A modern grocery store whose shelves are filled with everything from pasta to wine occupies a spot in central Havana once occupied by a dingy state-owned flower shop, with ceilings and walls repaired and repainted.
A former state glass company in a Havana suburb now houses a showroom for a private company selling Cuban-made furniture.
And in the port of the Cuban capital, forklifts carefully unload American eggs from a refrigerated container. The eggs are destined for a private online supermarket which, just like Amazon Fresh, provides home delivery.
These initiatives are part of the explosion of thousands of private businesses opening across Cuba in recent years, a remarkable change in a country where such businesses have not been permitted and where Fidel Castro came to power leading a communist revolution determined to eliminate capitalist notions. like private property.
But today Cuba is facing the worst financial crisis in decades, caused by government inefficiency and mismanagement and a decades-long economic embargo by the United States that has led to the collapse of domestic production, the increase in inflation, ongoing power outages and shortages of fuel, meat and other products. need.
So the island’s communist leaders are turning back the clock and embracing private entrepreneurs, a class of people they once vilified as “dirty” capitalists.
Taking advantage of the easing of government restrictions that grant Cubans the legal right to start their own businesses, some 10,200 new private businesses have opened since 2021, creating a dynamic, if fledgling, alternative economy alongside the country’s limping socialist model. village.
Underscoring the growth of private business – and government economic work – private sector and government imports last year each amounted to about $1 billion, according to government data.
Most private sector imports came from the United States and were financed by remittances sent by Cubans to relatives back home. Around 1.5 million people work for private businesses, a 30% increase from 2021, and now represent almost half of the Caribbean island’s total workforce.
“Never before has the private sector been given so much space to operate in Cuba,” said Pavel Vidal, a scholar of the Cuban economy and expert University professor in Cali, Colombia. “The government is bankrupt, so it has no choice but to invite other actors.”
Despite the growth of the private sector, its overall contribution to the Cuban economy, while increasing, remains modest, representing approximately 15% of gross domestic production.
However, the economic transformation is significant enough to lead to deep divisions in the island’s communist system as a new business elite acquires wealth, something anathema to Cuban revolutionary ideology.
Cubans who work for the state, including white-collar workers, doctors and teachers, earn the equivalent of about $15 a month in Cuban pesos, while private sector employees can earn five to 10 times that amount.
The state salary doesn’t go very far in the private stores that have sprung up, where a bag of Italian chips costs 51.25 Cuban pesos or $3, a bottle of good Italian wine $20 and even an everyday good, like toilet paper , costs 6 dollars. for a pack of 10 rolls.
Most customers who can afford these types of prices receive money from abroad, work for other private companies or are diplomats.
“You have to be a millionaire to live in Cuba today,” said Yoandris Hierrezuelo, 38, who sells fruit and vegetables from a cart in Havana’s Vedado neighborhood, earning about $5 a day. “The State can no longer satisfy the primary needs of the population”.
Cuban government officials said the legalization of private business was not a reluctant acceptance of capitalism for the sake of economic survival, making clear that state-run industries continue to dwarf the private sector’s role in the economy.
“It’s not an improvised strategy,” Susset Rosales, director of planning and development at the Ministry of Economy, said in an interview. “We have a very clear idea of the path towards a gradual recovery of the economy with the incorporation of new economic actors complementary to the socialist state economy.”
But U.S. officials say the growth of private business could be a turning point, paving the way for greater democracy and economic freedom.
“The question is: are they enough?” said Benjamin Ziff, the chargé d’affaires who heads the US embassy in Cuba. “Cuba is falling apart faster than it is being rebuilt. There’s no going back.”
A key question, he added, is whether the government will allow the private sector “to expand fast enough and freely enough to meet the challenges.”
Cuba’s rapidly expanding private sector has sparked deep skepticism within Miami’s staunchly anti-communist Cuban exile community, where many see it as a ploy by Cuban communist leaders to overcome the economic crisis and cling to power.
Rep. Maria Elvira Salazar, a Republican and one of three South Florida Cuban-Americans in Congress, led a congressional hearing on private business in January titled “The Myth of the New Cuban Entrepreneurs” and suggested that licensing for such initiatives to be reserved for relatives of Cubans. government officials.
“The Cuban regime is still in the business of power, and there is nothing that proves to me that they are willing to cede any part of that market share to anyone other than themselves,” he said in an interview.
Since banning private business in the 1960s, Cuba has, in fact, experimented with free market practices in other times of difficulty, only to reinstate them later when economic pressures have eased.
When the Soviet Union collapsed in the early 1990s and left Cuba without its main economic benefactor, the government issued a limited number of “self-employment” licenses to some low-income traders, including barbers and tire dealers.
After President Barack Obama restored diplomatic relations with Cuba in 2015 and eased the U.S. embargo, American tourists flooded the island and U.S. companies began exploring investments.
However, the Communist Party has never fully embraced the private sector, considering it a potential Trojan horse for “Yanqui imperialists.”
Then came a double whammy. Donald J. Trump’s election in 2016 led to the reinstatement of sanctions against Cuba, including a ban on U.S. cruise lines from sailing to the country. Three years later, the Covid-19 pandemic completely shut down Cuba’s tourism sector, its largest source of foreign exchange.
Since then, Cuba has been in financial free fall. According to the government, production of pork, rice and beans – staple foods – fell by more than half between 2019 and 2023.
This year Cuba asked – for the first time – for help from the United Nations World Food Programme, to provide enough milk powder for babies, state media reported. Lack of oil and an aging electricity grid have led to rolling blackouts across the country.
Worsening living conditions triggered a rare public display of unhappiness in March when hundreds of people took to the streets of Santiago, Cuba’s second-largest city, chanting “Power and Food,” according to social media and official reports from the government.
Economic difficulties have caused a huge wave of emigration. Since 2022, about 500,000 Cubans have left the island, an extraordinary exodus for a country of 11 million, and most of the Cubans who have left have headed to the United States.
Amid so much hardship, small, privately run businesses offer a small dose of hope to those with the money to open them and their employees.
Many are taking advantage of rules introduced in 2021 that grant Cubans the legal right to start their own businesses, limited to 100 employees.
New delis and cafes are springing up across Havana, while entire floors of offices rent space to young entrepreneurs filled with business plans and products, from construction and software to clothes and furniture.
Diana Sainz, who lived abroad for much of her life and worked for the European Union, took advantage of economic changes in her homeland and opened two Home Deli markets in Havana, offering a mix of local production such as pasta and ice cream, as well as imported goods, such as beer and cereals.
Ms. Sainz says Cuba hasn’t had a private supermarket in decades. “Now it’s nice to see a shop on every street corner,” she said. “When you compare things to five years ago it’s totally different.”
However, many business leaders say the Cuban government could do more to build the private sector.
Cuba’s state banks do not allow account holders to access dollar deposits to pay importers due to the government’s lack of foreign currency to pay their bills. U.S. sanctions also ban direct banking between the United States and Cuba.
And the Cuban government has kept major industries, including mining and tourism, off limits to private ownership.
But this still left plenty of opportunities.
Obel Martinez, 52, a Cuban-American interior decorator from Miami, recently teamed up with a local restaurant owner to reopen a historic Havana restaurant, La Carreta, that was abandoned by the state a decade ago.
“The ceiling was falling in and we had to completely demolish the interior and rebuild it,” he said.
Mr. Martinez grew up in Cuba and after working in Spain and Mexico, moved to Miami but never gave up his Cuban residency.
“We are showing the state that it is possible to do things another way,” Martinez said, as he surveyed a busy lunchtime crowd at the 136-seat restaurant, which serves traditional Cuban fare. “And we are totally private.”
