The growth of the private sector, especially micro, small and medium-sized enterprises (MSMEs), is practically paralyzed due to a bureaucratic process that slows the approval of new businesses, generating frustration among potential entrepreneurs and limiting market competition.
“The approval process of MSMEs is practically at a standstill,” said Oniel Díaz, general manager of Auge, in statements to the International Press Service (IPS) agency based in Havana.
Auge is a private Cuban enterprise dedicated to corporate services that has supported the growth of more than 400 businesses on the island.
“In the first few years, starting in 2021, around 100 MSMEs were approved weekly. From May 2024 until today, barely a handful have been approved,” the businessman quantified.
This slowdown, according to Díaz, is generating palpable discontent among hundreds of applicants who have been waiting for an official response for months or even more than a year. “This establishes a certain number of businesses and limits the possibility of competing in the market through better prices, quality and variety of products and services,” he added.
Frozen procedures and incomplete decentralization
In September 2024, Decree-Law 88 came into effect, transferring the responsibility for approving new MSMEs from the Ministry of Economy and Planning (MEP) to municipal councils or local governments.
In theory, this change, which was supposed to be completed by March 2025, seeks to bring management closer to the territories and facilitate the creation of businesses with a local impact.
However, “the reality is that March went by and that transfer was not completed,” explained Díaz.
Currently, only 16 of the 168 municipalities in Cuba are authorized to directly approve the creation of MSMEs. In the rest of the country, the MEP maintains control, although it must now seek input from local governments, which has further drawn out the process.
“It is very difficult to measure progress when official figures are no longer published regularly,” Díaz lamented. “Previously, the Ministry of Economy and Planning frequently reported on the approval of MSMEs, but that has stopped being done.”
A stricter fiscal environment
In addition to bureaucratic obstacles, the private sector faces an environment of increased fiscal control. In 2025, Cuban authorities have increased inspections and sanctions against private business activities.
According to Minister of Finance and Prices Vladimir Regueiro, during the second National Exercise to Prevent and Combat Crime, Corruption, Illegalities and Social Indiscipline held from March 24 to 29, 61,659 inspections were carried out, resulting in 1,921 temporary or permanent closures of establishments, and more than 36,500 fines were imposed for a total value of 131.3 million pesos.
As of November 2024, 43 MSMEs were closed for legal and accounting irregularities, 41 temporarily and two permanently, according to the first deputy chief of the National Administration Office.
“In December 2024, 55% of MSMEs’ fiscal bank accounts had a zero balance, indicating that many businesses are not operating formally,” Regueiro noted.
Business shield: a tool for navigating the bureaucratic jungle
Faced with this complex situation, Auge launched “El escudo empresarial” (The Business Shield) in June 2025, the first Cuban regulatory manual that compiles and summarizes in 64 pages more than 500 legal documents relevant to the non-state sector.
“It is an ideal manual for those who want to start a business and for those already established. It includes what permits are needed and how to apply for them, helping them prepare and be compliant,” explained Daniel Torralbas, economist and analyst at Auge, and one of the manual’s authors.
The expert emphasized that the manual comes in a context where “state inspections of private activity have skyrocketed.”
Socioeconomic impact of slowdown
The stagnation in the creation of MSMEs limits job creation, innovation and the supply of products and services in the Cuban economy. According to official data, the non-state sector accounts for nearly 30% of employment on the island, and MSMEs are a key driver of its growth.
“The delay in approving new businesses not only affects entrepreneurs but also hinders the diversification and revitalization of the economy,” Díaz noted. “In a market with few options, consumers lose out and the economy becomes less competitive.”
Financial challenges and lack of incentives
In addition to bureaucracy and fiscal control, entrepreneurs face financial difficulties. The absence of a formal foreign exchange market and the lack of credit facilities complicate access to resources for investment and growth.
“There are no clear incentives such as tax exemptions or accessible credit to help businesses take off,” Díaz commented.
Experts agree that to reactivate the growth of MSMEs, it is necessary to streamline approval processes and complete administrative decentralization. It is also vital to create a balanced fiscal environment that allows for supervision without stifling entrepreneurs.
“There must be transparency and clear communication between the government and the private sector,” Torralbas stated. “Only in this way can trust and investment be fostered,” he added in the IPS report.
Meanwhile, Cuban entrepreneurs continue to wait for the promises of reform to be translated into concrete actions that will boost economic and social development on the island.
Private businesses can be bad but a least there is some accountability. You can always take your business somewhere else. Government bureaucracy can be a nightmare. You hit a bureaucratic road block and there is no remedy. You are helpless.