By Mario Rodriguez Graniel, MBA ’15
A vibrant, independent private sector is emerging in Cuba, following recent government reforms allowing private enterprises to develop more freely in the country. After decades of state dominance, more and more Cubans have opted to become entrepreneurs or join a startup as a way to replace or supplement the reduced, fixed income from government-related jobs. Bed and breakfasts, restaurants, barbershops, and service-related businesses in areas such as technology and construction are flourishing. The implications of this phenomenon on the development of a middle class in a socialist regime are both, substantial and exciting. However, while the progress is tangible, so are the challenges. After meeting with a few entrepreneurs during my academic visit to Havana in March as part of an international seminar at Columbia Business School, I learned first-hand about issues related to access to capital and burdensome taxation, which often prevent some of these operations from getting off the ground or growing into larger companies. Yet, these obstacles only fuel the innovative thinking and impetus of these budding entrepreneurs and their hopes for redefining a new Cuba.
During my visit to 02, a one-of-a-kind wellness center in Havana’s Nuevo Vedado neighborhood, I had the opportunity to learn about the drastic tax structures connected to revenues and number of employees, which can surmount to tax rates of 150% for larger businesses. In response, entrepreneurs like the twin sisters Omara and Odalys, founders of 02,have developed an effective model in which they lease the different rooms of the center to their employees, which creates many small separate tax-paying entities operating under the same space. The hairdresser leases the salon and so does the spinning instructor and the spa’s masseuse with their respective areas. Another inspiring story was related to their launch marketing strategy. Given the low penetration of Internet access and bans for street advertising of private enterprises, the twins liaised with their neighborhood’s mailman and attached a small flier to different pieces of mails that would be delivered that day.
It remains to be seen whether the Cuban government will continue to move towards greater liberalization of new businesses and regulations that support not only their existence but also their expansion and partnership with state entities, in what could become a successful “hybrid” market economy. What is undeniable is the exceptional hope, enthusiasm, and creativity with which these entrepreneurs rise and fight for their business ideas and the wellbeing of their families – lessons that young entrepreneurs in countries, such as the US, which facilitate the opening of new businesses, should adopt and apply.