Are self-employed Cubans really budding entrepreneurs?

Posted on Sunday, 08.11.13

CUBAN ECONOMY



Are self-employed Cubans really budding entrepreneurs?

BY MIMI WHITEFIELD

MWHITEFIELD@MIAMIHERALD.COM



Entrepreneurship has many faces in Cuba today, from street vendors who

sell skimpy tube tops purchased at Miami discount stores to the

chauffeur of an improvised bicycle taxi to the operator of a

white-tablecloth private restaurant with the tips already included in

the bill.



But while the government initially declared that it wanted to move

500,000 Cubans off state payrolls by April 2011 and another 800,000 by

the beginning of 2012, it has fallen far short of those targets. And

there is a vast gray area in this world of so-called cuentapropistas,

where the self-employed function on the fringes of legality, key

elements that would lead to successful small businesses are missing and

broad questions remain about how the program should go forward in a

communist country.



There's also disagreement about whether Cuba's flirtation with private

business represents a path toward true entrepreneurship or has simply

resulted in reinforcement of a shadowy informal economy where

cuentapropistas bend the rules in order to survive.



At the end of May, nearly 430,000 Cubans in a workforce of 5 million

were self-employed, according to a report from the CubanMinistry of

Labor and Social Security. But not all of them are furloughed government

employees.



Some 14 percent were retired, meaning they didn't switch from current

state employment to working on their own, and analysts say a significant

number are probably former black marketeers, who are used to operating

outside the bounds of state control, or workers who have held on to

their state jobs but want to earn extra money on the side.



"So far it's been more of a legalization of the illegal economy than

creation of a small business class,'' said Ted Henken, a Baruch College

professor and president of the Association for the Study of the Cuban

Economy.



Self-employment is permitted in181 economic activities, and 18 percent

of cuentapropistas are employed by small private business owners. In

other fledgling attempts at private business, scores of non-farm

cooperatives — most of them former state companies — have been launched

and private farmers are now cultivating once-idle public land.



The budding private sector is mainly a service economy. The most popular

activities are selling and preparing food, transportation of cargo and

passengers, renting homes and selling agricultural products on the

street, according to the Ministry of Labor and Social Security.



Karina Gálvez, an economist from Pinar del Rio, agrees that the recent

changes aren't necessarily things the government wanted to do, but said

the economic situation as well as pressures from Cuba's nascent civil

society obligated the reforms.



Speaking at the recent meeting of the Association for the Study of the

Cuban Economy in Miami, Gálvez said that many of the self-employed have

to "break the law'' to make a living because taxes are so high and many

self-employment activities still aren't allowed, including freelance

work by lawyers, accountants, architects and other professionals.



Some of the new entrepreneurs have resorted to bribing inspectors to

avoid high fines for violations, said Gálvez, who is also one of the

founders of Convivencia, a digital magazine.



"In Cuba, everyone commits illegalities in their business,'' said

Antonio Rodiles, a Cuban political activist who has created a forum for

public debate through his Estado de SATS movement. One of the most

common infractions, he said, is stealing electricity because utility

bills are so high.



"At this point, self-employment is failing,'' he said. Many of the

cuentapropistas are dependent on the black market to supply them, and

instead of the emergence of a small entrepreneurial class, he said, what

is happening is the encouragement of an informal or underground economy.



But Gálvez said she believes the self-employed prefer to operate

legally. "This gives me hope,'' she said. "I believe in the force of la

pequeña (small)."



José Luis Leyva Cruz, a professor at the University of Camaguey, also

has embraced entrepreneurship with a project he calls " DLíderes,''

whose goal is to develop entrepreneurial leaders in Cuba. Lacking

another space, the organization held its first meeting in front of his

home in Camaguey.



He outlined DLíderes' goals during the ASCE meeting: Develop networks of

entrepreneurs and intellectuals, provide training in leadership and

technology, develop a digital magazine called @emprenda, and connect

international patrons with Cuban entrepreneurs.



"In Havana you see a lot of successful entrepreneurs who are creating

jobs or innovating,'' said Henken. For example, some of the more

sophisticated paladares (private restaurants) have live music, well

stocked bars and gourmet fare.



"There is a new class of high-quality gourmet restaurants mainly

surviving on their owners' ingenuity,'' he said. But Henken added, some

of the more established enterprises "may have some form of protection''

and are run by former military or government officials.



Many self-employed people are "still trapped in survival mode with very

low productivity,'' Henken said. "And a lot of corruption is caused by

unworkable, antagonistic rules the government has put in place.''



Analysts said important ingredients for these very small businesses to

be more successful would be micro-credit programs, a dependable

wholesale network to supply them, and a system for allowing investment

capital.



"The micro-entrepreneur is the beginning of the solution; it is not the

solution,'' said Jorge A. Sanguinetty, president of Devtech, an

international consulting firm specializing in development.



Self-employment became legal in Cuba in 1993 after the collapse of the

Soviet Union plunged the island into dire economic straits, but it fell

out of favor as a government policy until President Raúl Castro revived

it in 2010.



The Cuban government has made it clear that it doesn't want market

forces to get out of control and that it isn't a fan of wealth

accumulation by its citizens. During the 2011 Party Congress, Castro

said that self-employment is "an active element facilitating the

construction of socialism in Cuba.''



Meanwhile, informal trade connections also operate between the

cuentapropistas and Cuban-Americans despite the U.S. embargo, which has

been in place for more than 50 years and prohibits U.S. citizens and

companies from buying and selling in Cuba.



U.S. exports of food, farming equipment and medicine are exempt from the

embargo, but a wide array of goods also enters in the form of gifts to

family and friends.



Cuban-Americans not only bring in many of the products offered for sale

by Cuba's self-employed, but they invest in businesses and provide

tools, equipment and other inputs needed to set up small businesses from

car-washing operations to woodworking shops.



The Obama administration lifted restrictions on family visits and

remittances in 2009, opening the floodgates for Cubans-Americans to send

cash and products to the island, and then went even further in 2011 by

allowing any American to send $500 per quarter to qualified Cubans on

the island.



There are various levels to this "commerce.'' Some people operate purely

as "mules," ferrying goods to Cuba for a fee and working with a group of

customers who aren't necessarily family members. Others carry goods to

Cuba for resale by their families.



Still, other Cuban-Americans act as silent partners, generally joining

family members in various enterprises, or supply the cash for purchases

of real estate or cars.



"There is this gray area with various levels of legality,'' said Richard

Feinberg, a professor at the University of California, San Diego, and a

senior fellow at the Brookings Institution. In effect, sending

remittances and goods to Cuba's private sector is a "way to punch a hole

in the embargo,'' he said.



Despite the problems faced by Cuba's new class of small entrepreneurs,

Sanguinetty views self-employment as a positive in creating civil

society. "In any society there are entrepreneurs. The point is that a

business entrepreneur is an entrepreneur in general — including

political activities. An entrepreneur is a very dynamic person, willing

to take risks.''



Source: "Are self-employed Cubans really budding entrepreneurs? - Cuba -

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http://www.miamiherald.com/2013/08/11/v-fullstory/3554750/are-self-employed-cubans-really.html