Private Businesses in Cuba’s State-Centered Economy

An ongoing tale of loosening up and cracking down

By Francisco Acevedo

HAVANA TIMES – This is a recurring topic these days because it seems that the Cuban government is playing cat and mouse with private business owners.

Recently, it was announced that 16 municipalities in the country will soon experimentally promote new private businesses, which appears to be an opening for local entrepreneurship. However, given past examples (as we have covered on these same pages with the events at the China Import store), not everything is as rosy as it seems.

As explained by an official on the National Television News, the goal is to eliminate resellers and instead foster businesses that genuinely produce in Cuba, rather than buying cheap products from the United States to resell them.

The scarcity of food, fuel, water, and electricity in the nation makes it impossible to eliminate reselling, but the ideal scenario would be to guarantee basic services using the existing infrastructure, modernizing it as needed.

I don’t know what needs to be experimented with because everything has already been invented in this world. And it’s been shown here that when there’s a private owner with a name and surname, things work better, even in such a depressed market where one must resort to illegal activities for almost everything.

For instance, official sources confirmed that more than 600,000 people (over 1 in 20 on the island) are struggling with water supply issues, which, according to the leaders, is due to a lack of fuel. Yet water is a strategic sector, and the state mindset refuses to hand it over to private management.

In Havana, water leaks abound in the streets, sometimes gushing out for months before the state-owned water company arrives to fix the problem. By the time the leak is fixed, millions of liters of water are wasted. This scenario is repeated across municipalities throughout the country.

There is also a shortage of spare parts for the outdated water infrastructure, such as pipes and pumps, and without fuel, the number of water trucks available to solve the problem is insufficient.

The same thing happens with the basic food rations, a “conquest” that is becoming more and more diminished. This week, it was announced that starting this Monday, the weight of the rationed daily bread rolls sold to the population through will be 60 grams instead of the usual 80.

The price will be reduced by 15 cents from its usual price of one peso, but the poor quality will likely remain the same (despite the official note claiming otherwise), and the flour shortage will continue to pressure the state bakeries.

Official data indicate that the island requires about 700 metric tons of flour daily, mostly imported, equating to around 21,000 tons monthly. But the question remains: how is it that private businesses can offer quality bread using the same infrastructure and raw materials?

There are several specialized sales points where one can buy croissants and baguettes, but what reaches the local ration store is a half-raw dough that is only digestible when freshly made.

According to the authorities, the flour and other raw materials used by the state-run Cuban Bread Chain are “not comparable with the amount of flour imported by private producers, who, in just the first half of the year, imported only a fraction of what the Food Industry requires to guarantee this service.”

The entity that has long been the leader in public complaints will continue to hold that position, even though private businesses have the solution at hand, albeit at a higher price, but at least accessible for those who can afford it. The bakeries making the bread rolls are yet another sector that the state resists handing over to private businesses, even though it is overwhelmed by the task.

However, on the other hand, it is hard to understand the easing of restrictions on importing luxury cars from Japan, South Korea, China, and the United States.

In a country where it is common to see cars from the 1950s and Soviet-era Ladas, modern Mercedes, Teslas, and 4x4s are becoming increasingly common. They have exorbitant customs taxes and tariffs, but some private companies, or individuals with questionable benefits, manage to acquire these luxurious foreign vehicles, which are much more in line with current environmental goals.

For context, in the first quarter of this year alone, more than 20 million dollars were spent on car purchases from the United States, imported by private companies. This figure was already double the total acquired in 2023, according to statistics from the US-Cuba Economic and Trade Council.

The prices of cars sold by the state remain outrageous, and while those imported by private businesses are a little cheaper, they are still unattainable for the vast majority of Cubans. Most cannot even dream of buying a car; instead, they spend hours waiting at a bus stop for state transport or pay exorbitant taxi fares to private drivers for short distances in the capital or longer journeys across the rest of Cuba.

The narrative often blames the tightening of US sanctions, but it ignores the issues of bureaucracy, mismanagement, and corruption that plague the state’s management, which has contributed to the record exodus of Cuban migrants in recent years.

With private businesses, it’s the classic tale of loosening and tightening. They are the necessary evil to keep the national economy afloat, given the incapacity of the state sector. But they can be abruptly shut down at any moment, causing both Cuban and foreign investors to lose their time and money, and the government its prestige and credibility.

Read more from Cuba here on Havana Times.