Cuba’s economic reforms allow small businessmen to dream big

Cuban entrepreneurs Henry and Yendri García have long been selling homemade ice cream in their small town of Bauta, on the outskirts of HavanaBut now they’re dreaming big

In August, Cuba lifted a ban on private companies in force since 1968, a measure that has entrepreneurs such as “ice cream makers” fighting for opportunities within an antiquated state-dominated economy that contracted 13% in the last two years during the coronavirus pandemic.

Thanks to the reform, the Garcia brothers, known as “ice cream boys,” say they hope to move their small, makeshift home operation with discarded equipment to a larger facility and increase their workforce from 12 people to perhaps 30. employees, or more.

The government has already registered its operation with private companies and there are around 900 small and medium-sized companies that have been established since September, according to the Ministry of Economy.

“We have been recognized as a company and there will be opportunities that were previously unseen. We can already directly sell ice cream in the Mariel Development Zone, to hotels ”, declared Henry, one of the brothers.

In one of the greatest economic transformations since Fidel Castro with the 1959 revolution, Cuba is betting on the creation of hundreds, even thousands, of small businesses to help the economy recovering from the devastating impact of the pandemic, skyrocketing inflation and the US sanctions that added to the Cold War-era embargo.

The new rules, Henry said, mean that you can now trade foreign currency, get credit and sell ice cream to hotels, state-owned stores and even online.

“My lifelong dream is to have an ice cream factory and an industrial-size company,” said Henry.

There are still many obstacles to overcome, according to economists consulted by Reuters. The regulations require companies that go through the State as an intermediary to engage in foreign trade, it also prohibits entrepreneurs from owning more than one company and there is a limit of only 100 individual employees.

“There are real deficiencies that I hope they will quickly overcome,” said Cuban economist Ricardo Torres, visiting professor at the American University in Washington.

But this is very positive. It marks a new era. You can start talking about a mixed economy, “he added.

Dozens of new companies

Since the Minister of Economy announced the measures as part of President Miguel Díaz-Canel’s economic reforms in August, dozens of companies have joined, allowing them to participate in the state-owned wholesale system, ally with state-owned firms and seek loans and investors.

The businesses range from construction to food processing, bakeries and industrial repair of hydraulic works, online home delivery and software production.

According to the government, around 40% are new initiatives while the rest were already in operation, but in legal limbo and with much more limited rights as self-employed “self-employed”.

The government has said it expects to approve thousands more small and medium-sized private companies in the coming months, such as restaurants, bars and hostels.

Dforja is another small company that benefits from the reforms. The six-person Havana company shifted its focus from construction to restoring iron and wood furniture for patios and interiors, hoping to tap into the export market.

“The reforms have allowed us to mature and regularize the entry of materials and the sale of our product in coordination with state companies,” said owner Luis Betancourt outside his rustic workshop.

“Now we have to work hard and grow from a small to medium-sized business,” he considered.

State support

The enthusiasm and courage of Betancourt after the economic crisis that has caused a fall in imports of 40% and an increase in inflation, is shared by seven Cuban entrepreneurs consulted by Reuters, who maintain that for the first time they are experiencing state support.

However, many pitfalls remain for Cuba’s fledgling private sector.

The pandemic, combined with the US sanctions that limit Cuban access to goods and financing, has profoundly affected the “convertible” currency flows necessary to import from abroad, where the local peso has no value, said Óscar Fernández from “Habana Dehydratados” , a company that processes nuts.

“In our case, working with a state company created to help small companies and a foreign financial company, we were able to buy machinery in Europe for a new small factory. But I’m afraid we are an exception, “he said without further details.