The new frontier of “self-employment”

The self-employed sector (TCP) reached an historic high in 2019. After 50 years, the numbers of those linked to the sector (owners of enterprises and employees) reached 620,000, while it was 143,000 in 2009. This implies a high rate of job creation, in a context that has been characterised by huge challenges.

However, in this graph it can be clearly seen that this dynamism has been significantly reducing. The data shows two major turning points. One began in 2015, based on the improvement of relations with the United States. Not only did many people venture to open their own businesses, whose clients were mainly to be foreigners, but the huge hopes pinned on this process dispelled the doubts of many, both within and outside the country. The second turning point came in 2017, when two major events negatively impacted the sector: the freeze on the issuing of new licenses for the most important activities, and the application of travel restrictions from the U.S., combined with Hurricane Irma.

But the figures also reveal that each time growth slowed down, two significantly important events created the conditions for a recovery of the sector. Once the granting of licenses was re-established, albeit in challenging circumstances, many decided to venture into business or hire more employees.

While it is natural that this dynamism reduces over time, as the initial drivers behind it subside, it is worth asking whether “self-employment” has exhausted all its possibilities. In the context of the current economic difficulties, the viability of each business is a daily conquest. A notable number of businesses, in Havana and other tourist destinations, focused on international visitors for obvious reasons: they are a source of solvent demand.

However, the process of “updating” the economy brings several challenges that also offer new opportunities for the sector, and its role within the Cuban productive sphere. On the one hand, the restructuring of state companies and the public sector as a whole has only just begun. A clear result of this process in the following years will be the need to downsize, and economic policy should provide flexibility for the shift of many workers to new activities.

The second aspect is linked to the strengthening of commercial relations between entities of different ownership in the country. Hopes are that as more purchase-sales links, partnerships, etc. are generated, a larger internal market will be created, offering growth opportunities for entrepreneurs and cooperatives. It isn’t hard to imagine a scenario in which, under a favourable regulatory framework, many state, joint and foreign enterprises, but also budgeted units, subcontract services linked to TCPs and cooperatives. 

In order for this potential to be deployed, certain public policy changes are required. We offer two examples. On the one hand, it would be a good idea to swiftly advance towards a legal mechanism that allows many of the existing businesses to register as precisely what they are: companies. And together with this, the possibility of accessing a greater number of guarantees, including foreign trade. On the other hand, if the movement of workers to the private sector is aimed that contributing to the economic growth of the country, it will be necessary to ensure that our skilled workers can find or create jobs that make full use of their training. The positive list of activities is an anachronism that perpetuates inefficient use of the best resource of the nation: its people. It’s not only the number of skills, but their typology: it’s time to promote more complex businesses.   

The current entrepreneurs and those who are considering joining them should pay attention to the new changes in the Cuban economy.

Read more La Columna