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How to Support Cuba's New Entrepreneurs

(AP Photo)

May 02, 2014

Changes in Cuba in recent years show the time is ripe for supporting entrepreneurship on the island. Over the past 17 years, I watched entrepreneurship explode throughout Latin America and the Caribbean, empowering citizens, transforming economies and changing lives. Across the region, 60 percent of employees work for businesses with five or fewer employees. In Brazil, small enterprises create two of every three jobs. Mexico’s micro-, small- and medium-sized enterprises represent 72 percent of employment. And in the U.S., about 70 percent of gross job creation comes from young businesses.

As Cuba opens up for independent enterprise, these emerging entrepreneurs will also support growth and job creation.

In November 2012, we led our first delegation to Cuba, where we met with emerging entrepreneurs and longtime owners of paladares (small, privately owned restaurants first permitted during the 1993 economic reforms). At the time, it had only been a year since the implementation of President Raúl Castro’s economic reforms to open up Cuba’s small business and tourism sectors. The changes were fresh, and while the excitement was palpable, uncertainty over their implementation was high.

Those who had jumped at the opportunity to start a small business relayed various challenges, some similar to those faced by new business owners everywhere, but many specific to the island and an environment that places serious constraints on business formation and growth. Taxes are onerous. The state banking system is relatively inaccessible, leaving little opportunity to gain and build credit. There is a lack of access to wholesale goods and markets as well as technical knowledge, and commercial rental space is practically nonexistent.

Above the day-to-day challenges are broader issues inherent in the move from a primarily state-owned economy to a mixed one. For many new entrepreneurs, there is little understanding of the management, financial or legal framework required to start and build a business. Possibly the biggest challenge is around culture, changing employees’ mentality from that of a state worker to that of a business owner or company employee.

And of course, there is the U.S. embargo, which not only limits U.S. citizens’ travel and business opportunities, but impacts all of Cuba’s international trade relations. Every entrepreneur spoke to how the embargo disrupts their growth by limiting access to inputs, resources, capital, and customers.

When we returned to Havana in March 2014, we saw some change, though many obstacles for small business owners remain. Our delegation could feel optimism mounting as the now 450,000 self-employed Cubans gain confidence in the government’s commitment to this “update.” Havana’s storefronts are filled with privately owned cafes, barbershops, art galleries, and even a store specializing in bamboo plants.

Some entrepreneurs were enrolled in or graduated from business training and incubator programs like Proyecto Cuba Emprende. Such programs are crucial to expanding financial and management training needed to successfully run a business, and are already being replicated by the state, but many more are required.

These new business owners are cautious about growth, having seen the government roll back reforms in the past, but they are finding creative ways around red tape and an arduous regulatory environment. Many have sold their belongings in eagerness to start their own business for the first time, like entrepreneurs in any part of the world.

Of course, the same challenges we heard about in 2012 remain. But ensuring development of this nascent non-state sector is critical, not just for individual business owners, but for Cuba and for U.S. relations. And on the U.S. side, President Barack Obama can take several small steps to empower these entrepreneurs and give them space to succeed, which is in everyone’s interest.

New micro-businesses are primarily funded by Cuban-Americans taking advantage of openings created by the Obama administration that permit sending unrestricted remittances to their families. The president can go further by allowing family remittances to be used as credits or equity, and permitting U.S. non-governmental organizations and individuals engaged in small business development to send unlimited remittances to non-family members to back independent economic activity.

He can support entrepreneurs who cannot access inputs essential for running businesses by expanding the types of goods travelers may legally take to the island. U.S. Treasury authorization of the export and import of certain goods and services between our private sector and Cuban entrepreneurs would also serve to increase access to these inputs and partially open them to the U.S. market.

These are just a few changes that can be made under executive authority to directly aid these emerging entrepreneurs. The U.S. has been operating under the same policy toward Cuba since 1960, and has fallen short when it comes to helping the Cuban people. True humanitarian aid must promote economic development.

As Cuba’s citizens gain a new kind of economic autonomy for the first time in 55 years, it is our moment to reach out and help them build. Let’s give these entrepreneurs the chance to determine their own destiny, engage in free commerce, have the freedom to fail and the opportunity to succeed. It is these very entrepreneurs who will be the creators of Cuba’s future jobs, savings and, ultimately, growth.

This article was originally published in U.S. News & World Report's online opinion section.