Cuban economists analyze reforms at CUNY conference.

Omar Everleny, an economist with the University of Havana's Center for the Study of the Cuban Economy (CEEC)--and a top authority on the island's financial system--was scheduled to speak at a May 21 conference in New York.

The State Department denied him a visa at the last minute. However, it let President Raul Castro's daughter Mariela into the country so she could address the Latin American Studies Association conference in San Francisco.

Mariela Castro, director of Cuba's National Center for Sex Education and an outspoken advocate of gay rights on the island, was one of at least 60 Cuban scholars who got visas to attend LASA.

The Obama administration also gave visas to two Cuban academics so they could attend the CUNY Graduate Center's event on economic transformation in Cuba: Pavel Vidal, an economics professor at CEEC, and Camila Pineiro Harnecker, daughter of Manuel "Red Beard" Pineiro Losada--ex-leader of Cuba's Direction General de Inteligencia spy agency.

As CUNY conference attendees such as Carlos Saladrigas of the Cuba Study Group and Baruch College professor Ted Henken sat quietly, Vidal and Pineiro Harnecker discussed Raul's recent legalization of self-employed workers, known as cuentapropistas.

These workers, whose mere existence was once anathema to the regime's centrally planned system, are now being championed] as the last great hope of Cuba's sputtering socialist economy.

Vidal said that from 1999 to 2009. Cuban authorities issued an average 150,000 self-employment licenses a year. But that rose to 200,000 in 2010 and more than 300,000 last year, reaching 380,000 by April 2012.

Taxi drivers alone--always in demand in the bustling streets of Havana--saw their share of licenses jump from 5% of the total in December 2010 to 18% by September 2011.

Pineiro Harnecker cautioned attendees not to confuse the number of licenses granted with the number of self-employed obtaining them. "A self-employed person can have more than one license." she explained.

Vidal noted that the list of categories permitted by the Cuban government rose from 157 in 1990 to 181 by October 2010.

More significantly, he said, "a more flexible regulatory structure now permits microbusiness in Cuba. They can contract labor, sell their goods and services to state entities, have access to credit and banking services and rent commercial space and assets [both from the state and private citizens]."

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The mere ability of ordinary Cubans to hire workers is startling enough to both exiles and Cuba watchers everywhere, since Raul, in allowing this practice, has effectively ceded the state's monopoly on labor.

Pineiro Harnecker, who has studied cooperatives in both Cuba and Venezuela, holds a degree in sustainable development from the University of California at Berkeley.

She offered attendees an egalitarian spin on the makeup of Cuba's cuentapropistas: 67% of them were unemployed, 17% were retirees or former state workers and 0.3% were students when they got their licenses.

She also said 24% are women, and that 44% have a high-school education, with another 33% not having gone beyond ninth grade.

By this July, she said, the Cuban government will approve production cooperatives in the food, professional services, construction materials, housing and light industry sectors.

Vidal didn't shv away from the drawbacks of being a cuentapropista.

"They are not allowed to directly import anything," he said. 'There's an absence of a wholesale supply market. There's a costly retail supply market, with an unreliable supply of goods, high taxation and lack of training."

He added that the specific government-generated list of self-employment options is stifling individual initiative.

But there's also a practical reason Cuba's power structure is that way.

"This is the first step to increase the role of the informal sector in the [Cuban] economy. It absorbs excess labor--indispensable to increasing productivity in state-owned companies. It contributes toward fiscal adjustment, permitting the state to decrease costs, and these workers are paying taxes."

MICROFINANCING UP IN THE AIR

With regard to Cuba's fledgling banking reforms, said Vidal, "90% of new credit demand has been for repairing homes, with only 10% for self-employers and microbusiness."

Cuba's Central Bank sets interest rates, depending on credit purpose and term (from 4.25% to 9%), with collateral ranging from the applicant's pre-existing bank deposits (or that of a third party) to moveable goods (such as cars) and future income.

Yet unlike lending practices elsewhere, mortgages of permanent homes are not allowed. Cuban banks offering such loans will be BANDEC, BPA and Banco Metropolitano.

Despite these baby steps toward a market economy, Vidal says the idea of the Cuban government financing microbusinesses is a wild card, since this something new. He calls for nothing less than a modernization of the nation's banking sector in order to best manage the demand for financial services.

"Existing banking services have limited support for online or telephone banking, magnetic cards and ATMs," he said. 'There are also delays in Cuba's telecom infrastructure."

Vidal also said Cuban banks can't afford to provide microfinance on their own. That's why, he said, they "need to form alliances with local organizations, NGOs, United Nations programs and universities."

It remains to be seen, though, if the Castro government would ever form partnerships with foreign lending institutions to finance such efforts (the Cuba Study Group's idea of involving Mexican microloan entity Banco Compartamos comes to mind).

Quipped one attendee: "Miami Cubans are already starting to lend money to their couins small businesses on the island. That way, they can eventually stop being so dependent on them for monthly remittances."

RELATED ARTICLE: Cuba says it's open to discussing Gross case

The Cuban judicial system doesn't allow for a humanitarian release for jailed American contractor Alan Gross, but authorities there are ready to negotiate his status, a senior Cuban official told CNN on May 10.

"It is not conceived in the Cuban system that persons in this situation can be allowed to travel abroad," Josefina Vidal, the top official in the Cuban foreign ministry handling North America, told the network.

Gross, 63, was sentenced last year to 15 years on espionage charges related to his

State Department-backed project to hook Cuba's Jews to the Internet. He has repeatedly asked to be allowed to visit his 90-year-old mother, who is dying of cancer.

Vidal said Cuba was open to negotiating Gross' status, however.

"We have made clear to the U.S. government that we are ready to have a negotiation in order to try and find a humanitarian solution to Mr. Gross' case on a reciprocal basis," she told CNN's Wolf Blitzer.

Vidal wouldn't offer specifics though she did say the Cuban Five were a "concern."

Vito Echevarria, a New York-based freelance journalist, writes regularly for CubaNews about business, e-commerce, the arts and entertainment.