In the wake of President Obama’s order to restore full diplomatic relations with Cuba, there has been a lot of speculation about what it will mean for entrepreneurship on the island nation. Yes, hotel chains, tour companies and others probably are salivating to enter the market, but what about homegrown startups?
It’s exciting to imagine the possibilities in a country of 11 million people, newly freed of their shackles and seizing the opportunities in an economy where virtually everything is out-of-date or broken.
But, in reality, change is likely to be slow and halting, partly because of politics (American and Cuban) and partly because the Cuban economy is so unready for global entrepreneurship.
There will be opposition on the Cuban side as well.
It’s expected that Cuban leadership will try to ease its way into a Chinese-style system with state-controlled politics, but greater, though limited, economic freedom. It’s important to note that the dictatorship is entering the agreement, not out of a desire to give greater freedom to its people, but because its patron, Venezuela, crippled by falling oil prices, can no longer afford to subsidize Cuba.
It’s true that Raúl Castro in 2010 eased restrictions on private business, allowing more Cubans to start their own small concerns. Even the Catholic Church got into the act by offering entrepreneurship classes.
But a year ago, he warned entrepreneurs he said were pushing economic reform too far, too fast and competing with state-run enterprises. And since the diplomatic thaw was announced, Castro has made it clear he does not intend to abandon communism.
Even if politics weren’t a factor, Cuba simply does not have the capital, financial infrastructure, experience or mindset to leap into scalable entrepreneurship.
This is no criticism of the Cuban people, many of whom are already entrepreneurs. Cubans have had to be resourceful to survive the disastrous state-run economy and a pay structure that awards physicians the same as street sweepers. But they face a steep learning curve. Still, there are reasons to believe entrepreneurship will succeed in a changed Cuba.
Those who want more information, should read the 2013 Brookings Institute report about Cuba’s emerging middle class and entrepreneurship.
Finally, here’s a reality check for all the Americans dreading the prospect of a McDonald’s in Havana and lamenting that capitalism will “destroy” the purity of impoverished Cuba.
Photo by Artur Staszewski