A closer look at some entrepreneurs taking
advantage of recent reforms in Cuba.
Jordan Rodriguez recently took advantage of new reforms to establish his
own consulting firm in Havana, Ambar Servicios Profesionales Cooperativa. It
took nearly two years to establish Ambar, one of more than 300 non-agricultural
professional services entities that have been authorized to form independent
cooperatives. The firm is now working with Cuban and overseas corporations,
especially on trade deals for food imports from Miami and to establish foreign
companies in the special economic zone connected to the port of Mariel. It’s a
start, he says, that will inevitably lead to a demand among international
investors for assets on the ground.
Jordan is among those Cuban entrepreneurs fortunate
enough to have lived abroad. He spent a year in Port of Spain, Trinidad, in
2004, working with EY, before returning to Cuba to rejoin the ranks of
government employed attorneys, biding his time for the right moment to invest
in his own firm.
Jordan isn’t alone. Many entrepreneurs with international
experience are returning to Cuba to set up shop, encouraged by the most recent
rounds of economic reforms.
Luis Gell spent eight years studying photography and working in
Europe. He specialized in still life and architectural photography and worked
with some of Italy’s top architects. Upon returning to Cuba, he established
Studio 50, a full service independent production studio cooperative offering
professional photography, videography and design services. He works with Cuba’s
three state-owned music labels, BIS Music, EGREM and Producciones Colibri, as
well as with private clients from Cuba and abroad.
“Cuba is not yet competitive in this field if you compare
an audiovisual production company like ours with similar peers in the U.S.,
Europe or even Latin America,”Gell says. “But we are aiming to bring a more
cutting-edge sensibility to the local market, and we’re confident that with
time, we’ll be able to credibly state that we’re world class in this field.”
Studio 50 publishes a monthly online magazine, Vistar, featuring the latest in Cuba’s contemporary art and
music scene. The magazine is published using characteristic Cuban inventiveness
to overcome the logistical constraints that would otherwise make such a venture
impossible. Gell contracts with a hosting service in the Dominican Republic and
features the design work it performs on behalf of its clients rather than
selling advertising, which would not currently be a permitted business model,
Gell notes. The first print edition of Vistar is expected to launch in the
Former minister of culture Abel Prieto, who now serves as an advisor to President Raul Castro, has become a champion for
greater access to technology in Cuba, particularly to build capacity in information
technology and as a tool to promote culture and the arts. If
Prieto’s record is anything to go by, Vistar might soon host the website for
its electronic magazine on home turf.
Perhaps no entrepreneur better reflects the changes
underway in Cuba and the newfound confidence they instill than Richard Egues. A longtime resident of
Paris, Egues has launched a restaurant and cabaret in a penthouse overlooking
the U.S. interest section and Havana’s famed seafront promenade. Egues took
advantage of a reform to the seat limit in privately run restaurants —
previously set at 12 and now increased to 50 — and invested some $150,000 to
transform an apartment into a sleek restaurant, bar and cabaret, complete with
terrace and swimming pool, where live musicians perform seven nights a week.
The restaurant is packed to capacity virtually every night, and the families of
both Fidel and Raul Castro have been frequent guests.
Egues says he felt it was the right time to return to his
native Cuba given the relaxation of controls on private enterprise. The
business is not without its challenges, especially where procurement is
concerned, but the 32-year-old entrepreneur is moving full speed ahead, with plans
in the works to rent another unit in the same building to launch a cigar bar.
HERE COMES THE TAX MAN
Beneath the fervor surrounding greater economic freedoms
that allow Cuban entrepreneurs to participate in the island’s nascent private
sector, is a much less popular responsibility: taxes. While the per capita
income in U.S. dollar terms has for decades been insufficient to cover basic
needs unmet by the rations of foodstuffs allocated to each household at
subsidized prices, the vast majority of Cubans living on the island have never
known taxes. The country’s tax structure is now in the process of being
overhauled, and the creation of a regime that encourages compliance may be the
biggest challenge for Raul Castro in the years ahead as more and more Cubans
opt to work for themselves rather than rely on the state.
An important first step in overhauling the fiscal regime,
according to Ambar Asesores attorney Jorge Jordan, will be to redirect the
social safety net toward those who rely on it most. “In the U.S., the social
security system is designed to help those who are most in need,” he notes. “In
Cuba, it’s like the entire country is on food stamps; whether you earn US$30 a
month or US$1,000 a month, you’re entitled to the same rations. Under a system
where salaries vary widely, it’s unviable and constitutes a misappropriation of
resources that will need to be addressed.”
According to Ted
Henken, a professor at Baruch College in New York and author of Entrepreneurial Cuba: The Changing Policy
Landscape, the idea of egalitarianism “is dead in Cuba; even the government
has said egalitarianism is wrong and [that it] shouldn’t pursue that.” The
government is committed to ensuring equality of opportunity and rights, but it
has taken the position that egalitarianism creates lazy freeloaders, which
would have negative consequences for efficiency and productivity throughout the
economy, Henken adds. “The reforms are in that vein, to grant freedoms and
allow a disciplined workforce to be rewarded.”
As Cuba warily opens its doors to greater engagement with
the U.S., any erosion of the social guarantees Cubans have long considered their
birthright will face resistance from those who rely most on the state for their
day-to-day sustenance. Cuban policymakers will need to summon all the
inventiveness their people are known for to strike the right balance between
provider and facilitator as the state cedes space for private enterprise to
This is an
excerpt of a longer report on Cuba from Knowledge@Wharton.
Republished with permission
from http://www.knowledge.wharton.upenn.edu -- the online research and
business analysis journal of the Wharton School of
the University of Pennsylvania.