More than a month ago, the Cuban authorities approved the first 35 micro, small and medium-sized enterprises (MSMEs). They did so shortly after giving the green light to the emergence — or, actually, a resurgence, more than 50 years after their elimination by the revolutionary government in the 1960s — of these economic actors in the country, a measure long claimed by economists, academicians, and representatives of the private sector on the island, who saw their actions and perspectives limited and that, in practice, even exceeded the limits established at that time by the existing regulations.
So when the current government finally authorized the creation of MSMEs, both private and state, many celebrated the news, although it was done with more caution than desired and in the midst of a critical context for the Cuban economy, strongly impacted by the pandemic, internal difficulties and inefficiencies and U.S. sanctions, multiplied by Trump and maintained by Biden after the brief “thaw” in the final years of the Obama administration.
However, not a few specialists promptly pointed out the internal and external limitations that could affect the performance of the newly born Cuban MSMEs and hinder their real development possibilities and their contribution to the island’s economic fabric. Among these they point out, for example, the very effects of the pandemic and the U.S. embargo and the difficulties that these and other factors generate in obtaining the supplies and products necessary for their work; the shortage of foreign exchange, the devaluation of the Cuban peso and rising inflation in the context of the “monetary reorganization”; the “closed mentality” of state administrators, officials and entrepreneurs to negotiate with the new private enterprises and promote productive chains that are beneficial to all, and the limits set by the founding regulations of this reborn economic actor.
Among the latter are the obligation to carry out their imports and exports through state-owned enterprises, not being able to have foreign partners — although MSMEs can, at least in theory, form a joint venture with a foreign company and receive credits in foreign currency — or that one of its partners may be able to do so with more than one MSME, the impossibility of establishing parent enterprises or subsidiaries, some aspects of their tax regulation, and the controversial prohibition of a group of activities considered “strategic” by the government — such as those related to health, telecommunications, energy and the press — and others not so much, such as those carried out by architects, accountants, tourist guides and other professions included in the banned list for self-employment.
“With these signs it is very difficult to foresee, at least immediately, that MSMEs will be another driving force behind the economy, despite their enormous potential,” Cuban economist Omar Everleny commented last month to the Spanish agency EFE, when assessing the complex scenario for the resurgence of micro, small and medium-sized enterprises on the island. And shortly after, in a text published by OnCuba, the specialist himself assured that “the improvement of economic actors should lead to recognizing the difficulties that the new enterprises that are being created will have to go through.”
“If the State has acted with a certain pragmatism and allowed MSMEs in this adverse situation, the ‘now yes’ must be accompanied by other decisions that still hinder the optimal use of the potential of this type of business,” Everleny added at the time.
However, even with the limits and difficulties indicated, there are already more than 500 MSMEs approved by the Cuban government ― the vast majority of them, private, and more than half reconversions of pre-existing businesses ―, which has reiterated that it will not put a cap on these new actors. If so, the also economist Pedro Monreal has calculated that, given the existing potential in the country and the government support for its rapid formation, in a short time some 14,000 could emerge on the island. And he has wondered, according to a quote from the Spanish newspaper El País, “How could a centralized planning scheme that is not effective to operate some 2,000 (state) enterprises have the capacity to assimilate a business fabric seven or eight times larger than the current one, in a relatively short period of time?”
But beyond the general scenario and its analyzes ― critical or optimistic ― for the future, the new potential entrepreneurs have welcomed the measure, judging by the rapid response of a large group to the calls of the Ministry of Economy and Planning (MEP) to the formation of MSMEs once the regulation came into force, and by the criteria and testimonies of several partners of already approved enterprises, which have been published in the Cuban and foreign press media. And, seen from the particular perspective of those who have found in this opening a long-awaited way to make their business grow, it seems logical that this should be the case.
A month after the approval of the first MSMEs, OnCuba wanted to know the experience and opinion of new private entrepreneurs on the island. To do so, it contacted several of the beneficiaries in the first package of 35 micro, small and medium-sized enterprises, whom it asked about their reasons for starting the process, its progress, and its objectives and expectations after 30 days of its governmental authorization. And, as a result of our investigation, we present you with the answers of three of them, which, in our opinion, can contribute even more to the knowledge and debate about this resurging and necessary actor in the Cuban economy.
Asked about his reasons for setting up a MSME, Abel Bajuelos, one of Addimensional’s two partners, considered that this “is a natural and logical step, essential for any undertaking with clear objectives, results and value propositions.” For this Cuban entrepreneur, who leads a project of digital manufacturing services based on additive manufacturing ― that is, 3D printing ―, this conversion implies greater economic, commercial, technological and legal benefits for his business than those derived from his previous status as a self-employed worker, and also has a positive meaning “for the evolution of thought at the national level.” “The economy is made by people, and if they evolve, so does it,” he said.
Meanwhile, Luis Betancourt, sole partner of DFORJA Creaciones, a micro-enterprise for the manufacture of furniture and the restoration of furniture and real estate, told OnCuba that he took this step “since our interest is to grow.” “We are constituted as a MSME to achieve the consolidation of the enterprise as a legal entity, which gives us the necessary equality before other actors in the economy and, in turn, allows us to achieve the development of our activity for the benefit of the municipality,” he said.
“Regarding the benefits for the Cuban economy,” he said in a general way, “it is important to highlight that these new economic actors, through the performance of their activity, enter the country the necessary foreign exchange through the export of their services and products, and substitute imports and they provide the people with goods and services.”
For his part, Alain Peña, leader and one of the founders of Pyxel Solutions, a MSME specialized in the creation of products and services in the field of information technology and communication, commented that among the advantages of this step for his undertaking “the first element to mention is the legal dimension, since the rest of the economic, commercial and other benefits will derive from this.” “Based on the conversion to MSME, we acquired legal status and that, in the first instance, means that we stop managing projects in a personal capacity, that is, as a self-employed worker and we begin to do it as an enterprise, with the benefits that this implies,” he explained to OnCuba.
“From this point we not only derive benefits for us as a team, but for the institutions and enterprises with which we traditionally work, since we must remember that, since our foundation almost 9 years ago, the Cuban state sector is one of the main beneficiaries of the solutions we provide. By acquiring legal status, the collaboration and contracting environment becomes more reliable and secure for both parties. In any circumstance, the project no longer responds to a single person, but to a team; that is to say, the product ceases to be, from the legal point of view, the property of a single person,” he specified.
“Let’s say that at this point many of the conditions that limited the links and alliances ― possible and probable ― between the state and non-state sectors are considerably reduced, no more and no less than within the framework of the economic-monetary reorganization Cuba is living in the current situation and a brutal health crisis not only in Cuba, but in the world,” added Peña, who argues that the creation of MSMEs “is a significant opportunity to unleash productive forces in Cuba” and affirms that the conversion of his business in one of them “has motivated the interest of various entities to make alliances with us.”
As to the process of application and approval of these ventures to become MSMEs, the three new entrepreneurs coincided in highlighting its speed and quality. For Peña, for example, everything happened “in a quite linear and expeditious way; we made the presentation and in seven days, just as they told us, they gave us the answer, in this case approval.” Bajuelos, for his part, assures that it was “spectacular, unprecedented in its fluidity, agility and level of automation, a real change,” and highlighted the “total” support of the MEP and the Academy, something also highlighted by Betancourt.
“We were called for the necessary training regarding the process that would begin in September, and so far we have had the accompaniment and support of the MEP and the institutions involved, to meet the established deadlines and make the process organic. In our opinion, the capacity and commitment of all the personnel involved to make the process work and function well was demonstrated,” said the leader of DFORJA.
Regarding what happened with the enterprise the first month since it was approved as a MSME, Betancourt said that the processes have been advancing “at the expected pace, thanks to the computerization that has been made available to these new economic and social actors.” In addition, he said that since its approval they have been contacted by Cuban press media and audiovisual producers, to publish and promote their services, as well as by other self-employed workers “in search of advice.”
On Addimensional, Bajuelos acknowledged that “we really haven’t experienced much as a MSME yet,” but affirmed that “so far all the steps are going according to plan.” Meanwhile, the founder of Pyxel Solutions was not as satisfied as his colleagues with the way things were going after its approval. “The rest of the processes,” among which he mentioned the notarial signature to continue with the commercial registry, something they finally did this week, “have not had the same level of operation as the application/approval,” he told OnCuba when we contacted him. “We thought it would be faster,” he lamented.
Even so, Peña preferred not to speak of dissatisfactions and difficulties when asked directly about them. “More than dissatisfaction, right now we see opportunities. According to the government’s projection, we believe that these measures open new paths, since the enterprise law assesses all the actors that intervene in the Cuban economy, which, moreover, is also being considered as one. Private or state, the elementary principles of management are the same,” he maintained. In his opinion, “each one of these MSMEs, or a set of them, will cover market sectors that will be optimized and, therefore, society will benefit.”
In a similar vein, Bajuelos said that “right now what must be done is work hard and show how much you can do.” “The best way to deal with dissatisfaction is by showing indisputable results,” he said, without explicitly referring to the difficulties that he encounters or could encounter for his work, something that, on the contrary, Betancourt did. For him “it would be necessary to grease the mechanisms of some import entities, which do not work with the speed demanded by this new form of management.” From his point of view, “it would be good for the economy to substitute imports and to be able to acquire national productions, even in freely convertible currency,” because with this, he asserted, “costs would be reduced.”
Similarly, he referred to the existence of “mental barriers” that must be overcome for a more optimal functioning of MSMEs in the Cuban economic network and suggested “the creation of spaces to connect with all economic actors in the country, achieving negotiations” and “the constitution of entities that concentrate raw materials, such as a free zone, in Havana.”
Finally, regarding the perspectives and objectives of his business as a MSME, Betancourt indicated his intention of achieving “the sustainable growth of the enterprise, through the diversification of our products, to meet the existing demand in the country.” Also, “to achieve our workers’ training in order, together with our work as an economic actor, to be a social actor in the transformation of our community,” as well as “to give opportunities to children and young people to have a space for the learning of these trades.”
Bajuelos, for his part, said “the short-term objective” of Addimensional is “to scale in capacities, and therefore in solutions, with a tremendous potential for impact even at the regional level, since the penetration and adoption levels of the technology ecosystem of additive manufacturing is just beginning to take off in the world.” “It is a historic opportunity for Cuba to develop and create capabilities on a technological substrate that is the backbone of what Germany has colloquially called Industry 4.0,” he added.
And for Peña, the conversion of his venture into a MSME is “an excellent moment to boost alliances with enterprises with which we previously already had contacts and negotiations, for which our solutions are extremely useful — especially in the computerization of their processes — and that had not been able to be materialized due to Pyxel Solutions’ lack of legal status.”
“A very interesting market pitch is opening up. So, in the short term we intend to materialize ideas, projects and negotiations, which we have carried out for years and which could not materialize for the reasons stated above, with competitive and updated proposals. We also have the challenge of accompanying and assisting the new emerging business sector, which we know needs to computerize its processes,” he concluded.