The Resilience of Cuban Entrepreneurs: Navigating a Complex Economic Landscape

“Don’t try to understand this place. We don’t understand it either.” This refrain echoed through my conversations with Cuban entrepreneurs during my March 2024 visit to Havana. Accompanied by my colleague William Trumbull from The Citadel, we brought a group of student cadets to witness firsthand the complexities of Cuba’s economy, a culmination of our semester-long exploration of socialist and capitalist systems. Our journey revealed not just the struggles but also the remarkable resilience of Cuban entrepreneurs, who are carving out a new economic identity in a landscape marked by uncertainty.

The Emergence of Entrepreneurship in Cuba

Cuban entrepreneurs are a relatively new phenomenon, emerging from the state’s reluctant concessions to private enterprise in response to ongoing economic crises. Today, they represent one-third of Cuba’s economy, demonstrating extraordinary perseverance despite significant policy uncertainty and high transaction costs. Each entrepreneur we met faced high opportunity costs; many could earn substantially more abroad, yet they chose to remain in Cuba, driven by a desire to be part of a burgeoning entrepreneurial class.

Economic Transition or Socialist Band-Aids?

Cuba’s economy remains fundamentally centrally planned, with autocratic decision-making governing economic activity. However, the vibrant atmosphere of Havana’s paladares—privately-owned restaurants—might suggest otherwise. Dining at Restaurante Yarini in the San Isidro neighborhood, one could easily mistake the scene for Miami, until the sight of crumbling buildings reminds you of the underlying economic reality.

The modest extent of privatization in Cuba is the result of piecemeal reforms initiated by the Communist Party in response to economic crises. Despite the growth of the private sector, fundamental economic questions—what gets produced, how, and who benefits—are still largely dictated by central planning. Following the 1959 Cuban Revolution, private entrepreneurship was demonized, with all resources state-owned and tightly controlled.

The collapse of the Soviet Union in the early 1990s prompted Cuba to legalize self-employment in specific occupations and allow foreign investment. However, these reforms came with caveats, indicating the government’s readiness to retract concessions at any moment. Economist Luis Locay argues that these reforms primarily serve to prolong the regime’s survival rather than transition to a market economy.

Stories of Cuban Entrepreneurship

Business #1: A Fruitful Venture

“In Cuba, the Spanish verb resolver (to resolve) means doing what needs to be done to make ends meet, legally or through the black market,” reflects Daniel Alvarez, a professor turned entrepreneur. Despite his Ph.D., Daniel earned less than fifty dollars a month as a professor, prompting him to seek alternative avenues. Along with two fellow professors, he founded Business #1, Cuba’s first company producing and exporting fruit-based products.

Their journey began during the COVID-19 pandemic, driven by a realization of the lack of healthy, convenient food options. After 14 months of navigating regulatory hurdles, they launched their product, which gained traction online and led to a significant international order. Today, Business #1 employs over 25 people, with salaries that far exceed those of university professors.

However, Daniel faces ongoing challenges, including uncertainty about state policies and difficulties in securing financing. His innovative approach to business, including operating an unmarked delivery truck to avoid drawing attention, exemplifies the resourcefulness required to thrive in Cuba’s complex economic environment.

Business #2: Software Solutions

Luca Marino co-founded Business #2, a software development company, recognizing an opportunity to provide high-skill services to international firms at competitive rates. Initially operating as “autonomous workers,” Business #2 now employs over 200 people and generates monthly revenues exceeding $150,000—surpassing the earnings of Cuba’s largest state-owned software company.

To navigate international financial transactions amidst U.S. banking restrictions, Business #2 developed a complex structure involving multiple shell companies. This elaborate workaround highlights the high transaction costs faced by Cuban entrepreneurs. Despite their success, Luca’s company struggles with talent retention, as many skilled workers emigrate for better opportunities.

Business #3: Reviving Fashion

Maria Fernandez co-founded Business #3 to revive Cuba’s dormant fashion industry. After gaining experience in New York’s fashion scene, she returned to Havana, where she and her partners sought to produce high-quality, locally made attire. Operating under the “seamstress” designation, they navigated regulatory challenges to establish their brand.

Their innovative approach included allowing customers to witness the production process, adding value to the shopping experience. Maria’s journey underscores the creativity and determination required to succeed in a market with limited resources and institutional support.

The Need for Institutional Support

The entrepreneurs we met exemplified remarkable perseverance and adaptability. As attitudes toward private enterprise shift, there is a growing recognition of the value of entrepreneurship. However, for these ideas to flourish, supporting institutions are essential. Without property rights, market prices, and profit/loss signals, the necessary incentives and information for economic development are absent.

Cuba’s piecemeal reforms resemble planting a few trees without considering the broader ecological system required for a thriving market. Genuine economic liberalization, though unlikely in the near term, could unleash a pool of entrepreneurial talent eager for institutional support.

Conclusion

My trip to Cuba reinforced the notion that a vibrant entrepreneurial spirit exists within the country, waiting for the right conditions to thrive. As Lucía Cabrera, a fashion entrepreneur, noted, “We are opening a lane, and people will follow.” The resilience of Cuban entrepreneurs is a testament to their determination to navigate a complex economic landscape, and with the right institutional support, they could play a pivotal role in shaping Cuba’s economic future.