A new dawn for Cuba as capitalism eclipses communism

As state control rolls back, 500,000 are about to lose their jobs. In the first part of a new series, David Usborne reports from Havana

Hidden and hedonistic, the party begins to pop at about midnight when the half-naked male models point the last stragglers to the open roof top.

On a second level above us under the stars the DJ turns it down briefly to allow a solo trumpeter to play a sensuous salsa serenade while behind the bar – as long as a swimming pool and sagging with mojito cocktails – lesbian porn from the nineteen thirties is projected on an bare wall.

The guests, in from Sao Paolo, Mexico City, Paris and Madrid, take it in their sophisticated stride, navigating past mattresses for the boozed up and the louche and feigning insouciance as Oscar-winning actor Benicio Del Toro brushes past. There had been a clue in the invitation about what was to come. Dress code: "tropical glam".

Yet there is wonder if not actual shock in their smiles even as they dance their last dance and surrender to the approaching Caribbean dawn. We are not in Miami, Palm Beach or even Los Angeles. This is Havana, home to one of the last Soviet-style regimes in the world. Now in the lift going back down an impossible rumour goes around. Two of Raul Castro's sons attended the party. You never saw them?

Cuba is changing. The roof-garden fete, with its decadent pulse, was not something you see in Havana on your average Saturday night. Some may have thought of it as an aberrant flashback to the pre-revolution days when frolicsome behaviour was the norm. But to others it seemed like a back-to-the-future experience. Was this a glimpse of this grand but crumbling city 10 or 20 years from now, raring once again for fun? A reporter meanwhile tries to straighten out those Castro sightings. The surprise: no sons but two grand-daughters had indeed shown up.

Grandfather Raul, who turns 80 this year four years after taking over as President from his ailing brother and founder of the revolution, Fidel, will not have given the party a second's thought. That Cuba is tiptoeing back into the sunlight is of his own personal doing, after all. It was last September that a stunned nation as told that the centrally planned economy was dying and needed radical surgery. By the end of this April, the government decreed, 500,000 Cubans would have been fired from state jobs. In the longer term, the Raul-sanctioned plan would eliminate about 1 million jobs, or roughly 20 per cent of the workforce.

It is an audacious blueprint that will kill the socialist model erected by Fidel and his co-revolutionary Che Guevara 53 years ago or save it from collapse. Its success or failure will depend largely on whether Cuba, with its epic inefficiencies and laid-back rhythms, can rediscover long-suppressed capitalist instincts. Today, the state employs almost 90 per cent of all workers. As many of those are now laid off they will be encouraged to apply for licenses to try their hand at private enterprise. Fidel did something similar 15 years ago, but on a far tinier scale – Havana saw the opening of a handful of family-run restaurants and hostelries for tourists – and he later backed away. This promises to be much bigger.

What it means is that Cuba is in a state of high agitation. Interviews over several days with Cubans of all backgrounds suggested a people uncertain whether to be deeply afraid of what is coming or grateful that after decades of stagnation, their leaders finally are ready for reform. And there have been other signs of movement from the top. In February, the regime with little fanfare lifted the internet firewall that for years had blocked much of what Cubans could see on the web (though only a fraction of the population has access to it). And the months since last July have seen 60 political prisoners released, all originally rounded up in the so-called 'Black Spring' of 2003. Only seven of those arrested in that crackdown now remain behind bars.

Miguel Barnet, the President of the Writers' and Artist's Union, an amiable man about Havana who has a direct line of communication with the Castros (and is therefore not free to speak entirely candidly), accepted that Cuba is in a tricky place but was certain that Raul knows what he's doing. "I am very optimistic for Cuba," he tells me. "What would be tricky is if there was no transition going on. We need to do this."

Raul has support from other members of the top communist leadership. Next month, a Communist Party Congress will be convened, something not seen in a decade and a half. It will approve the full Raul reforms that not only will significantly broaden the areas in which free enterprise will be tolerated and even encouraged but – perhaps most surprising and risky – will simultaneously introduce a system of income tax.

We also know, however, that resistance has been powerful at the next level of communist leaders – the ones who have to choose who is to lose their jobs and then tell them. Sources spoke of uproar one recent night at the luxury, state-operated Melia Cobiba Hotel when top socialist officials gathered the staff of 580 people and told them only 480 would be returning the following day.

In an attempt at consultation and fairness, committees were established to discuss how the lay-offs might work. Their work was concluded last weekend and on Monday Raul acknowledged that progress on sacking the first 500,000 workers had been slow. The end-April deadline, he said, would therefore be extended. He gave no new clear schedule for reaching his final goals.

Speculation abounds that he may also be slowing the pace because of Tunisia, Egypt, Libya and other countries in the Middle East where citizens have risen up against authoritarian regimes. However, Cuba is different. It does not have a youth-heavy population, access to sites like Twitter and Facebook is extremely limited and there is no issue of corruption or great displays of wealth among the ruling elite. "We write to our capitals every day and say it is not going to happen in Cuba," says one junior diplomat at the Canadian embassy here. "Change is going to come not at once, but bit by bit."

Then there is this: while the prisoner release programme has cheered human rights groups and even some dissident leaders in the country, no one supposes that old habits of repression have died. Thus two weeks ago, on the first anniversary of the death from hunger strike while behind bars of dissident Orlando Zapata Tamayo, the regime moved temporarily to round up 45 dissidents and confine 60 more in their homes to diminish the chances of street protests. All were released when the anniversary was over.

"Some positive steps have been taken," a diplomatic source in Havana said, noting the release of the 60 political prisoners. "But we remain extremely worried about the human rights situation." He described a security apparatus that remained alert and ubiquitous. Any kinds of street gatherings are instantly quashed, in part by thugs hired by the state. The front page of the Communist Party paper, Granma, last week reported that the spokesperson for the Ladies in White, a protest group of wives and relatives of those first incarcerated in 2003, had been unveiled as a government informer. What motivated the paper to run this is unclear.

The United States, which maintains its 49-year-old economic embargo although restrictions on sending money and travelling to Cuba have been eased by President Barack Obama, has its own human rights crisis with Cuba, involving US citizen Alan Gross, 61, who was to go on trial in Havana yesterday. Caught distributing satellite reception equipment to Jewish groups in Cuba to improve their access to the internet, he was arrested on charges of espionage and could face 20 years in jail if convicted. The US has protested and demanded his release.

The embargo is a big part of what ails Cuba, which was kept afloat for years by Moscow until the Soviet Union collapsed in 1989. The other problem is the lack of liquidity in Cuba, where no system of credit exists. Meet Jose, for example, who for years worked as a carpenter before – in the Cuban equivalent of winning the lottery – landed a job last year driving a tourist horse-drawn buggy in Old Havana on a monthly salary of $11 that is multiplied many times over by tips. With two of his four sons along with him, he acknowledges that he risks being fired under Raul's reforms. "We will deal with that if it comes," he says, before revealing an ambition to open a paladar – the name of the private restaurants permitted to serve tourists: "I will be the waiter and my wife will cook." But he echoes the worries many others have.

"The pillars of our country are all gone – coffee, sugar, rum – they aren't good any more," laments Fran, 66, once a farm labourer who now earns $4 a month as cabaret singer for the state aviation institute. He too is lucky as the holder of one of Fidel's original licenses to entertain tourist groups. He sings old Beatles' numbers at a creaking paladar on a river outside Havana. Fran tells me something that would be hard to credit were we not in Cuba where nothing seems too bizarre. He claims his son Ojani was married in the early 1990s to Jennifer Lopez. "I told him not to worry about the money and just leave," he says with a smile of obvious chagrin. He is pessimistic about the Raul reforms. "So, the people will be allowed to work for themselves and have their own business. Yes, fine. But how do you that without any money? We have no savings."

"It will all come from Miami," says a US businessman who has permitted business dealings in Cuba. In spite of the embargo, the US is Cuba's fifth trading partner. This is why the relaxation of the rules on money remittances to Cuba by Obama are seen by some as crucial, because those dollars may fuel the nascent free enterprise sector.

Few in Cuba, however, expect the embargo to end soon and most react sceptically to the idea that when Fidel dies, Uncle Sam will come with dollars and cruise ships and take the island for itself. "I don't think that the Americans want another mortgage," says Mr Barnet, the union leader. "We have to do this for ourselves."

More important now, with the Communist Congress around the corner, is if ordinary Cubans think it can be done. That they want to have faith is clear and they don't need rooftop parties to feel the breeze of possible change. But the gap between Raul's promises and free enterprise taking root is wide and fear still reigns over hope. "This," says a diplomat "is their last chance, because the country is in dire shape."

Five Revolutionary Decades

2002: The US Naval base at Guantanamo Bay on the island takes on new prominence as a prison for detainees in the wars in Afghanistan and against terror.

1962: Cuban missile crisis. The USSR and USA come to the brink after Moscow deploys nuclear missiles on Cuba at Castro's request. Kruschev later agrees to remove them.

1961: The US-supported Bay of Pigs invasion by Cuban exiles fails. Castro declares Cuba a communist country and allies it with Moscow. The US breaks off all relations.

1959: President Fulgencio Batista is driven from Cuba and Fidel Castro, leader of the revolution, becomes the President. Raul, his brother, is deputy and the Argentine revolutionary Che Guevara is named third in command.