Entrepreneurship among Remittances Recipients in Cuba

While the amount of remittances to Cuba appears to have declined moderately, they still represent at least one half of the total income of Cuban households. Flows come mainly from the US, with increasing levels from Europe and Latin America in the last five years—particularly Spain and Venezuela. The Inter-American Dialogue hosted a luncheon discussion on Monday, May 2nd to present results from a recent survey on Cuban remittance recipients and their interests in running micro and small enterprises. The session was moderated by Michael Shifter, president of the Inter-American Dialogue, with comments from Manuel Orozco, senior associate at the Dialogue and Katrin Hansing, associate professor of Black and Hispanic Studies at Baruch College (CUNY). The survey, conducted in January 2011, focused on remittances recipients that have an interest in opening a small business. In October 2010, the Castro government implemented reforms that cut spending, tightened taxation measures and allowed Cubans to acquire licenses to start small businesses in order to develop the private sector and relieve hardship from the current economic recession. Findings show that 43 percent of Cubans are not interested in opening a business, primarily because they spend their entire income on household expenses, do not have savings, or think the economic environment is not appropriate for such an investment. Those who are interested in opening a small enterprise (34 percent) are comprised mainly of men who are looking to start a business out of necessity or because they lost their jobs. The final 23 percent already own a “timbiriche” (the colloquial name for a small private business in Cuba) in activities such as food and retail. These are mainly owned by women, have monthly sales of about US$ 200 that complement existing household income, averaged at US$ 100 per month. Timbiriches are therefore best characterized as subsistent—as opposed to revenue-generating—businesses. While there is little doubt that remittances recipients are better positioned to open a business because of their access to financial capital, a lack of financial education or business skills will likely limit the success factors of Cuban entrepreneurship. There is a sharp disconnect between the Cuban economic reforms and people’s needs. According to the panelists, for the reforms to be successful, the Cuban government must carefully restructure the taxation system and include long-term planning on how to create incentives for investment. Current taxation levels stand at 25 to 50 percent of sales. The speakers agreed that while the government’s measures do not create a sufficiently favorable economic environment for Cubans to invest, more people will be interested in owning a business in the future and are more likely to be remittances recipients. The role of the financial and NGO sector as well as the government’s openness to these entities will be crucial for their success.