficits.

Authorities have declared an emergency and are pushing through various market-oriented reforms first approved a decade ago under then President Raul Castro, but stalled ever since by bureaucratic self-interest and conservatives.

In recent speeches, Castro's successor, President Miguel Diaz-Canel, has said subsidies will be eliminated for the state-run eateries as part of a monetary reform expected by the end of the year, forcing the issue.

That will shake up what is known as the gastronomy sector, which has been unable to shake a reputation for poor service and theft ever since all eateries down to lowly hot dog venders were nationalized in 1968.

"The plan now being put into effect calls for a small minority of the more than 7,000 government-run eateries in the country to form new, unsubsidized, state companies separated from local politicians and the remainder to be moved into private hands," said a senior manager of the capital’s food service department, who asked not to be identified as he was not authorized to speak to journalists.

The Cuban government did not respond to a request for comment.

There were around 1,900 state-owned eateries in Havana before the government launched initial reforms under Castro, turning 258 into cooperatives and private businesses under a leasing system, according to the senior manager.

Of those, 60% had improved their service, increased wages by 600% to 800% and controlled pilfering, he said.

Now, more than 70% of the remainder will follow suit, the senior manager said, adding that city authorities had already picked around a dozen restaurants that will remain state-run and 450 establishments that will be leased to employees and other interested parties.

“The process should never have stopped and I think this time it will happen as the system can’t resist more scrutiny,” he said.

Reuters could not ascertain details yet for all Cuba's other provinces. But the Cuban National News Agency reported last week that a new local state-run company will keep 15% percent of the 486 eateries run by the government in central Camaguey province.

"The other facilities will pass to non-state forms of management, either in the form of self-employment or non-agricultural cooperatives," the agency said, citing local authorities.

Ever since Castro announced the state would be pulling out of non-strategic activities at a Communist Party congress in 2011, thousands of private eateries have opened and successfully competed with the state sector.

Meanwhile the state bureaucracy has worked to spruce up, not move out of, most of its restaurants and cafeterias.

Yet Economy Minister Alejandro Gil, speaking to the National Assembly last month, said the sector had to be transformed, and those eateries remaining under state control must pay their own way.

“They have to be efficient, covering expenses with income, paying suppliers in a timely manner, linking salaries with economic results and banishing illegalities and the diversion of resources,” he said.

The move comes amid a depressed market and supply shortage impacting state and private eateries in the wake of the pandemic and Cuba's cash crunch.