A breakout year for Cuban entrepreneurs

1200x-1HAVANA, August 21 Yovanni Cantillo started Ya, Cuba’s first fast-food drive-through, last year. Every six weeks since, he travels overseas to haul back suitcases full of soda cups with lids, thick straws for milkshakes, and small plastic cups for ketchup—items Cuba’s state-owned stores don’t carry.

Julio Alvarez and Nidialys Acosta opened a garage to restore classic cars, but finding scrap metal, auto body paint, and the gas for welding is so hard that customers often bring their own parts and materials.

With no such thing as a bank loan to finance their restaurant, Rafael Muñoz and Sasha Ramos persuaded Muñoz’s mother to trade her house for an abandoned cooking oil factory, and Ramos’s mother and father-in-law to invest. The partners brought blenders, sinks, hand dryers, and light fixtures from Miami and Panama. Artisans copied furniture from Italian design magazines using rebar, fiberglass, and other discarded materials.


Acosta and her husband restore classic cars with limited resources. Photographer: Lisette Poole/Bloomberg

Cuba’s private sector may seem awkwardly DIY, but it’s the fastest-growing part of an otherwise moribund economy, fueling almost 10 percent of gross domestic product. President Raúl Castro says private business is part of Cuba’s new economic model. He has expanded private employment to 201 occupations, including barber, taxi driver, and cell phone technician.

Real estate agents are now legal, a radical concept in a nation that didn’t permit home sales for more than a half-century. In the past few years, almost 500,000 Cubans have registered as tax-paying private businesspeople, but economists figure the actual number is closer to 2 million—40 percent of the workforce—including state workers and farmers who moonlight in the private sector.

Entrepreneurs must overcome obstacles unheard of in the U.S. Supplies and materials sold only at state-owned stores and warehouses are limited. Items unavailable in Cuba must be couriered in.
There’s no wholesale market or private distribution network. When Rafael Rosales, who runs Café Madrigal, Havana’s first privately owned bar since the revolution, needed cocktail glasses, he spent a day combing state stores and didn’t find any. He’s still an optimist: “Our economy has improved a lot in the last three years. You see people fixing up their houses, dressing better.”

The government classifies these businesspeople as cuentapropistas, or self-employed, but the most successful create jobs as well. Ernesto Blanco started La Fontana, a restaurant with a grill and 12 chairs on his friend’s patio. He now employs 29 workers and grosses thousands of dollars a month, paying 10 percent to the state in taxes.

With scant programming on television, four friends started a business that enlists people with broadband Internet connections at their workplace to download sports, soap operas, and other shows onto hard drives. Those packages are copied and sold for $2 to $5 through an elaborate unofficial distribution network. It’s all unauthorized, but the government tolerates the venture, which provides income to thousands and has exposed Cuba to foreign entertainment.

There’s a tug of war in Cuba over reforms. “This is a struggle between old forces and new forces in a country that nationalized everything, even hot-dog stands,” says Carlos Alzugaray, a former ambassador to the European Union and a University of Havana professor.
“The genie’s out of the bottle now. If the government cannot create well-paid jobs, then let the private sector do it.” Yet Hugo Pons, of Cuba’s National Economics and Accounting Association, cautions that “the aim is not to build capitalism or a market economy; the idea is to preserve socialism.”

Even many Cuban entrepreneurs say they don’t want a total market economy. They credit their government with providing health care, education, and public safety at levels far above most of Latin America. “You could study economics in any part of the world and not be able to apply it here,” says Ramos, co-owner of his factory-turned-restaurant, now one of Havana’s most glamorous.

The “original vision” of Cuban socialism is gone, he says, but what remains is “a model trying to preserve itself without abandoning its original principles, at the same time conscious that if it doesn’t advance and evolve, it will die.”

The bottom line: Although 201 categories of work are now open to entrepreneurs in Cuba, the state still dominates the economy.