How to Support Cuba's New Entrepreneurs

How to Support Cuba's New Entrepreneurs
The administration should take several steps to cement economic ties
with Cuba's burgeoning businesses.
By Susan Segal May 2, 2014

Changes in Cuba in recent years show the time is ripe for supporting
entrepreneurship on the island. Over the past 17 years, I watched
entrepreneurship explode throughout Latin America and the Caribbean,
empowering citizens, transforming economies and changing lives. Across
the region, 60 percent of employees work for businesses with five or
fewer employees. In Brazil, small enterprises create two of every three
jobs. Mexico's micro-, small- and medium-sized enterprises represent 72
percent of employment. And in the U.S., about 70 percent of gross job
creation comes from young businesses.

As Cuba opens up for independent enterprise, these emerging
entrepreneurs will also support growth and job creation.

In November 2012, we led our first delegation to Cuba, where we met with
emerging entrepreneurs and longtime owners of paladares (small,
privately owned restaurants first permitted during the 1993 economic
reforms). At the time, it had only been a year since the implementation
of President Raúl Castro's economic reforms to open up Cuba's small
business and tourism sectors. The changes were fresh, and while the
excitement was palpable, uncertainty over their implementation was high.

Those who had jumped at the opportunity to start a small business
relayed various challenges, some similar to those faced by new business
owners everywhere, but many specific to the island and an environment
that places serious constraints on business formation and growth. Taxes
are onerous. The state banking system is relatively inaccessible,
leaving little opportunity to gain and build credit. There is a lack of
access to wholesale goods and markets as well as technical knowledge,
and commercial rental space is practically nonexistent.

Above the day-to-day challenges are broader issues inherent in the move
from a primarily state-owned economy to a mixed one. For many new
entrepreneurs, there is little understanding of the management,
financial or legal framework required to start and build a business.
Possibly the biggest challenge is around culture, changing employees'
mentality from that of a state worker to that of a business owner or
company employee.

And of course, there is the U.S. embargo, which not only limits U.S.
citizens' travel and business opportunities, but impacts all of Cuba's
international trade relations. Every entrepreneur spoke to how the
embargo disrupts their growth by limiting access to inputs, resources,
capital, and customers.

[See a collection of political cartoons on the economy.]

When we returned to Havana in March 2014, we saw some change, though
many obstacles for small business owners remain. Our delegation could
feel optimism mounting as the now 450,000 self-employed Cubans gain
confidence in the government's commitment to this "update." Havana's
storefronts are filled with privately owned cafes, barbershops, art
galleries, and even a store specializing in bamboo plants.

Some entrepreneurs were enrolled in or graduated from business training
and incubator programs like Proyecto Cuba Emprende. Such programs are
crucial to expanding financial and management training needed to
successfully run a business, and are already being replicated by the
state, but many more are required.

These new business owners are cautious about growth, having seen the
government roll back reforms in the past, but they are finding creative
ways around red tape and an arduous regulatory environment. Many have
sold their belongings in eagerness to start their own business for the
first time, like entrepreneurs in any part of the world.

Of course, the same challenges we heard about in 2012 remain. But
ensuring development of this nascent non-state sector is critical, not
just for individual business owners, but for Cuba and for U.S.
relations. And on the U.S. side, President Barack Obama can take several
small steps to empower these entrepreneurs and give them space to
succeed, which is in everyone's interest.

New micro-businesses are primarily funded by Cuban-Americans taking
advantage of openings created by the Obama administration that permit
sending unrestricted remittances to their families. The president can go
further by allowing family remittances to be used as credits or equity,
and permitting U.S. non-governmental organizations and individuals
engaged in small business development to send unlimited remittances to
non-family members to back independent economic activity.

He can support entrepreneurs who cannot access inputs essential for
running businesses by expanding the types of goods travelers may legally
take to the island. U.S. Treasury authorization of the export and import
of certain goods and services between our private sector and Cuban
entrepreneurs would also serve to increase access to these inputs and
partially open them to the U.S. market.

These are just a few changes that can be made under executive authority
to directly aid these emerging entrepreneurs. The U.S. has been
operating under the same policy toward Cuba since 1960, and has fallen
short when it comes to helping the Cuban people. True humanitarian aid
must promote economic development.

As Cuba's citizens gain a new kind of economic autonomy for the first
time in 55 years, it is our moment to reach out and help them build.
Let's give these entrepreneurs the chance to determine their own
destiny, engage in free commerce, have the freedom to fail and the
opportunity to succeed. It is these very entrepreneurs who will be the
creators of Cuba's future jobs, savings and, ultimately, growth.

Source: How Obama Can Support Cuba's Entrepreneurs - US News -
http://www.usnews.com/opinion/blogs/world-report/2014/05/02/how-obama-can-support-cubas-entrepreneurs