Richard Feinberg | Brookings
A dynamic, independent private sector is rapidly emerging in Cuba and it is quickly absorbing workers laid off from the government and enlarging a growing middle class.
Cubans are now opening bed and breakfasts, paladares, small retail shops and offering services in newly licensed construction and tourism related endeavors.
However, challenges in access to working capital and high taxes often prevent some of these entrepreneurial ventures from growing into larger businesses.
Richard Feinberg wrote a thorough, 62 page report titled “Soft Landing for Cuba? Emerging Entrepreneurs and Middle Classes” where he provides a look into:
The history of emerging private enterprise in Cuba
Case studies of the challenges entrepreneurs face in launching and expanding their operations
Recommendations on what the Cuban – and U.S. – governments can do to cultivate a more inclusive economy thus bringing prosperity to the wider population.
Table of Contents
Historical Background: The Repression and Rebirth of Private Enterprise
A Panoramic View of the Emerging Private Sectors
Entrepreneurship in Cuba Today
Lessons from the Case Studies and Conversations
Stages of Capital Accumulation
The Post-Revolutionary Middle Classes
Policy Conclusions and Recommendations
Annex: Authorized business activities (as of September 26, 2013)
Within the Cuban state socialist system, a dynamic independent private sector as many as 2 million strong, and middle classes possibly majoritarian in scope, are rapidly emerging to define the new Cuba. The old narrative - that Fidel and Raúl Castro had to pass from the scene - before real change could occur - has been discredited by these current trends.
The growing private sector is sopping up unemployment and providing the Cuban public and international tourists with a widening range of more attractive goods and services.
A common imagery fixes Cuba as a poor society whose middle classes departed in the wake of the revolution; yet in Cuba today the middle class has been replenished, such that as in much of Latin America, Cuba has become a society of emerging middle classes (albeit with depressed levels of private consumption).
These tectonic shifts are unlikely to reverse as the Cuban socialist system becomes more heterogeneous and pluralistic.
But it remains to be seen whether the powerful Cuban state is prepared to allow private business and the overlapping middle classes to extend their wings and grow into medium, and eventually large-size firms, and whether state entities will seek to partner with successful private entrepreneurs, a newly experimental cooperative sector, and take advantage of foreign (including diaspora) capital.
Only then might today’s modest economic gains accelerate into a genuine boom.
Since the collapse of the Soviet Union, Cuban socialism has indisputably failed to generate the savings and investment required to place Cuba on a sustainable path to prosperity. The decay of the urban landscape is on display in Havana. Factories and farms, suffering from prolonged de-capitalization, are unable to supply the domestic market with sufficient goods and services to meet consumer demands and aspirations and (with some exceptions) are too inefficient to compete in international markets.
Most painfully, the best educated youth are exiting the island in alarmingly high proportions.
In response to economic stagnation, the government has embarked on an effort to reform the state-owned enterprises (SOEs), but prior efforts in Cuba and frustrating experiences in Eastern Europe and elsewhere suggest the difficulty of the task. Rather, it is the emerging private sector that offers the best hope for a more dynamic and efficient Cuban economy, especially if it is permitted to partner with foreign investment and with the more efficient SOEs.