Cuban Economy Minister Alejandro Gil said in a televised presentation that the new rules would put private businesses on an equal footing with state-run ones. They will have access to the state wholesale system, be allowed to import and export, and set prices, but they will still be heavily regulated.
Increased Sales
As a result, sales of Micro Cuban merchandise are rapidly increasing. The company’s products are currently available in over 30 countries, and its online store has seen a tenfold increase in orders since the start of the year.
In the long run, Micro Cuban plans to partner with Social Investors who want to make a positive social impact while still considering risk, return, and impact. The company will continue expanding its e-commerce business and explore opening an office in Havana.
Cuba has made progress in boosting the economy through several reforms, including currency reform and opening the market to private imports. But, those efforts must address the fundamental causes of abysmal worker productivity, which drive emigration. Private enterprise needs access to the private wholesale markets for raw material inputs, import and export materials and final products, set prices, and lower taxes.
Increased Customer Satisfaction
Despite the limitations, enterprising Cubans have managed to start their micro-enterprises. In recent years, the share of workers licensed for private activities has risen to 13%, though these businesses have limited potential.
One example is the one who set up a simple gymnasium in her courtyard and garage in a neighborhood two years ago. She charges $5 a month for membership and makes a small profit.
Another is the pharmaceutical distribution business that bypasses the market’s intermediaries – including price negotiators like CVS Caremark – to buy pills directly from producers and sell them to their clients at a fixed markup. The business has grown to 50 paying customers in Havana and beyond.
However, economists have noted that the overall macroeconomic environment does not favor the growth of private businesses. “There are a lot of obstacles that the economy needs to overcome,” said Pavel Vidal, a former Cuban central bank economist who now teaches at Colombia’s Pontificia Universidad Javeriana.
Increased Brand Recognition
As the owner of the Dallas Mavericks and a prolific investor in various businesses, Cuban has made a name for himself as an entrepreneur. He’s also an advocate for minority and women-owned businesses, a champion of AI education, and is heavily invested in the blockchain sector.
Nevertheless, Cuba’s government has restricted private workers’ activities and has maintained inefficient state monopolies in critical areas like food distribution. Many private business owners must buy scarce supplies on the black market or pay networks of “mules” to bring them in checked airline luggage.
However, reforms have increased the potential for private business growth. Last month, the Communist Party Congress approved a new category for small, medium, and micro businesses that will allow them to import, export, and set prices—although they’ll still be subject to strict regulations. This new category could help boost the economy, especially if the United States lifts its travel ban. It aims to cooperate with Social Investors who want to actively create positive social or environmental impacts while still considering risk, return, and result in their investment decisions.
Increased Customer Loyalty
In a country in crisis due to COVID-19, a hardening of US policy, and a severe slump in tourism (a mainstay for the island), there is growing concern about the lack of private sector jobs and increasing frustration among the population at long lines to buy gasoline or basic supplies. The economy also suffers from currency distortion, shortages of goods and services, blackouts, and record emigration.
In 2021, the Cuban government began to allow the creation of micro- and small-sized businesses called cuentapropistas (small entrepreneurs). They can access the state wholesale system, import and export, and set prices, but they remain heavily regulated by the state. They are also limited in the number of employees and may only be partners in one company.
Arturo Williams ’16, an Emerson Fellow working with Visiting Assistant Professor of Government Omobolaji Olarinmoye, has been analyzing the potential impact of microfinance for these Cuban entrepreneurs. He spent six weeks interviewing local entrepreneurs to understand their goals, needs, and challenges.