Cuba's Entrepreneurs Flourish Against the Odds

Monday, 21 January, 2013

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Carlos Rodríguez

More and more Cubans are running their own small businesses, generating incomes and helping support the economy. But in a system heavily weighted against them, they struggle to gain a competitive edge.

The self-employed entrepreneurs known as “cuentapropistas” took off in the early 1990s, and they have come to fill various economic niches, running shops, selling goods in the street and driving taxis.

They still operate on the margins of a predominately state-controlled economy, in which the government tries to manage supply and demand by fixing prices and rationing certain basic items.

Under President Raúl Castro, the role of the cuentapropistas has been accorded greater official recognition, forming part of a new economic strategy set out at the last Communist Party congress, held in April 2011.

Since then, the cuentapropista numbers have been on the rise. By November last year, there were close to 400,000 people running their own small businesses, a ten per cent increase on the end of 2011.

Cuentapropistas can earn considerably more than they would on a fixed wage in the public sector. There is plenty of demand, too, as they can offer products and services that the state sector cannot, and also offer an alternative source for those goods that are sold in state shops but often run out.

As shoppers like María González find, the prices charged by private traders can be much higher than in the state shops.

Half a kilogramme of black beans that would cost eight pesos in a state store would cost 12 pesos from a cuentapropista, a difference of about 20 US cents. Pork, a popular meat in Cuba, costs a third more from a private seller than from a state shop.

González says prices are high because private traders ultimately source their goods from state suppliers, and then charge a mark-up.

The lack of leeway to set competitive prices reflects the wider difficulties facing any setting up on their own in a state-run economy.

Lawyer Laritza Diversent lists some of the obstacles facing cuentapropistas – they cannot join together to form partnerships, nor can they seek investment from outside Cuba. And their transactions and savings are complicated by the existence of two currencies, one the normal Cuban peso whose value is fixed by the state, and a second, convertible peso which is pegged to the US dollar.

In addition, the private sector is tightly regulated, and the numerous bureaucratic regulations with which cuentapropistas must comply offer scope for officials to demand bribes.

“Cuentapropistas complain mainly about the excessive powers of the bodies in charge of regulating their activities,” Diversent said.

The self-employed have few rights and are always at risk of being accused of speculative dealing or accumulating capital. Both are crimes in Cuban law, and liable to lead to confiscation of property and earnings.

According to independent economist Espinosa Chepe, Cuba’s leaders are still wary of the idea of their citizens building up capital, and hence they impose taxes “designed to curb economic growth”.

Despite the obstacles facing them, at least some cuentapropistas are content with the deal they get.

Street trader Luis Fernández earns around 130 pesos per day, which works out at over 40,000 a year.

At around 2,000 dollars, that is far more than the average Cuban earns, around 5,400 pesos or 215 dollars a year.

Fernández pays the state about 2,300 pesos a year, all in, for his trading license and social security contributions. He said the license to trade from a hand cart was “easy to get”, and costs him 40 or 50 pesos a year plus another 40 for other paperwork.

Since wages are so low, Chepe points out that private shops and services are out of reach for large numbers of people.

Carlos Rodríguez is the pseudonym of an independent journalist based in Havana.