Cuba’s new entrepreneurs: Success, failure and a bit of both

Cuba’s new small businesses open with mixed results, the Associated Press reports.

There was no colorful bunting to mark the grand opening, and no way to advertise in the local press. There was not even money to hand out fliers in this decaying Havana neighbourhood of potholed streets and crumbling one-story homes.

So when the freshly painted front window of the tiny pizzeria swung open on the most important afternoon in Julio Cesar Hidalgo’s life, nobody noticed at first.

Hidalgo and his girlfriend Gisselle de la Noval waited for half an hour, then another, and another. Finally, 92-year-old Estrella Soto shuffled up to the takeout counter and ordered a medium pizza with onion toppings.

“I love it,” she declared, and Hidalgo and de la Noval have barely sat down since.

They sold seven more pizzas in the next 15 minutes, and a total of 30 on their March 8 opening day. The following Saturday they had their best afternoon yet, churning out 60 pies from a used gas oven that looks too narrow even for a small family’s needs.

It has been six months since President Raul Castro opened this tightly controlled communist country to a smattering of free-market capitalism, in the most significant change to its economy in decades.

By March 8, entrepreneurs had taken out more than 171,000 business licenses, according to state-run media, more than two-thirds of the 250,000 goal for all of 2011.

As Cuba’s new business class journeys cautiously forth, some, are enjoying the first fruits of success. Others say the terrain has been rockier than anticipated. Some already have closed the door on their entrepreneurial dreams.

The Associated Press began following the fortunes of a group of would-be small business owners in December. Four months later, their experiences seem to reflect the sweep of Cuba’s grand fiscal experiment, as well as the sometimes cruel vicissitudes of the free market.

There is Javier Acosta, who is struggling to get customers into his upscale Havana restaurant. And Yusdany Simpson, a young single mother making a modest income selling coffee and sandwiches from her front yard, a humble venture that resembles a child’s lemonade stand.

Then there is Danilo Perez, a 21-year-old bookkeeper who got a license to sell pirated DVDs, only to give up bitterly after authorities suddenly quadrupled his taxes.

“Cubans are entrepreneurial people, and to the extent they are allowed to work and make some money, they will,” said Lorenzo Perez, a former IMF economist and member of the Association of the Study of the Cuban Economy, a nonpartisan think-tank based in Washington, D.C.

But he added the new enterprises face stiff challenges in a country where few have business acumen, raw materials are hard to find, tax rates can be exorbitant and myriad government regulations still restrict basic activities.

“All over the world, the percentage of small businesses that succeed is very small, even in the United States,” said Perez. “In Cuba, the difficulties are enormous, because the environment is not very conducive yet to business … but that doesn’t mean it can’t be done.”

Dozens of restaurants have opened, some of them remarkably chic for an island of 11 million people where it can be hard to find such basics as matching tables and chairs, and an explosion of private apartments has flooded the rental market.

Those who have sought out licenses say the process is fast and straightforward. Fears that government inspectors, some looking for kickbacks, would undo the free market drive have not materialized, perhaps because there are as yet too few to check in regularly on the unexpectedly large number of new businesses.

Meanwhile, the government has pushed back indefinitely plans to lay off 500,000 state workers, acknowledging the move was extremely difficult and had to be handled with the utmost delicacy. More details are likely to be announced at a coming Communist Party Congress slated to begin April 16.

So far, all has not been smooth sailing for the entrepreneurs.

Perez, the DVD seller, threw in the towel two weeks ago. He said when he went to get a license in December, officials told him he needed to pay $2.50 a month to operate a street-side kiosk. When he went back in March, they told him the rates had gone up to $10.50 a month, with an extra month’s taxes in advance.

“There were many people protesting, some even crying, because they didn’t have the money to pay,” said Perez, who is unemployed and getting help from his parents to make ends meet.

Javier Acosta, owner of a new restaurant in the Playa neighbourhood, said he did not make enough in his first month even to cover the monthly tax of $458, and so had to dip into his savings to pay the government and his employees. The next month Acosta did cover his costs, barely, and he is hoping nervously the trend continues.

“There are days when nobody has come, absolutely nobody,” Acosta said. “Sometimes I’ve had one table, or two, but I know how this works … one must go slowly, little by little, and build a reputation through word of mouth.”

Simpson, the single mother, has had more success, albeit with far more modest goals. Before she opened her kiosk in Havana’s Vedado neighbourhood, she was unemployed and dependent on remittances sent from abroad to raise her 2-year-old son. Now, she makes about $25 a month selling coffee, soft drinks and mayonnaise sandwiches for pennies apiece, a little more than the average Cuban monthly salary.

“This isn’t going to make me rich, but I make enough to get by,” she said.

Back at Hidalgo’s pizza parlour, the strains of business ownership were evident. Hidalgo has spent more than $1,000 to get the pizzeria off the ground, much of it a gift from a cousin in the United States.

Now that it is open, he spends hours standing up each day next to the hot oven, and hours more each week lugging sacks of flour and large cans of tomato sauce back on his bicycle. He has been able to find all the ingredients he needs in official shops, a sign, he says, that the government is making good on promises to increase access to raw materials.

Hidalgo said he has had no time to contemplate success because he falls asleep at the end of each long day before his head hits the pillow.

He said his lowest moment came when a housing inspector turned up to fine him because he did not have a permit for carving out the pizzeria at the front of his house.

At first, it looked like he would have to pay the equivalent of $75, but in the end he was told the fine would be forgiven if he got an architect to retroactively draw up plans for the building work — something that will cost him just $4.

Hidalgo said no inspectors have been by to check his books or demand copies of his receipts, a major change from his experience opening another pizzeria with his cousin in the 1990s. Then, inspectors paid them weekly visits, and drove the venture out of business when they discovered the pair was buying ingredients on the black market.

This time, Hidalgo had planned to take a leave of absence from his $11-a-month job at a state-owned bakery, but he quickly realized his heart was in his new venture and quit outright.

He said there still are slow days, particularly at the end of the month when many people run short of cash, but he reckoned he averages selling 20 pies a day. On a good afternoon, he can easily make more than in an entire month at his old job, though profits are split with de la Noval and Hidalgo’s aunt, the owner of the house.

Hidalgo charges from 50 cents for a small cheese pizza to $3 for a family sized pie piled high with toppings, a small fortune on an island where the average salary is just $20 a month.

Some Cuban economists have warned that the fiscal changes might not work in part because islanders will not have enough spending money to support the new ventures. Many Cubans receive money from abroad, and almost everyone makes cash on the side, either stealing items from their government workplaces or doing odd jobs.

When asked where his clients get the cash for his pizzas, Hidalgo smiled.

“There are people who live off their salary or pension, but there’s always money that comes in in other ways,” he said, pulling another pie out of the oven and wiping the sweat from his brow. “If it were only for the salaries, people would be living on the street in loincloths.”

Hidalgo and his girlfriend say the business has changed their outlook on the country.

A year ago, both were looking to emigrate: her through a quickie marriage to a Cuban-American, him to live in Atlanta with the cousin who was once his business partner.

“We took a risk, we believed in the country and the changes they are making,” said de la Noval. “We are hoping that things are only going to get better.”

Success, failure and a bit of both: Cuba’s new small businesses open with mixed results

By Paul Haven, The Associated Press – 1 hour ago

HAVANA — There was no colorful bunting to mark the grand opening, and no way to advertise in the local press. There was not even money to hand out fliers in this decaying Havana neighbourhood of potholed streets and crumbling one-story homes.

So when the freshly painted front window of the tiny pizzeria swung open on the most important afternoon in Julio Cesar Hidalgo’s life, nobody noticed at first.

Hidalgo and his girlfriend Gisselle de la Noval waited for half an hour, then another, and another. Finally, 92-year-old Estrella Soto shuffled up to the takeout counter and ordered a medium pizza with onion toppings.

“I love it,” she declared, and Hidalgo and de la Noval have barely sat down since.

They sold seven more pizzas in the next 15 minutes, and a total of 30 on their March 8 opening day. The following Saturday they had their best afternoon yet, churning out 60 pies from a used gas oven that looks too narrow even for a small family’s needs.

It has been six months since President Raul Castro opened this tightly controlled communist country to a smattering of free-market capitalism, in the most significant change to its economy in decades.

By March 8, entrepreneurs had taken out more than 171,000 business licenses, according to state-run media, more than two-thirds of the 250,000 goal for all of 2011.

As Cuba’s new business class journeys cautiously forth, some, are enjoying the first fruits of success. Others say the terrain has been rockier than anticipated. Some already have closed the door on their entrepreneurial dreams.

The Associated Press began following the fortunes of a group of would-be small business owners in December. Four months later, their experiences seem to reflect the sweep of Cuba’s grand fiscal experiment, as well as the sometimes cruel vicissitudes of the free market.

There is Javier Acosta, who is struggling to get customers into his upscale Havana restaurant. And Yusdany Simpson, a young single mother making a modest income selling coffee and sandwiches from her front yard, a humble venture that resembles a child’s lemonade stand.

Then there is Danilo Perez, a 21-year-old bookkeeper who got a license to sell pirated DVDs, only to give up bitterly after authorities suddenly quadrupled his taxes.

“Cubans are entrepreneurial people, and to the extent they are allowed to work and make some money, they will,” said Lorenzo Perez, a former IMF economist and member of the Association of the Study of the Cuban Economy, a nonpartisan think-tank based in Washington, D.C.

But he added the new enterprises face stiff challenges in a country where few have business acumen, raw materials are hard to find, tax rates can be exorbitant and myriad government regulations still restrict basic activities.

“All over the world, the percentage of small businesses that succeed is very small, even in the United States,” said Perez. “In Cuba, the difficulties are enormous, because the environment is not very conducive yet to business … but that doesn’t mean it can’t be done.”

Dozens of restaurants have opened, some of them remarkably chic for an island of 11 million people where it can be hard to find such basics as matching tables and chairs, and an explosion of private apartments has flooded the rental market.

Those who have sought out licenses say the process is fast and straightforward. Fears that government inspectors, some looking for kickbacks, would undo the free market drive have not materialized, perhaps because there are as yet too few to check in regularly on the unexpectedly large number of new businesses.

Meanwhile, the government has pushed back indefinitely plans to lay off 500,000 state workers, acknowledging the move was extremely difficult and had to be handled with the utmost delicacy. More details are likely to be announced at a coming Communist Party Congress slated to begin April 16.

So far, all has not been smooth sailing for the entrepreneurs.

Perez, the DVD seller, threw in the towel two weeks ago. He said when he went to get a license in December, officials told him he needed to pay $2.50 a month to operate a street-side kiosk. When he went back in March, they told him the rates had gone up to $10.50 a month, with an extra month’s taxes in advance.

“There were many people protesting, some even crying, because they didn’t have the money to pay,” said Perez, who is unemployed and getting help from his parents to make ends meet.

Javier Acosta, owner of a new restaurant in the Playa neighbourhood, said he did not make enough in his first month even to cover the monthly tax of $458, and so had to dip into his savings to pay the government and his employees. The next month Acosta did cover his costs, barely, and he is hoping nervously the trend continues.

“There are days when nobody has come, absolutely nobody,” Acosta said. “Sometimes I’ve had one table, or two, but I know how this works … one must go slowly, little by little, and build a reputation through word of mouth.”

Simpson, the single mother, has had more success, albeit with far more modest goals. Before she opened her kiosk in Havana’s Vedado neighbourhood, she was unemployed and dependent on remittances sent from abroad to raise her 2-year-old son. Now, she makes about $25 a month selling coffee, soft drinks and mayonnaise sandwiches for pennies apiece, a little more than the average Cuban monthly salary.

“This isn’t going to make me rich, but I make enough to get by,” she said.

Back at Hidalgo’s pizza parlour, the strains of business ownership were evident. Hidalgo has spent more than $1,000 to get the pizzeria off the ground, much of it a gift from a cousin in the United States.

Now that it is open, he spends hours standing up each day next to the hot oven, and hours more each week lugging sacks of flour and large cans of tomato sauce back on his bicycle. He has been able to find all the ingredients he needs in official shops, a sign, he says, that the government is making good on promises to increase access to raw materials.

Hidalgo said he has had no time to contemplate success because he falls asleep at the end of each long day before his head hits the pillow.

He said his lowest moment came when a housing inspector turned up to fine him because he did not have a permit for carving out the pizzeria at the front of his house.

At first, it looked like he would have to pay the equivalent of $75, but in the end he was told the fine would be forgiven if he got an architect to retroactively draw up plans for the building work — something that will cost him just $4.

Hidalgo said no inspectors have been by to check his books or demand copies of his receipts, a major change from his experience opening another pizzeria with his cousin in the 1990s. Then, inspectors paid them weekly visits, and drove the venture out of business when they discovered the pair was buying ingredients on the black market.

This time, Hidalgo had planned to take a leave of absence from his $11-a-month job at a state-owned bakery, but he quickly realized his heart was in his new venture and quit outright.

He said there still are slow days, particularly at the end of the month when many people run short of cash, but he reckoned he averages selling 20 pies a day. On a good afternoon, he can easily make more than in an entire month at his old job, though profits are split with de la Noval and Hidalgo’s aunt, the owner of the house.

Hidalgo charges from 50 cents for a small cheese pizza to $3 for a family sized pie piled high with toppings, a small fortune on an island where the average salary is just $20 a month.

Some Cuban economists have warned that the fiscal changes might not work in part because islanders will not have enough spending money to support the new ventures. Many Cubans receive money from abroad, and almost everyone makes cash on the side, either stealing items from their government workplaces or doing odd jobs.

When asked where his clients get the cash for his pizzas, Hidalgo smiled.

“There are people who live off their salary or pension, but there’s always money that comes in in other ways,” he said, pulling another pie out of the oven and wiping the sweat from his brow. “If it were only for the salaries, people would be living on the street in loincloths.”

Hidalgo and his girlfriend say the business has changed their outlook on the country.

A year ago, both were looking to emigrate: her through a quickie marriage to a Cuban-American, him to live in Atlanta with the cousin who was once his business partner.

“We took a risk, we believed in the country and the changes they are making,” said de la Noval. “We are hoping that things are only going to get better.”

For the original report go to http://www.google.com/hostednews/canadianpress/article/ALeqM5hJ5XsRf42NGDh2s6l0ZVwwXHIkJw?docId=6519331

One thought on “Cuba’s new entrepreneurs: Success, failure and a bit of both

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s