Miami visit gave a rare inside look at Cuba’s fledgling capitalists. Some key takeaways

An unprecedented visit to Miami by a large group of Cuban entrepreneurs last week is providing a rare glimpse into the inner workings of the private sector in Cuba, the struggles the fledgling company owners face, and the potential for assistance from both the U.S. government and the South Florida business community.

The group of about 70 entrepreneurs from the island participated in panel discussions with lawyers, U.S. officials, representatives of American companies and prominent Cuban American business leaders in a meeting hosted by Akerman LLP, a Miami-based law firm that has represented companies doing business with Cuba.

Private enterprise at the current scale is a new phenomenon in Cuba’s otherwise rigidly controlled Marxist economy. Although the government had allowed the existence of self-employment at small levels for some time, it wasn’t until two years ago, in the midst of a severe economic crisis, that it began to permit its citizens to start their own businesses, buy supplies abroad and hire as many as a hundred workers each.

Cuba’s economy minister recently told the country’s National Assembly that private businesses are already on track this year to import more than the government does — about $1 billion worth of goods. Experts in and outside Cuba say the entrepreneurs also employ more workers in most sectors of the economy, 1.6 million than the government does.

Because the Cuban government severely limits what foreign journalists on the island can report, the rapid growth of the private sector had until recently gotten little attention outside Cuba, so the Miami visit offered an eye-opening look at Cuba’s baby steps into capitalism.

Here are some compelling insights gained from the visit:

Cuba’s private sector is surprisingly diverse

In just two years, the businesses — known as pymes, a Spanish acronym for Pequeñas y Medianas Empresas, small and medium enterprises — have played a significant role in importing food and other basic supplies, at a time the cash-strapped government has faced major difficulties providing essentials for Cuba’s population.

But the group that visited Miami included several businesses producing other goods like clothes (Los Hilos de Ariadna, Confecciones Ramos, Zory), beauty products (D’Cabellos SURL), fruit juice and preserves (Conservas El Roble, Media Luna, La Ceiba, Reyna Victoria), lamps (Vitroarte), and decorations and furniture (Yes Group). Other enterprises export software and provide services like logistics, transportation, interior design and company-management solutions. And the companies are spread throughout the island, not concentrated just in Havana.

Looking to stay nimble in such a challenging environment, many of the companies have diversified, adding other lines of business to their main activities. D’Cabellos SURL, for example, mainly makes beauty products like shampoo and bath gels, but has also branched out into making plastic bottles and bags.

Despite rapid success, entrepreneurs are struggling

Though proud of their achievements, members of the group expressed a litany of problems they face, some unique to Cuba.

A major roadblock: Lack of access to the international banking system. This means Cuban entrepreneurs cannot easily do what their counterparts around the world do every day: Borrow money to buy supplies, pay workers and expand their businesses.

The U.S. embargo prohibits most trade and financial transactions with Cuba. That may change a bit soon: The Biden administration plans to allow Cuban entrepreneurs to open bank accounts in the United States and access them from Cuba. However, experts believe few U.S. banks will take the risk because many banks will still be reluctant to process transactions with Cuba, which remains on the U.S. State Department’s list of countries that sponsor terrorism.

But even for Cubans who already have accounts in foreign banks, in countries like Mexico, Spain, the Dominican Republic or Panama, there’s another challenge: Converting the local currency, the Cuban peso, into dollars and then moving the money abroad to pay suppliers.

None of that is possible right now because Cuba’s banks do not have enough dollars to convert currency and do not allow private companies to transfer money abroad. That leaves little choice to many of the business owners other than cumbersome workarounds, such as paying commissions to foreign companies to act as intermediaries and pay providers abroad on their behalf. In return, the entrepreneurs pay the companies back in dollars obtained in the black market in Cuba.

“These are our modern buccaneers,” one of the event organizers, Alfonso Larrea, said of the Cuban entrepreneurs who find creative ways to import food for the population despite the many limitations.

But that unwieldy workaround, known as the círculo cerrado — the closed loop — is in peril, too, because the government recently limited bank cash withdrawals and demanded that most transactions take place online. That makes it harder for private entrepreneurs to take their Cuban pesos in cash to buy dollars in the black market to pay those intermediary companies.

“If you don’t sell me dollars, and now you don’t let me take the cash to buy the dollars on the street, what do you want from me? Strangle me,” said a business owner who asked not to be identified because of fears of government retaliation. Two other entrepreneurs, who also asked to remain anonymous, said the cash restrictions are hitting their businesses hard, but were waiting to see what happens next. “Every six months, there is a change in policy in Cuba,” one of them said.

The limitation on cash withdrawals “is going to have a great impact at this moment for our people because the pymes are the ones who sell in the neighborhoods, in corner shops,” said Larrea, a former Cuban Ministry of Culture employee who founded Evexcon SRL, a private company on the island that specializes in event planning.

They want to learn from American capitalism

Beyond access to banking, the Cuban companies say they need just everything else: capital, credit, technology, expertise, cheaper providers and basic materials like food preservatives and packaging, they said. They hope to get some of those things in the United States.

“What do we need? Training, which is constant and necessary for any company, and updates on the latest technologies,” said Luis Hernández, one of the few Black business owners in the group visiting Miami. He runs Vitroarte, a workshop producing glassware, lamps and stained-glass window panels in Camagüey, a city in central Cuba. “They are the two most important things we need, apart from materials, supplies and machinery.”

Several business owners said those needs are particularly acute in the construction field, where it is also difficult to retain labor because of the continual mass emigration of Cubans to the U.S. and other countries.

Private construction firms are currently small, cannot provide engineering services or participate in big development projects in tourism, which the government channels to state enterprises and military companies.

But some of the business owners are thinking longer term.

Because most of Cuba’s infrastructure and residential buildings are in bad shape, “at some point, there will be a building frenzy in Cuba; we must prepare for that moment,” said Ivan Díaz, founder of Dimas Soluciones, a construction firm that also sells renewable-energy equipment.

Lázaro Valdés Sánchez, a farmer who owns a small facility in the western province of Mayabeque making fruit preserves and traditional Cuban desserts like guava shells in syrup, said he doesn’t have access to the technology to increase production nor the proper containers for export.

Yamilka Avilés, chief economic officer of Agroindustria Media Luna, a producer of fruit juices and preserves in Ciego de Ávila, a province in central Cuba, said importing basic supplies like metal cans and other packaging from Europe and China takes so long her company is forced to buy quantities for the entire year just she can keep production lines moving.

“If I could make direct imports from the United States, I wouldn’t have to invest so much in supplies and have the high inventories that I have today,” she said.

Some of these small business owners said the fact that they have to import from countries as far as China, and that they cannot easily pay providers, all contribute to the high prices of food sold in private stores on the island, which many Cubans cannot afford. One of the reasons they said they came to Miami was to meet providers directly so they could sidestep resellers on the island, cut costs and lower final prices.

The state still plays a big role

The entrepreneurs made clear that the future of the private sector in Cuba hangs on the will of the Cuban government, which dictates what activities are authorized or banned, how many employees an enterprise can hire, and even how much of its own money a company can withdraw from a bank account.

Cuban authorities also require private businesses to import and export goods through state companies working as intermediaries, adding red tape and cost.

Because the government owns most industries, warehouses, and factories and controls tourism, the entrepreneurs said they have to partner at times with state companies, have them as clients or lease their facilities.

Before 2021, some businesses were allowed in partnership with state companies under a different legal status, as a “local development project,” which required sharing revenues with the local governments. That was the case of Agroindustria Media Luna before it became a private enterprise.

The business has its own Communist Party committee, and its workers belong to the state-controlled union, according to a company video. One of its flagship stores in the city of Ciego de Avila displays a sign with Fidel Castro’s signature, the video shows.

Some entrepreneurs visiting Miami previously worked for the government or state institutions, which are still the country’s largest employer. Some companies, like Dofleini, a software firm founded by a current member of Cuba’s National Assembly, have worked hand-in-hand with the government, for example, creating the platform the government uses to register private businesses.

But many entrepreneurs who spoke to the Miami Herald were farmers, artisans, mechanics, and owners of hostels and small restaurants who had been self-employed for several years until they could turn their businesses into companies in 2021. Others lived abroad before returning and opening their enterprises or have permanent residency in another country but tend to their businesses on the island.

As the private businesses continue to grow, creating jobs and supplying goods needed by the population and state enterprises, they will have more leverage to stand up to the government when they don’t agree with some policies, said Pedro Freyre, a lawyer with Akerman.

The fact that the Cuban government allowed the entrepreneurs to come to Miami as a group is itself relevant, some of the Cuban Americans attending the meetings said, and a sign that at least some government members, who appear divided on the existence of private companies in a Communist economy, are at least interested in seeing what comes of the trip.

A Hialeah office

There is at least one concrete result from the visit.

Larrea took the group of entrepreneurs to an office in Hialeah that has been set up to support Cuban entrepreneurs visiting the United States, offering services like work space, car rentals, mail and other business essentials.

Speaking to the group, Larrea again voiced some of the concerns and expectations of Cuban private business owners, such as being allowed to legally provide financing to other enterprises or being able to form an independent business owners’ association.

But despite the frustrations, he urged the business owners to continue pushing the limits of what’s possible on the island.

“It’s a slow process, but just remember that a few years ago you could not have a company, dollars were prohibited, and speaking about pymes was counterrevolutionary,” he said.

“I always said you don’t knock at the door; you knock down the door,” he added. “Let’s keep kicking down doors.”