New regulations will allow small and medium-sized businesses to gain legal status, and form part of a series of economic reforms
HAVANA TIMES – Cubans who run businesses on the island – which can range from selling dried fruit to fixing bikes and developing software -, are struggling to understand the opportunities and new challenges that lie on the horizon after a historic change to the rules that govern Cuba’s Communist economy, Mark Frank and Anett write for Reuters news agency.
At the beginning of this month, the Cuban government issued new regulations that would allow small and medium-sized enterprises to formally set themselves up as businesses, which will give them access to state funding and put an end to decades of being classified as “self-employed”.
Analysts maintain that this reform is one of the most important in Cuba since 1968, when every business, no matter how small (even shoeshiners), were nationalized by the late Fidel Castro.
Omar Everleny, one of the most renowned economists in Cuba, described the reform as very positive and something that many Cubans have long-awaited.
However, the reform has important restrictions. For example, people can’t own more than one company and they can’t enter into business with foreign partners, or directly sell abroad.
“Given the economic situation and the remaining restrictions, this won’t translate into great economic recovery in the short-term,” Everleny warned.
But according to Nayvis Diaz, founder of Velo Cuba, a bike repair and rental company with 17 employees in Havana, this reform marks significant change.
“The important thing now is that we form an integrated part of the economy and are no longer marginalized,” she said.
“Lots of people with great social and commercial responsibilities in the city, and many others in the private sector, were waiting for this,” she added.
The measure forms part of a series of economic reforms undertaken by Cuban president Miguel Diaz-Canel over the past year in Cuba, where the pandemic and stricter US sanctions forced the unstable economy to plummet and led to shortages of food, medicines and other basic essentials.
The Cuban economy shrunk by 10.9% in 2020 and a further 2% this year up until June, compared with the same period in 2020. It continues to depend on tourism and imports.
The Fernandez brothers, owners of Deshidratados Habana (the only company in Cuba that processes and sells dried fruit), were excited at the news.
“A bad economy can present opportunity,” Oscar Fernandez said, standing amid improvised ovens and other appliances in his basement. The company started up when the pandemic forced him to close down his cafe, he explained.
The horizon has opened up
Hundreds of small businesses have found niches in a State-led economy that lacks imagination and initiative: from gourmet restaurants and manufacturing 3D pieces to developing software, home delivery services, landscaping and contracting in the construction sector.
The private sector, excluding farmers, has grown since the 1990s. It also includes owners of small businesses, non-agricultural cooperatives, their employees and members, shopkeepers and taxi drivers.
The Fernandez family business sells dried fruit online and has placed their products in three private luxury food stores in Havana.
“The horizon has opened up,” Oscar said, who has a doctorate in Economics. “Once incorporated, we can form relationships with state and private supply chains and sell our products to whomever we want, from state-led stores to hotels, as well as exporting them and seeking credit from local or foreign banks,” he added.
In her bike-filled workshop, Diaz is also excited as her prospects for growth, and said that that she will be cautious, speaking to her lawyer and accountant along every step of the way.
“We have to analyze the economic situation closely because we have an even greater responsibility right now to the people who we are going to employ in our businesses,” she said.
The Fernandez brothers have drawn up plans for a small factory that would process a ton of fruit every day, including for export. They dream of having a store that sells their products.
“We have the land and suppliers lined up. We just need about 100,000 USD in credit,” Oscar said.
However, there is still one great concern, one that many Cubans are sharing on social media.
“We would like to see how real implementation of this regulation is in practice: to what extent the government really allows us to develop,” Ricardo Fernandez added.