The new realities of running a business in Cuba

The new realities of running a business in Cuba

In an attempt to jumpstart Cuba's economy and shed unprofitable state

enterprises, the government is converting select businesses into

cooperatives. It's an adjustment for many Cuban workers.

By Jonathan Wolfe, Contributor JULY 2, 2014



HAVANA, CUBA — The stakes were high when Café Nautico lost electricity

during its grand reopening here last month. Losing power is commonplace

in Cuba, but this occasion was different: It was the first time

restaurant employees would be paid based on the day's earnings. The chef

scrambled to keep the kitchen running by candlelight while the waitstaff

assured the handful of customers that the lights would be back shortly.



Café Nautico used to be a state-run restaurant, which meant reliable –

albeit low – wages for the staff of 12 whether or not anyone came to

dine. But the Cuban government recently transferred management of the

location to its employees, now called "associates," to be run as a

cooperative.



"We are making a lot of changes and we will try anything that can be

useful," says Jorge Cercera Montes, the president of the cooperative who

got his start as a cook. He's opening the restaurant for business

earlier in the day, hosting parties and weddings, and renting out the

back room for private events. "Our objective is to grow so that this

place can provide more income for us as cooperative members."



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The Cuban government is strapped for cash as it works to keep its

economic vision alive, more than five decades after the US implemented

its economically isolating trade embargo. In an attempt to jumpstart the

economy and shed unprofitable state enterprises, the government is now

converting select businesses into cooperatives and allowing others to

pop up in the Cuban market.





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The move is part of a broader attempt by President Raúl Castro to update

Cuba's economic model, while maintaining its socialist principles. But

the nearly 250 cooperatives operating here exist without constitutional

protection, and will only be legally incorporated into the economy if

the experiment is deemed a success. This leaves many Cuban entrepreneurs

excited, yet skeptical of the viability of projects like Café Nautico in

the volatile Cuban marketplace.



"The Cuban government is afraid of losing subsidies from Venezuela and

they are … turning to cooperatives to help fill the gap the state can't

provide," says Christopher Sabatini, the senior director of policy at

the Americas Society and Council of the Americas.



"Decentralizing the economy will allow the government to earn money from

taxes [from cooperatives], inject productivity into the lumbering,

inefficient government, and sop up some of the thousands of employees

that were recently let go by the state," Mr. Sabatini says.



'A little imposing'

In contrast to businesses run by the government, cooperatives allow

their members to take home a portion of the business' earnings, and give

their workers democratic control over operations and management,

including electing their own president. The state is also giving them a

leg up on their private competitors by offering them perks like a 20

percent discount on products bought from the state in the case of Café

Nautico, and subsidizing their utility bills.



"The old system was a little imposing," says Tania Lourdes Ortiz

Fernández, an esthetician at the Bellall Health and Beauty Institute in

the Vedado neighborhood. She says she's "more happy with this system

than the one we had before."



For example, she makes more money – about $42 a month compared to $15

when her "boss" was the Cuban government. Ms. Ortiz says that although

she lost clients when the beauty center became a cooperative (the

associates voted to raise their prices), she now has access to better

products and has more time to dedicate to services.



Although many cooperative members say they receive higher wages, there

are complaints.



"The largest obstacle right now is the bureaucratic process of approving

new cooperatives," says Eric Leenson, president of Sol Economics, a

company that promotes socially responsible development in Cuba.



Additionally, cooperative employees complain they don't have access to

wholesale markets, and that importing materials or products from outside

the country is almost impossible.



Even convincing the Cuban workforce that they could benefit from working

in a cooperative has been a challenge, says Adriana Cervantes, the

president of the Bellall Health and Beauty Institute. She lost more than

a quarter of her workers when the business converted to a cooperative

eight months ago, and has had trouble convincing others to invest the

one-time payment of 500 Cuban pesos ($22) required to join.



"Right now I need a manicurist … we have so much demand," says Ms.

Cervantes. "For months I have tried to hire more associates but people

tell me that they don't understand why they have to invest in order to

become a member of the cooperative," she says as dozens of clients pass

her on their way to an aerobics class at the institute.



Mr. Leenson believes that, despite these initial problems, the

cooperative project in Cuba is here to stay.



"This change in Cuba is broad enough and strong enough that there is no

going back."



Source: The new realities of running a business in Cuba - CSMonitor.com

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http://www.csmonitor.com/World/Americas/2014/0702/The-new-realities-of-running-a-business-in-Cuba