Emigrate or Start a Business? Most Cubans Prefer to Leave
The conclusion of the most recent report by the online opposition platform Cuba Siglo 21 (21st Century Cuba) on the emergence of small and medium-sized companies (MSMEs) on the island is that they have been a resounding failure. Designed as an attempt to breathe life into the Island’s moribund economy — and in the process replenish the state’s coffers — they never managed to attract capital from the Cuban exile community, nor did they generate the economic freedom needed to fulfill their promise.
According to Cuban business consultant and Cuba Siglo 21 director Emilio Morales, who edited the report, “The effort by the Cuban regime to liberalize the economy through the MSME law has been resoundingly rejected not only by Cubans living on the island but also by Cuban exiles.”
The proof is in the number of private businesses registered since 2021, when the government adopted a law that allowed for the creation of private companies. Cubans have paid thousands of dollars to leave the country. Money that, under different circumstances, could have provided any of them the start-up capital for a small private business.
In the last three years, half a million Cubans arrived at the Mexican border in hopes of entering the United States. Morales estimates that another million and a half managed to get in, or hope to get in, through the so-called parole program. Together, these figures represent roughly 20% of Cuba’s total population.
“In monetary terms, we could say that, if fully implemented, this program could represent an investment of around thirty billion dollars by the Cuban diaspora over a period of three to six months. More a rescue operation than immigration program, it dwarfs any other previous effort,” he says. “Given the hard choice that Cubans face today — to start over by emigrating or opening a new business under the new MSME legislation — they have decided overwhelmingly to emigrate.”
According to Morales, the mass demonstrations of July 11, 2021 were a watershed moment in government’s policy, which split into two approaches. On the one hand, there was an obvious increase in repression, which lead to hundreds more political prisoners in jail. On the other hand, the state quickly looked for a way to assuage the public mood. Both the apparent economic liberalization for private citizens and free visas to go to Nicaragua – which gave Cuban emigrés a new way out – were some of the measures taken.
In Morales’ opinion, however, MSMEs only give the illusion of economic freedom on the Island. “To be approved, they must get past controls set up by local and provincial governments, and the Ministry of Economy and Planning, to say nothing of the hidden nets of counterintelligence and the Cuban Communist Party. All in all, a selection process that is fertile ground for discriminatory exclusion on ideological grounds and for corruption,” he says. The Cuban regime refused to adopt the legislation during the Obama administration — a period when there was a thaw in diplomatic relations — which would have been the right time to do so. Instead, it chose to halt the reform process and squelch the largest growth in entrepreneurship that the island had seen in six decades of communism.
One example of this is the abysmal difference between the number of MSMEs that exist on the island versus the rest of Latin America: some 8,938 in Cuba according to official statistics versus more than four million in Mexico and between 147,000 to 880,000 in the smallest countries. “It is the dynamics of the market. Each of these countries has its own rules to promote business development. In Cuba, on the other hand, the constitution outlaws the concentration of wealth, the state caps prices and banks retain the dollars that companies earn in profits”
Furthermore, he argues, Cuban statistics do not reflect the number of these ventures that do not survive for longer than a few months or which never turn a profit. “If we compare MSME statistics from Latin America, where only 45% of these companies are still in business after the first two years — and that is under conditions where there is full freedom to operate, freedom to set prices and a totally open market economy with access to financing from banks and private entities — the number of MSMEs incorporated in Cuba in the last two years is truly disappointing and nothing to brag about.”
Morales also alluded to recent attempts at raprochement between Cuban-American businesspeople and the the island’s government, including a meeting in Miami between a U.S. contingent and several Cuban MSMEs. On other occasions, owners of some MSMEs have written to President Biden asking him to lift the embargo, which is impacting their businesses, and to remove Cuba from the list of state sponsors of terrorism
It is understandable that the Biden administrtion, in its desire to stem the tide of immigrants, would try to offer incentives for Cubans to remain on the island rather than risk emigrating to the United States. However, it is the Cuban regime itself that is preventing this empowerment with its with its gag laws, its relentless repression, its endless obstacles and its persecution of anyone creating wealth,” says the Morales.
The Cuban regime, he claims, has used large waves of migration in recent years to blackmail its northern neighbor. “International law provides the United States with a large arsenal of effective, dissuasive tools it can use to stop this immigration blackmail,” he adds. “[But]engaging in political marketing operations in an effort to promote a private sector that does not exist, that is artificial, and that has been created for the benefit of the regime is a regrettable and useless exercise.”
Last August, Cuba Siglo 21 presented a series of appeals to the United Nations Human Rights Commission aimed at establishing a truly functional private sector on the island. The appeals called for the freedom to incorporate and manage one’s own company, free-market economic reform and an end to economic discrimination for political reasons. According to the organization, trying to put the country’s economy back on track by establishing a private sector under current conditions “is absurd.”
“The main obstacle to prosperity in Cuba is not the external sanctions but the internal blockade that the regime has imposed on its citizens. It is the mental blockade of the oligarchs who control the country, who do not yet understand that their time has passed, that for the country to function, for capital to flow and for the economy and the population to stay afloat, a democracy is needed,” he concludes.