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Hundreds of state-run beauty salons in Cuba, as well as barber shops, are getting a free-market makeover. The government is handing over management of these salons to employees who've been drawing paychecks from the state for decades. But as Nick Miroff reports from Havana, Cuba's hairstylists are not entirely happy with their cut of the profits.

NICK MIROFF: The Salon Soroa on O'Reilly Street is everything you'd imagine in an Old Havana barber shop.

(Soundbite of music)

MIROFF: There's a live band playing in a rundown cafe on the corner, and inside the barber shop are vintage, iron-and-leather chairs with ornate footrests that read Emil J. Paidar Company, Chicago. Three middle-aged men in white coats work quietly, snipping and trimming, as rickety ceiling fans whirl above.

(Soundbite of scissors clipping)

MIROFF: Rene Navarro has been cutting hair here for 15 years as an employee of the Cuban government. But as of April 1st, he's been working for himself.

Mr. RENE NAVARRO (Barber, Salon Soroa): (Spanish spoken)

MIROFF: This is new to us, and we're still getting used to the change, Navarro said. We don't know how it's going to work out.

Many here are watching this experiment closely. It's the first time Cuba's Communist government has given up control over some of the small businesses that were nationalized in 1968.

Some barbers say they're thrilled with the change. But Navarro is less enthusiastic. One reason is that he now has to pay nearly $40 a month in taxes and fees. At Cuban prices, that's about 50 haircuts.

Mr. NAVARRO: (Spanish spoken)

MIROFF: In the past, Navarro said, you worked, reported your hours, earned a salary and took vacations. Now you don't have any of that, he said. You just work and work.

(Soundbite of hair dryer)

MIROFF: If it sounds like Cuba is moving toward capitalism, keep in mind that the government still controls about 90 percent of the island's economy. And it will continue to own the barber shops and beauty parlors, even if it allows the workers to run them. That drains some of the incentive to fix them up, so their retro, pre-revolution look is probably safe for now.

Ms. YUSEMI BETANCOURT (Beautician): (Spanish spoken)

MIROFF: Havana beautician Yusemi Betancourt is another newly minted but uneasy Cuban entrepreneur. She says she and her co-workers don't have any money saved to fix up their shop or invest in new equipment. The taxes are high, so she's raised prices. But that's driving customers away, she says.

(Soundbite of music)

MIROFF: This recent government rally in Havana was held to mark the 49th anniversary of the day when Fidel Castro first publicly declared the socialist nature of the Cuban Revolution.

Prime Minister FIDEL CASTRO (Cuba): (Spanish spoken)

(Soundbite of cheering)

MIROFF: Castro made this speech during the Bay of Pigs invasion, rallying thousands of rifle-toting militiamen to defend the island. These days, with Raul Castro in charge and the economy struggling, Cuba's talking about redefining socialism.

Ricardo Torres is a graduate student in economics.

Mr. RICARDO TORRES (Graduate Student): For me, and I think for many people in Cuba, socialism is opportunities - the ability of a society to provide opportunity for all of its citizens. Socialism is also social justice. So we need to change. It's not easy because there's not,like, model to follow. We have to build our own model.

MIROFF: Raul Castro didn't speak at this rally, but he recently said that the country may have a million excess workers on government payrolls. Getting the state out of the small-scale service sector appears to be part of the solution, and places like appliance and watch-repair shops are rumored to be next. It's not clear how far the reforms will go, but they're not likely to happen very quickly.

For NPR News, I'm Nick Miroff in Havana.

(Soundbite of music)

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