Tag Archives: Self

WHY THE U.S. SHOULD EMBRACE THE RISE OF CUBA’S ENTREPRENEURS

Huffington Post 01/25/2016;

Original Article here: Cuba’s Entrepreneurs

Ted A. Henken, Former President of the Association for the Study of the Cuban Economy (ASCE) and Baruch College (CUNY) Professor

Cuentapropista (a Cuban entrepreneur) is a term that up until a few years ago would not have been used to describe a large sector of Cuba’s centralized and still heavily planned economy. But despite heavy odds, I have recently witnessed the proliferation of Cuban entrepreneurship and its positive effects on the Island. As a Yuma (a Cuban term of endearment referring to visiting Americans), I’ve seen Cuba’s “non-state” sector expand considerably, giving testimony to the entrepreneurial successes that everyday Cubans are achieving, and hunger to expand upon.

Engaging directly with Cuba’s entrepreneurial sector — while we push for an end to our pernicious trade embargo — allows us to remove the U.S. as the Cuban government’s bête noir and empower more Cubans to be the masters of their own fates. Some hardliners in the U.S. would argue that engaging any sector in Cuba is helping the monopolistic and undemocratic Cuban government consolidate its power. However, the last 50 years have shown that isolation has only aided the Cuban government in strengthening its monopolies while deflecting blame for its failing economy onto the U.S. embargo. Engagement with cuentapropistas, on the other hand, gives us the chance to begin to build relationships of trust and mutual benefit with the Cuban people.

In the face of constant economic instability and state control, cuentapropistas are the defining social and economic catalyst for Cuba’s future. They are men and women who display incredible motivation and creativity in their business ventures, and are willing to take risks, often at great personal cost. As a result, the burgeoning private sector is now one of the most productive areas of an otherwise failing economy.

In a fact sheet I recently released in partnership with Engage Cuba and the Cuba Emprende Foundation, we found that while Cuba has the most educated, low-cost labor force in the world, private sector opportunities for Cuban professionals continue to be severely limited. As a result, entrepreneurial Cubans have taken their fate into their own hands and are now estimated to be one-third of Cuba’s total workforce. The rate of self-employment has surged to new heights in the last five years, rising from just under 150,000 to over half a million cuentapropistas by mid-2015.

A surprising area of self-employment growth is in telecommunications. The chronic scarcities and bottlenecks caused by the lethal combination of state socialist planning and the U.S. embargo have resulted in the incubation of a true “maker” culture. Highly trained but underemployed computer programmers and telecom agents have started launching innovative start-ups like AlaMesa and Conoce Cuba or designing “lean” software and offline mobile apps for both a Cuban and international clientele. Aiming to encourage this dynamic phenomenon, new U.S. regulations issued by the Obama Administration during 2015 now allow the contracting of Cuba’s private sector IT and other professionals.

But don’t be fooled. There are still drastic internal barriers for motivated, business-minded Cubans. The tax structure is burdensome, the private sector is legally cut off from international trade (apart from imports and exports via “suitcase commerce”), and cuentapropistas enjoy little reliable access to wholesale goods, rental space, credit, or foreign investment. Basic infrastructure is woefully outdated, and Internet access — the driver of any modern business — is still very limited and costly. Perhaps this is why despite unprecedented growth over the past five years, the cuentapropista sector contracted for the first time in the second half of 2015, falling to 496,400 by January 2016.

There are also serious structural workforce issues. For example, every year over 4,000 information technology engineers graduate across the country, but there are a limited number of state positions available to them. Therefore, many of these graduates are forced to join the historic exodus of young professionals abroad in order to find an economic return on their educations.

The possibilities for these young entrepreneurs will be virtually limitless once the island is equipped with a modern telecommunications infrastructure — something that can be made possible with the help of American investment. But in order for U.S. telecommunication services and other businesses to help bring meaningful change in Cuba, Congress needs to lift the trade embargo.

Because while American entrepreneurs and businesses await an end to the embargo, both Americans and Cubans are missing out. It is estimated that the U.S. is currently forgoing 1.6 billion in potential sales to Cuba annually due to current policy. Americans from across political parties have duly noted this fact. According to a Pew Research Center report, 72 percent of Americans, including 59 percent of Republicans, favor ending the Cuban trade embargo.

It is ironic that many embargo supporters rightly critique the Cuban government for restricting the free market inside the Island while simultaneously supporting an embargo that unfairly restricts American businesses abroad and any benefits they could bring to Cuba’s struggling entrepreneurs and its people. By allowing Americans to bring business and investment to the Island, we will grow our own economy while supporting the Cuban people, including cuentapropistas, in the process.

henkenteaching_001_jpgTed A. Henken, Ph.D., is the President Ex-Officio of the Association for Study of the Cuban Economy (ASCE) and co-author of the book “Entrepreneurial Cuba: The Changing Policy Landscape.” Henken is a member of the Policy Council of Engage Cuba, a bipartisan organization dedicated to mobilizing American businesses and non-profit groups to support the ongoing U.S.Cuba normalization process.

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Lack of Customers Affects New Cuban Micro-enterprises

Canadian Press | Dec 27, 2013

CuentaPropistaCuenta Propista, Calle Monte, 

HAVANA – The dented metal pizza trays are packed away, so too the old blender that never worked when it was needed. Gone is the sweet smell of rising dough that infused Julio Cesar Hidalgo’s Havana apartment when he and his girlfriend were in business for themselves, churning out cheesy pies for hungry costumers. Two years on the front lines of Cuba’s experiment with limited free market capitalism has left Hidalgo broke, out of work and facing a possible crushing fine. But the 33-year-old known for his wide smile and sunny disposition says the biggest loss is harder to define.

“I feel frustrated and let down,” Hidalgo said, slumped in a rocking chair one recent December afternoon, shrugging his shoulders as he described the pizzeria’s collapse. “The business didn’t turn out as I had hoped.”

The Associated Press recently checked in with nine small business owners whose fortunes it first reported on in 2011 as they set up shop amid the excitement of President Raul Castro’s surprising embrace of some free enterprise. Among them were restaurant and cafeteria owners, a seamstress and taekwondo instructor, a vendor of bootleg DVDs and a woman renting her rooms out to well-heeled tourists. Their fates tell a story of divided fortunes.

Of the six ventures that relied on revenue from cash-strapped islanders, four are now out of business, their owners in more dire financial straits than when they started. But the three enterprises that cater to well-heeled foreigners, and to the minority of well-paid Cubans who work for foreign businesses, are still going and in some cases thriving. While the sample size is small, the numbers point to a basic problem that economists who follow Cuba have noted from the start: There simply isn’t enough money to support a thriving private sector on an island where salaries average $20 a month.

“Clearly, there is a macroeconomic environment that does not favour the private sector or the expansion of demand that the private sector requires,” said Pavel Vidal, a former Cuban Central Bank economist.

Vidal has long called on Communist authorities to adopt a huge stimulus package or more aggressively seek capital from foreign investors. Now a professor at Colombia’s Javeriana University, he says one has only to look at the trends since 2011 to see the private sector economy is nearly tapped out. After a surge of enthusiasm, the number of islanders working for themselves has stalled for the past two years at about 444,000 — or 9 per cent of the workforce.

Even in developed countries where entrepreneurs have access to capital, loans and a wide pool of paying customers, startups are risky ventures. According to the U.S. Small Business Administration, about half of all new establishments in America close within five years, and two-thirds are gone within a decade. The failure rate of Cuban entrepreneurs followed by AP was 44 per cent in less than two years, and worse if one considers only those that relied primarily on Cuban customers.

“There’s not enough money circulating in the economy in the hands of everyday people,” said Ted Henken, a professor of Latin American studies at Baruch College in New York and author of an upcoming book on private enterprise in Cuba. “You’re all competing for the same customers, most of whom are poor and have very limited disposable income.”

Cuba Mar 2011 063Reparaciones, photo by Arch Ritter

Economists have criticized the Cuban government for a series of measures to crack down on what it sees as illegal activities — including banning private movie cinemas, taxing the import of hard-to-get products in travellers’ luggage, and banning the sale of imported clothing. But on Saturday, Castro came down firmly in favour of increased regulation, sternly warning entrepreneurs that “those pressuring us to move faster are moving us toward failure.”

Henken and Vidal said Cuba must find a way to raise state salaries, expand state-funded microcredits and create a functional wholesale market to service the new businesses. They also noted that for a relatively well-educated society like Cuba’s, there are remarkably few white collar jobs on the list of nearly 200 activities that have been legalized.

Still, not every entrepreneur is struggling. High-end bars and glamorous new restaurants have become common in Havana, with shiny state tour buses disgorging photo-snapping travellers to sample lobster tail and filet mignon at upward of $20 a plate. Private rooms and homes that rent to foreigners can go for $25-$100 a night, less than most tourist hotels. Cubans with the means, and the business sense, to tap into the gravy train can do very well.

Chef-owner Javier Acosta sank more than $30,000 into Parthenon, a private restaurant catering to tourists and diplomats. He struggled at first, telling the AP back in 2011 that there were nights when nobody came in and he and his four waiters just sat around. But the restaurant slowly gained a reputation, in part because Acosta makes a potent Cuban mojito and offers a special suckling pig that can feed up to five people for $50.

These days, Acosta is expanding. He recently added tables in a new room decked out with mosaic tiles and faux Greek pillars, and plans to build a roof deck. He even has started advertising, paying $300 a year to have his establishment included in a tourist magazine. “I haven’t yet managed to recover my initial investment and the other money we’ve put into the place,” the 40-year-old said. “But in two or three more years maybe I can.”

Even more humble operations can do well, as long as they have some access to foreign money. One woman who rents an apartment to foreigners for $25 a night in the upscale Vedado neighbourhood says her business provides a stable income that supports her and allows her to help her son and granddaughter.

Two women who sell $1.25 box lunches to Cubans and foreigners in a building in Old Havana with many international firms and consular offices have managed to stay afloat despite a sharp drop in customers following the departure of several companies, and what they say has been a steady rise in prices of key ingredients like black beans, rice, cooking oil and pork. “This has become difficult,” said Odalis Lozano, 48. “But we’re still here, because we can always make some money.”

For those without access to that foreign cash line, the results have been grim. Besides, the failed pizzeria, a DVD salesman, seamstress and street-side cafe owner who allowed the AP to tell their stories shut down after less than a year in business, citing high monthly taxes, a lack of customers and limited resources and business sense.

The only two operations that rely on everyday Cubans for revenue which remain in business are gymnasiums. One is run by Maria Regla Zaldivar, who in 2011 was giving taekwondo classes to children in Nuevo Vedado and dreamed of converting a ruined dry cleaning factory into a proper gymnasium. The factory remains a crumbling shell, but Zaldivar said her business continues. She declined to grant a formal interview, but said in a brief phone call that she had rented a small space near her apartment and continued to give classes.

The other success story belongs to Neysi Hernandez, the mother of Julio Cesar Hidalgo’s girlfriend. Hernandez opened a simple gymnasium for women in the courtyard and garage of her home in Havana’s La Lisa neighbourhood, charging the equivalent of $5 a month for membership. Two years later, she has 25 paying clients and ekes out a small profit.

Hernandez says her customers are loyal, despite the fact the gymnasium lacks basic amenities like a shower room, lockers and towels. Unable to afford imported equipment, Hernandez uses sand-filled plastic water bottles for weights. Her three exercise bicycles and mechanical treadmill are creaky and aging. “My gymnasium is modest, but they like it,” Hernandez said, adding she has dreams of one day installing a small massage room and sauna. “A little bit at a time.”

For the pizza man Hidalgo, however, the experience with private enterprise has been a bitter one. He says he lost between $800 and $1,000 on the pizzeria. He is appealing a $520 fine levied by tax authorities who accuse him of understating his profits, even though the business failed. He has had bouts with illness, and has been unemployed since the pizzeria closed in April. Hidalgo says he has not given up on the idea of opening a new business one day. But he is also setting his sights beyond Cuba’s shores.

“What I wanted was to work and make money so that I could live a normal life, have money to buy myself shoes, eat, and go out with my girlfriend,” Hidalgo said, punctuating each modest desire with a flip of his hand and a rueful smile. “I hope that kind of work materializes in my country, but if the opportunity presents itself to work somewhere else, I won’t turn it down.”

Recently, Hidalgo’s girlfriend, Gisselle de la Noval, 25, took out a license to operate a nail salon in the space once occupied by the pizzeria. The salon has been open a matter of weeks and it is too soon to know if it will do well. But she says she is content, charging about 40 cents for a manicure and slightly more for a pedicure. “I don’t miss the pizzeria, but I am sad it wasn’t a success,” she says with a shrug. “But I am young, so whatever. Now I’m dedicated to this.”

Cuba-taxiingBicytaxis, photo by Arch Ritter

 

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