‘Here you go!’ The nascent private sector gains space in Cuba, at the expense of the state – 06/08/2023 – Market

An explosion of small stores spreads across Havana, the most visible expression of the space that the private sector has been conquering in Cuba. The so-called pymes (small and medium-sized enterprises – SMEs), whose creation has been authorized since 2021, are stealing space from state-owned commercial establishments, which are increasingly empty.

“Here you go, yes!” is the name of a small store recently opened in the western part of the Cuban capital, where new establishments appear every week – from garages with beers and sweets to stores with meat, dairy products and groceries, impossible to find elsewhere.

After six decades with only active state-owned companies, in August 2021 the island’s communist government decided to accelerate economic opening, approving the creation of SMEs. The measure was adopted amid the worst economic crisis in three decades on the island, ravaged by the pandemic and hampered by Washington’s tightening of sanctions.

“El Bodegón 21”, another of these private stores, was opened at this time in the Vedado neighborhood of central Havana, with a wide variety of products attractively displayed on wooden shelves and baskets, forming a contrast with the gray aisles of the state supermarkets, with their rows of matching cans and their empty refrigerators.

“If you need something that you can’t find (in state stores), you’ll find it in these little shops. These are things we need!”, María Leonor, 73, told AFP, leaving the bodega with a yogurt.

“Pretty high prices”

She, who is self-employed, says that she would like to be able to buy more products, but that “the prices are quite high”.

An example of this is powdered milk. Previously found only on the black market, today it can be bought in these private stores for around 2,000 pesos (US$16 at the official exchange rate), this in a country where the average salary is 4,800 pesos (US$39).

During the Covid pandemic, Omar Bouso, 27, was working in a restaurant that had to close. Unemployed, he and two colleagues opened a business in the kitchen of a house. Later they inaugurated the fast food space they currently have, which is in the process of being converted into an SME.

“We found a niche market to do something different,” he says. “Rico de Casa” (tasty from home), as the establishment is called, offers a Hawaiian dish that the customer can customize to taste with ingredients and accompaniments and which is delivered at home in a clay bowl with the house’s brand.

Entrepreneurs obtain supplies from private import companies, which did not exist until recently and which bring food and other inputs to Cuba.

These firms are the most visible face of the 7,800 existing private SMEs. According to a UN report, 22% of SMEs are in the construction sector, 19.2% correspond to gastronomy and accommodation (tourism), 12.5% ​​to industrial food production and 2.9% to commerce, among others.

In these establishments, Cubans can buy imported products in the national currency, according to their purchasing power, unlike state stores, where they pay in foreign currency.

“From night to day”

“The State used to be the country’s only and great provider. But that situation has changed”, comments Oniel Díaz, founder of the private business consultancy Auge.

The boom in these SMEs comes despite the huge devaluation of the Cuban currency in two years, which caused prices to skyrocket.

This year, inflation will exceed last year’s by 39%, according to official forecasts, although analysts estimate that it would have reached triple-digit figures after the monetary reform implemented by the government in 2021.

Economy Minister Alejandro Gil exempted the government from responsibility for high prices and pointed the finger at the private sector.

“No one is asked to work to make a loss, (…) but they cannot profit 500% in a short time” on top of what they invested, he indicated in a session of Parliament.

The minister defended state-owned companies, which continue to weigh more heavily on the economy and generate 65% of jobs, according to ECLAC (Economic Commission for Latin America and the Caribbean). “In order not to raise the prices they charge the population, they have no income and earn the minimum wage,” he complained.

For Oniel Díaz, it is a problem that needs to be solved with regulation, without forgetting that companies are designed to generate wealth and need to recoup their costs.

The transition in one of the last communist countries in the world draws international attention. Joe Biden, in 2022, pledged to support “independent Cuban entrepreneurs”. Russia and the European Union, Cuba’s main trading partner, have expressed their interest in developing the private sector.

Consultant Oniel Díaz says that Cuba changed “overnight” in this regard, but that “mental barriers” still need to be knocked down on several fronts.

Translated by Clara Allain