What was once a drab state-owned flower shop in downtown Havana is now a modern grocery store with shelves stocked with everything from pasta to wine, and ceilings and walls that have been restored and repainted.
A former state-owned glass company on the outskirts of Havana now houses a showroom for a private company selling Cuban-made furniture.
Forklifts carefully unload American eggs from refrigerated containers at the port of the Cuban capital. The eggs will be shipped to an online private supermarket that offers home delivery, similar to Amazon Fresh.
The businesses are part of thousands of private businesses that have opened across Cuba in recent years, in a country that did not allow such businesses and that brought Fidel Castro to power to lead a communist revolution determined to eliminate the idea of capitalism. This is a significant shift just like private ownership.
But now, Cuba is facing its worst financial crisis in decades, caused by government inefficiency and mismanagement, coupled with a decades-long U.S. economic embargo that has led to the collapse of domestic production, rising inflation, persistent power outages, and fuel, There were shortages of meat and other supplies. necessity.
As a result, the island’s communist leaders are backtracking and embracing private entrepreneurs, a class of people they once dismissed as “dirty” capitalists.
The government has loosened restrictions and given Cubans the legal right to start their own businesses, opening some 10,200 new private businesses since 2021, creating a vibrant, albeit fledgling, alternative to the country’s faltering socialist model. alternative economy.
Private sector and government imports totaled about $1 billion last year, according to government data, underscoring the growth of private business and the government’s economic woes.
Private-sector imports come mostly from the United States and are funded by remittances from Cubans to relatives back home. About 1.5 million people work in the private sector, an increase of 30% since 2021, and now account for almost half of the Caribbean island nation’s total workforce.
“The private sector has never been given so much room to operate in Cuba,” said Pavel Vidal, a Cuban economic expert who studies the country’s economy. University professor In Cali, Colombia. “The government is broke, so it has no choice but to invite other actors to join.”
Despite the growth of the private sector, its overall contribution to the Cuban economy has increased but remains modest, accounting for approximately 15% of GDP.
Still, the economic transformation was significant enough that, as a new business elite gained wealth, Cuba’s communist system was causing deep divisions that were anathema to Cuba’s revolutionary ideology.
Cubans working for the state, including white-collar professionals, doctors and teachers, earn about $15 (Cuban pesos) per month, while private-sector employees can earn 5 to 10 times that amount.
In the private shops that have sprung up, government wages are not high. A bag of Italian potato chips costs 51.25 Cuban pesos, or 3 US dollars, a bottle of Italian high-quality wine costs 20 US dollars, and even daily necessities such as toilet paper cost 6 US dollars a pack. roll.
Most customers who can afford such prices receive funds from abroad, work for other private businesses or are diplomats.
“Today you have to be a millionaire to live in Cuba,” said Yoandris Hierrezuelo, 38, who earns about $5 a day selling fruits and vegetables from a cart in Havana’s Vedado neighborhood. “The state can no longer meet the basic needs of its people.”
Cuban government officials say the legalization of private enterprise is not a grudging acceptance of capitalism for the sake of economic survival, a clear sign that state-run industry still dwarfs the private sector’s role in the economy.
“This is not a temporary strategy,” Susset Rosales, the economic ministry’s director of planning and development, said in an interview. “We have very clear ideas on the path to gradually restore the economy by absorbing new economic players that are complementary to the economies of socialist countries.”
But U.S. officials say the growth of private enterprise could be a game-changer, paving the way for greater democracy and economic freedom.
“The question is — are they enough?” said Benjamin Ziff, charge d’affaires of the U.S. Embassy in Cuba. “Cuba is falling apart faster than it can be rebuilt. There is no turning back.”
He added that a key question is whether the government will allow the private sector to expand “fast enough and freely enough to meet the challenges”.
Cuba’s rapidly expanding private sector has aroused strong suspicion among Miami’s staunchly anti-communist Cuban exile community, with many viewing it as a ploy by Cuba’s communist leaders to weather the economic crisis and stay in power.
Republican Rep. Maria Elvira Salazar, one of three Cuban-Americans in Congress from South Florida, hosted a panel in January titled “New Cuban Entrepreneurs.” Myth” congressional hearings on private enterprise and recommended that licenses for such businesses be reserved for relatives of Cuban Americans. Government officials.
“The Cuban regime is still in power and there is no evidence to me that they are willing to give a portion of the market share to anyone but themselves,” she said in an interview.
Indeed, since banning private enterprise in the 1960s, Cuba has experimented with free-market practices in other difficult times, only to withdraw from them when economic pressures eased.
In the early 1990s, when the Soviet Union collapsed and Cuba lost its main economic sponsor, the government issued a limited number of “self-employment” licenses to some low-income businessmen, including barbers and tire repairmen.
After U.S. President Obama restored diplomatic relations with Cuba and eased the U.S. embargo in 2015, U.S. tourists flocked to Cuba and U.S. companies began exploring investment.
Nonetheless, the Communist Party never fully embraced the private sector, viewing it as a potential Trojan horse for “American imperialists.”
Then came the double whammy. The election of Donald J. Trump in 2016 led to the reinstatement of sanctions against Cuba, including a ban on U.S. cruise lines sailing in the country. Three years later, the Covid-19 pandemic has led to the complete shutdown of Cuba’s tourism industry, its largest source of foreign exchange.
Since then, Cuba’s financial situation has plummeted. According to the government, production of pork, rice and beans (staple foods) fell by more than half between 2019 and 2023.
For the first time this year, Cuba asked the United Nations World Food Program for help in providing enough milk powder for children, state media reported. Oil shortages and an aging power grid have led to rolling blackouts across the country.
In March, deteriorating living conditions sparked a rare public outburst of discontent, with hundreds of people taking to the streets of Santiago, Cuba’s second-largest city, chanting “power and food,” according to social media and official government reports.
Economic hardship triggered a surge in immigration. About 500,000 Cubans have left the island since 2022, an extraordinary exodus for a country of 11 million people, and most of those who left went to the United States.
In the face of such poverty, private small businesses provide a glimmer of hope for those with the money to start a business and their employees.
Many are taking advantage of regulations introduced in 2021 giving Cubans the legal right to establish their own businesses, which can employ no more than 100 people.
Across Havana, new delis and cafes are popping up, while entire office floors are leasing space to young entrepreneurs filled with business plans and products, from architecture and software to clothing and furniture.
Diana Sainz, who has lived abroad most of her life and worked for the European Union, has taken advantage of economic changes in her home country to open two family deli markets in Havana, offering locally made products such as pasta and ice cream. merchandise, as well as imported goods such as beer and cereals.
Ms Sainz said there had been no private supermarkets in Cuba for decades. “It’s great to have a shop on every corner now,” she said. “When you compare it to five years ago, it’s a completely different situation.”
Still, many business owners say the Cuban government could do more to build the private sector.
Cuba’s state-owned banks do not allow account holders to pay importers with dollar deposits because the government lacks the foreign currency to pay its own bills. U.S. sanctions also ban direct banking between the United States and Cuba.
The Cuban government prohibits private ownership of major industries, including mining and tourism.
But that still leaves a lot of opportunity.
Obel Martinez, 52, a Cuban-American interior designer from Miami, recently teamed up with a local restaurateur to reopen La Carreta, a landmark Havana restaurant that opened a decade ago Abandoned by the state.
“The ceiling was caving in and we had to completely tear out the interior and rebuild it,” he said.
Mr. Martinez grew up in Cuba and, after working in Spain and Mexico, settled in Miami but never gave up his Cuban residency.
“We are showing the government that we can do things another way,” Mr. Martinez said as he surveyed the busy lunchtime crowd at the 136-seat restaurant, which serves traditional Cuban cuisine. “And we keep it completely confidential.”
