“Here there is!”, the nascent private sector gains space from the state sector in Cuba

An explosion of small shops stretches across Havana, the most visible expression of the space gained by private companies in Cuba. The so-called SMEs, authorized only in 2021, displace state businesses, which are increasingly empty.

“Here there is!”, is the name of a small store recently opened in the west of the Cuban capital, where new businesses appear every week. From garages with beers and sweets, to establishments with meat, dairy and grocery products, impossible to find elsewhere.

After six decades of having only state-owned companies active, in August 2021 the island’s communist government decided to accelerate the economic opening by approving small and medium-sized enterprises (SMEs). The change was authorized in the midst of the worst economic crisis in three decades on the island, hit by the pandemic and the tightening of Washington’s sanctions.

“The Still Life 21″another of these private stores then opened its doors in the central Vedado neighborhood with a variety of products attractively presented in wooden shelves and baskets, contrasting with the greyish corridors of the state markets that display rows of identical cans and empty refrigerators.

“If you need something that you can’t buy (in state stores), well, they have it. They are things that one needs!”tells AFP María Leonor, 73, as she leaves the tavern with yogurt.

“Quite high prices”

This freelancer says she would like to buy more products, but “the prices are quite high”.

An example is powdered milk. Before it was only found on the black market, now it is available in these private businesses for about 2,000 pesos (16 dollars at the official exchange rate), in a country where the average salary is 4,800 pesos (39 dollars).

During the covid-19 pandemic, Omar Bouso, 27, worked at a restaurant that had to close. Unemployed, he and two colleagues opened a business in the kitchen of a house, before inaugurating the fast food place they currently have and which is in the process of becoming an SME.

“We found a market niche to do something different”assures. “Rich from Home” offers a Hawaiian dish that customers can customize to their liking with ingredients and seasonings, and that is delivered to their homes in a house-brand clay bowl.

Entrepreneurs get their supplies from private importing companies, which did not exist until recently and which not only bring food to the country but also other inputs.

These businesses are the most visible face of the 7,800 existing private SMEs. According to a UN report the 22.4% corresponds to the construction 19.2% to gastronomy and accommodation (tourism), 12.2% to industrial food production and 2.9% to trade, among others.

In these businesses, Cubans can buy imported products in national currency according to their purchasing power, unlike state stores where they pay in foreign currency.

“From night to day”

“The State was the only and great provider of this country. That situation has changed.”says Oniel Díaz, founder of the private business consultancy Auge.

The flourishing of these SMEs occurs despite the dramatic devaluation that the Cuban currency has suffered in two years, skyrocketing prices.

This 2023, inflation will exceed the 39% last year, according to official forecasts, although analysts estimate that it would have reached triple digits after the government applied a monetary reform in 2021.

The Minister of Economy, Alejandro Gil, made the government less responsible for the high prices and lashed out at the private sector.

“No one is going to be asked to work at a loss, (…) but they cannot have profits (of) five times quickly” about his investment, he indicated in a session of Parliament.

He defended the state companies, which continue to carry the greatest weight in the economy and generate the 65% employment, according to ECLAC. “They are unable to earn income and work with minimum wage in the interest of not increasing prices for the population.”Gil complained.

For Oniel Díaz, it is a problem that must be addressed with “regulation”, without forgetting that companies are designed to “generate wealth” and they need to recover their costs.

This transition in one of the last communist countries in the world draws attention from abroad: Joe Biden promised from 2022 to support “independent Cuban entrepreneurs”while Russia and the European Union (EU), Cuba’s main trading partner, expressed their interest in the development of the private sector.

Cuba has “gone from night to day” in this matter, but still has to tear down “mental barriers” on several fronts, warns the consultant Oniel Díaz.

Source: AFP