The Struggles of Small Businesses in Cuba: A Reflection of the Regime's Economic Failures

In the past year, we've witnessed an economic and social phenomenon shaking the foundations of Cuba's economic model: the rise of Micro, Small, and Medium Enterprises (MIPYMES). This small group of entrepreneurs has achieved in just a few months what the Cuban government has failed to accomplish in decades despite numerous attempts to revitalize the economy through various forms of state-controlled retail in foreign currency.

From "foreign currency stores" to "diplotiendas," "gold and silver shops," "foreign currency collection stores" (TRD), and more recently, "MLC stores" (Freely Convertible Currency), all these initiatives share a common denominator: inefficiency and inability to meet the needs of the Cuban population. Despite their grandiose names and promises of modernization and progress, these stores have done nothing but highlight the limitations of a centralized economic system that does not respond to the reality or demands of the people.

In contrast, MIPYMES have emerged as a compelling proof that Cubans, when given the opportunity, have the capacity to innovate, create, and thrive. These small businesses have demonstrated agility and efficiency that state-run stores have never achieved. While the shelves of MLC stores often remain empty, MIPYMES have adeptly identified market niches, offered quality products and services, and, most importantly, created jobs and energized the local economy.

Almost as significant as the creation of these businesses is the fact that these stores largely operate in the national currency. MIPYMES usually accept payments in Cuban pesos. How peculiar! The government has spent over 60 years devaluing this currency to create stores with "foreign" products, inventing currencies, certificates, coupons, electronic cards, and later devaluing and eliminating their own currencies (like the CUC) to avoid charging in pesos.

Why have state-run stores failed? The answer is simple: bureaucracy, corruption, and a lack of real incentives to improve. Employees of these stores, often underpaid and demotivated—from the store clerk to the buyer and importer—have no reason to strive to provide good service or find ways to optimize resources. In contrast, MIPYMES entrepreneurs are directly involved in the success of their businesses. Each satisfied customer, each sale made, each innovation implemented translates directly into benefits for them, their families, and their employees.

Moreover, the government ends up using the dollars collected for other purposes instead of restocking stores. On the contrary, MIPYMES dedicate all acquired dollars to importing and acquiring more merchandise, thus ensuring a constant flow of products and improving customer satisfaction. This is what Gil promised about relaunching the economy, which they never did.

The Cuban government has attempted to control and limit the growth of MIPYMES by imposing taxes, restrictions, and regulations designed to hinder their progress. However, despite these obstacles, entrepreneurs have learned to navigate the complex legal framework and find ways to make their businesses prosper, even in such a hostile environment.

The success of MIPYMES is a mirror reflecting the regime's failure. For decades, the government has tried to impose an economic model that doesn't work, while in just a few months, a group of entrepreneurs has shown that another Cuba is possible—a Cuba where creativity, innovation, and personal effort are rewarded.

Steps to Liberalize the Cuban Economy

It's time for the Cuban government to step aside and acknowledge that the socialist enterprise is not the path to prosperity in Cuba. Let Cubans have factories, industries, produce clothing, footwear, sugar, rum, tobacco. Free up imports, eliminate taxes (and subsidies to socialist enterprises), genuinely free the countryside. They need to step aside and let the nation prosper. There is a growing consensus that the Cuban government should recognize the failure of the socialist enterprise and allow MIPYMES to operate with greater freedom.

The Cuban government should consider several measures to liberalize the economy:

Privatization of State Enterprises: Allow the privatization of state enterprises and encourage the creation of new private companies in all economic sectors. This will increase efficiency and productivity by introducing competition in the market.

Tax System Reform: Reduce and simplify taxes to facilitate the creation and operation of new businesses. Eliminate excessive taxes that stifle private initiative and maintain a fair fiscal system that incentivizes investment.

Elimination of Subsidies to State Enterprises: Gradually eliminate subsidies to inefficient state enterprises to create a level playing field where private companies can compete on equal terms.

Trade Liberalization: Abolish restrictions on imports and exports. Easing access to foreign goods and services will improve the quality of life for Cubans and allow local businesses to access cutting-edge inputs and technology.

Encouraging Foreign Investment: Create a legal and administrative environment favorable to foreign investment. Provide legal guarantees and protect intellectual property to attract international capital and expertise.

Agricultural Control Decentralization: Allow farmers complete control over their lands and crops. Eliminate restrictions on what and how much they can produce, and permit the free sale of their products in the national and international markets.

Labor Market Deregulation: Make labor laws more flexible to allow businesses to efficiently hire and manage their workforce. Establish a fair minimum wage and ensure basic labor rights, but allow more flexible labor negotiations.

Infrastructure Development: Invest in critical infrastructure such as roads, ports, and telecommunications networks. Facilitate public-private collaboration for the development of infrastructure projects that benefit the economy as a whole.

Entrepreneurship Support: Create support programs for entrepreneurs that include access to financing, business training, and mentorship. Establish business incubators and accelerators to foster innovation and the development of new companies.

Will the Cuban government implement any of this? Probably not; they are still clinging to the mantra of the socialist enterprise as the center of the economy. Failing to leverage the environment created by the measures announced today by the Biden administration would be foolish. They just need to remember what happened when they scorned and attacked Obama's opening. Trump is ready to repeat history.