With the Kremlin tightening its purse strings, even Putin gets a pay cut

private employment to 201 occupations, including barber, taxi driver, and cell phone technician. Real estate agents are now legal, a radical concept in a nation that didn’t permit home sales for more than a half-century. In the past few years, almost 500,000 Cubans have registered as tax- paying private businesspeople, but economists figure the actual number is closer to 2 million— 40 percent of the workforce—including state workers and farmers who moonlight in the private sector.

Entrepreneurs must overcome obstacles unheard of in the U.S. Supplies and materials sold only at state-owned stores and warehouses are limited. Items unavailable in Cuba must be couriered in. There’s no wholesale market or private distribution network. When Rafael Rosales, who runs Café Madrigal, Havana’s first privately owned bar since the revolution, needed cocktail glasses, he spent a day combing state stores and didn’t find any. He’s still an optimist: “Our economy has improved a lot in the last three years. You see people fixing up their houses, dressing better.”

The government classifies these business people as cuentapropistas, or self-employed, but the most successful create jobs as well. Ernesto Blanco started La Fontana, a restaurant with a grill and 12 chairs on his friend’s patio. He now employs 29 workers and grosses thousands of dollars a month, paying 10 percent to the state in taxes.

With scant programming on television, four friends started a business that enlists people with broadband Internet connections at their workplace to download sports, soap operas, and other shows onto hard drives. Those packages are copied and sold for $2 to $5 through an elaborate unofficial distribution network. It’s all unauthorized, but the government tolerates the venture, which provides income to thousands and has exposed Cuba to foreign entertainment.

There’s a tug of war in Cuba over reforms. “This is a struggle between old forces and new forces in a country that nationalized everything, even hot-dog stands,” says Carlos Alzugaray, a former ambassador to the European Union and a University of Havana professor. “The genie’s out of the bottle now. If the government cannot create wellpaid jobs, then let the private sector do it.” Yet Hugo Pons, of Cuba’s National Economics and Accounting Association, cautions that “the aim is not to build capitalism or a market economy; the idea is to preserve socialism.”

Even many Cuban entrepreneurs say they don’t want a total market economy. They credit their government with providing health care, education, and public safety at levels far above most of Latin America. “You could study economics in any part of the world and not be able to apply it here,” says Ramos, co-owner of his factory-turned- restaurant, now one of Havana’s most glamorous. The “original vision” of Cuban socialism is gone, he says, but what remains is “a model trying to preserve itself without abandoning its original principles, at the same time conscious that if it doesn’t advance and evolve, it will die.” —Indira A.R. Lakshmanan

Acosta and her husband restore classic cars with limited resources

The bottom line Although 201 categories of work are now open to entrepreneurs in Cuba, the state still dominates the economy.

Austerity Putin Decides the Kremlin Must Suffer, Too

Trimming privileged jobs while an expensive watch causes a scandal

It’s “an important signal at the beginning of an election campaign” As he gears up for a parliamentary vote a year from now, Vladimir Putin has a chance to show the electorate that even his own entourage is feeling the pain of recession. As part of spending curbs on the bureaucracy, Russia’s president has agreed to cuts in the Kremlin’s budget by as much as 10 percent, people with knowledge of the plan said.

The moves were decided before a public uproar over an expensive watch that Putin’s spokesman, Dmitry Peskov, flashed at his July wedding. The first deputy chief of staff of the presidential executive office, Vyacheslav Volodin, has also faced criticism for his property holdings. This popular displeasure reveals an underlying irritation with the lifestyles of cosseted officials. A bureaucrat’s half-million-dollar watch is “an important signal at the beginning of an election campaign,” says Nikolay Petrov, a researcher at the Russian Academy of Sciences in Moscow.

Peskov says the watch was a gift from his bride, 2006 Olympic ice-dancing champion Tatiana Navka. He declined to comment on the Kremlin’s budget. The Ministry of Finance didn’t respond to requests for comment.

Those who work inside the Kremlin have the most prestigious, lucrative, and secure jobs in the public service. “People know that officials live much better than most Russians,” says Igor Bunin, the director of the Center for Political Technologies in Moscow. “They have a whole system of bonuses and privileges, including apartments.”