Resilience: Challenges and opportunities for Cuban entrepreneurs

Covid-19 has caused significant contractions for the self-employed economy in Cuba. According to Alejandro Gil, Minister of Economy, “Around 250,000 Cubans requested the temporary suspension of their license.”

The decline in tourism, restrictions on mobility, paralysis of some activities in order to avoid contagion, and regulations that limited services ended up imposing new rules on Cuban entrepreneurs. Although the self-employed have learned to survive under many difficult situations — they’ve been resourceful, no doubt — previous experiences do not compete with the situation created by the pandemic. There is no comparison.

The dilemma for many ventures has been to reinvent themselves. Although reality limits the scope of this possibility, and considering any favorable alternatives, there are many who have had to shut down for lack of resources. (Rents, wages, taxes, electricity, and so on, were expected in many of the ventures during months of closure — which meant extraordinary budgetary pressures on them.)

The scenario for innovation, even though for many creativity has no limits, has been marked by certain constraints and possibilities. In the current context it is evident that a large part of the world’s population, even in developed nations, has had to use their reserves, and Cubans have not been the exception. This has been only one of the consequences of the decrease in income in this third sector, and mainly in activities related to recreation and tourism. This inevitably implies that a post-covid-19 scenario can be expected to contain a decrease in consumption levels, as compared to pre-pandemic standards.

The paralysis of many activities of the state and private sectors have caused their workers to begin to receive wages that are not in line with their daily expenses (even with the salary reform of January 2021). Add to that the rise in prices and the monetary devaluation (1 USD = 22 CUP in 2019 vs 1 USD = 50 CUP in 2021, real value), dissolving savings and salary increases, especially when one considers that many markets today (the better supplied stores) operate in MLC (freely convertible currency).

So for businesses to obtain supplies they must have MLC — essential especially in stores and state importers that operate only with hard currencies. Covid-19 limited personal travel and with it a very important source of supplies for the country.

The import of goods and raw materials by way of state sources has been one of the measures taken in 2020 that favors self-employment, but its management and their prices have not been sufficiently adjusted to the times and necessary competitiveness demanded by the self-employed. Intermediation of the state was imposed on the import process, and not always need, hiking up the prices by between 20 and 40 percent without the possibility of bidding options, according to Cuban economist and entrepreneur Oscar Fernández.

Without a short-term recovery of the tourism industry in Cuba, one of the leading sector’s of the country’s economy, the situation does not bode well for those who depend for the livelihood on this sector. This will affect other sectors of the economy linked to activities surrounding tourism limiting opportunities in the domestic market. ‟Between January and December 2020, income from tourism fell by 80 percent in the country compared to 2019,″ wrote Cuban economist [and frequent Progreso Weekly contributor] Ricardo Torres at the beginning of 2021.

This implies that businesses that focus on covering non-basic needs experience a drop in demand for their products (goods and services). This circumstance directly affects activities related to recreation and tourism, limiting their redirection towards the domestic market (in the Cuban case).

Businesses that market goods and services, with a presence on the social networks, but focused on the segments of the national market where people with higher income are found, have achieved better results maintaining their operations so far. During the pandemic the time has been used by a number of its users to remodel businesses and homes.

‟(…) One of the things that has also happened to us with COVID-19 is our insertion into WhatsApp groups. We’ve focused on social networks, created a WhatsApp group and have really had incredible results. Many people have called us. We had not developed social networks, had not exploited them and we have done very well. With COVID-19 we learned to focus on social networks and value everything we can do from home (…),” stated Jairam Guevara Passapera, founder of Muebles D’Franco.

Shortages and limitations on mobility in all senses have favored sales in several enterprises dedicated to the commercialization of decorative and utility items, provided they increased their presence on the social networks and guaranteed their products be delivered to the home. This led to several flourishing courier businesses as a result of COVID-19’s social distancing.

The productive chain working together with the state sector is a window that has been opened and supported institutionally since the impact of Covid-19 on the country. And although the circumstances to which the pandemic has subjected the global economy limit what can be done, it continues to be a good opportunity to undertake and scale new possibilities of development in self-employment that operate in the country today.

Programming, software development and applications for mobile devices as a means of self-employment, has closed agreements and established alliances with the state sector during this stage of the pandemic. This last activity has managed to significantly grow during 2020, taking into account the prominence of information and communication technologies in this stage as a support for business management.

Bernardo Romero, founder of Ingenius Cuba — a micro-company of computer and electronic solutions — has recently signed three export contracts, two through Softel and one through Desoft. And this is just one example of good news. We also know of alliances between various forms of management in the Cuban technology sector, and the final version of La Pira in the state company Apklis.

The recent changes to the rules for self-employment are undoubtedly a plus for the sector under the current circumstances. Limited by only 124 prohibited activities opens a range of possibilities for the commercialization of goods and services, which can increase the income of businesses, with a greater assortment of products no longer tied to licenses.

Although the major challenge for businesses that have continued to operate despite the pandemic has been and continues to be the availability of goods and raw materials, the immediate future is marked by the ability of entrepreneurs to think of themselves as companies.