What are ‘pymes’? Cuban entrepreneurs living a boom after little known 2021 economic reform

DORAL — Among those seated at a roundtable during a recent lunch gathering were Cuban entrepreneurs, not an unusual sight in the Miami-Dade city burgeoning with ambitious, successful expatriates from other countries. Except that these business people, including one who specializes in international trade and another who is rolling out a chain of cafeterias, are owners of surging private businesses inside the communist country.

The visiting merchants, who asked not to be identified by name, are part of a fast-growing class of businesses in Cuba known as the “pyme,” pronounced pee-meh. The word is a euphemism for small- and medium-sized businesses, or “pequeñas y medianas empresas” in Spanish.

Cuban government statistics suggest the proliferation of pymes is a key reason the number of Cubans employed by non-state owned enterprises, at 1.6 million, far exceeds those working in government companies, 1.17 million.

“There’s been a massive migration from the state sector, particularly the state enterprise sector, but from all over the state, really, to the private sector,” said Ricardo Herrero, executive director of the Cuba Study Group in Washington, D.C., who attended the luncheon.

“You look at the numbers, and if you put yourself in the eyes of a hardline communist, they are not very flattering.”

The tide of Cuban entrepreneurs may be about to swell even more.

Next week, the Biden administration is expected to announce new measures allowing Americans to assist Cuban pymes directly, including long-awaited specific guidelines for loans to these independent companies from financiers in South Florida and beyond. The access to greater capital sources could lead to a boom for existing Cuban private businesses as well as for those budding entrepreneurs needing money to turn start-up talk into action.

Which is one of the reasons the pymes owners were dining at the trendy Doral eatery that day, telling their stories and answering questions as they took a break from wooing potential financiers, suppliers and clients.

Cold War with Cuba commands attention, small businesses fly under the radar

Yet the flourishing of a capitalist-like sector within Cuba’s economy in the past two years is a development that has flown under the attention radar across South Florida. When it comes to conversations about the Cold War adversary 90 miles offshore, the focus remains squarely on geopolitics, the immigration crisis from the Caribbean island and the repressiveness of the post-Castros regime in Havana.

That will be the case again on Monday, for example, when Cuban leader Miguel Díaz-Canel is scheduled to speak at the United Nations in New York. In the lead-up to that appearance, one of the topics circulating through media this week was the “trafficking” of Cuban men to Ukraine to assist in Moscow’s brutal invasion of the neighboring country.

The scant attention given to an unprecedented, if even fledgling, financial reformation has frustrated those who advocate policies to bolster the fortunes and longevity of Cuba’s entrepreneurs.

Herrero points out the 2021 reforms that legalized small and medium business creation and ownership in Cuba was a direct result of the stunning and inspiring Patria y Vida movement in July of that year. Images of the widespread street protests circulated globally through social media and sparked solidarity demonstrations along roadways across Florida, but also led to the imprisoning of hundreds of activists and participants on the island.

However, Herrero said a month later, the regime led by Díaz-Canel was forced to “fast-track” the economic reforms that created the pymes and allowed the Cuban citizen-owned businesses to pay their suppliers from bank accounts in other countries. He said Cuba’s government had initially planned to approve the law, which was part of a group of measures languishing since 2011, this year.

“Basically, the reformers won a major round,” Herrero said. “But it’s frustrating because no one is calling a victory here. We really won a round after the protests because they were forced to fast-track this law.”

Divided by politics, can pymes businesses create a common interest between Florida, Cuba?

Statistically speaking, the scorecard on that W is telling. All told, the data suggests nearly 30% of the country’s workforce, just shy of 6 million people, gets paychecks from businesses not managed by Cuba’s communist rulers.

The catalyst, those touting pymes say, is the two-year-old law that essentially legalized the status of what are known in the United States as limited liability companies. Before then, Cuban law largely limited private enterprise to sole proprietors, such as a hairdresser who decided to open a living room salon.

Despite the success they have encountered, the entrepreneurs at the lunch noted major obstacles still impede growth. One is the dire state of the country’s infrastructure, from a short-circuiting power grid to potholed roadways. Another is the virtually nonexistent banking system.

The latter is what is leading to them to court financing in America.

The U.S. Treasury Department, which enforces many U.S. embargo rules under the 1996 Helms-Burton Act, appears ready to issue regulations on loans to pymes. Up to now, U.S. law permitted such lending, cubanologists say, but absent the specifics of what is allowed in total dollar amounts or terms per loan, banks and other institutions have stayed on the sidelines.

Once the details are released, it could open a spigot of capital and scale up involvement by Cuban-Americans.

“I believe that if we are going to find a point of common interest that Cubans on the island and Cubans here recognize, it is this,” said Joe Garcia, a former Democratic congressman from Miami.

Garcia, who now consults on commerce with Cuba, said the pymes speak to universal principles embodied by private business from “butchers, bakers and candlestick makers” — investment in local communities and helping people directly with employment and financial mobility.

“And this is part of the great success of South Florida, entrepreneurship,” he said. “That’s what you are seeing in Cuba. Many of these people are doing this with a deep sense of trying to help their country. They are doing quite well, many of them, but they are also making the sacrifice and the investment of staying in their country, which is very laudable.”

In and away from Miami, Cuban economic reforms still met with deep-seeded skepticism

But at the lunch gathering, the Cuban entrepreneurs were also met with a dose of skepticism.

“How does Raul Castro get his mordida?” asked Ruben Roque, a 1960s-era exile, referring to the Spanish slang word for a cut of the profits, or payoff.

The zinger by Roque, a former executive for the developer that built the Bayside complex in downtown Miami, reflected a widely embraced suspicion held by Cuban-Americans and other skeptics. Namely, that any independent activity in Cuba that is not overtly dissident lacks authenticity or is umbilical to the communist government and party apparatus.

Another impediment is doubt among many stakeholders that reform in Cuba will be more than a short-term fix, said an international attorney who has worked on commercial and investment deals with Cuba.

Adolfo Garcia represented clients as varied as one vying to develop an industrial zone in the Port of Mariel, the site of the 1980 boatlift, and a telecommunications outfit proposing to extend a fiber optic cable from Florida to Cuba. He said “recent history” doesn’t bode well for pymes.

Garcia, who is based in Boston but winters in Palm Beach, said he supported the engagement policy of President Barack Obama a decade ago believing commerce would, over time, soften the inflexibility of the Cuban body politic. But the optimism proved unwarranted, he said, as hardliners devoted to the late dictator Fidel Castro won elections, gained leverage and hammered the country with hardline policies.

“The fact is the opening not only didn’t work, it did not succeed as Obama and people like me thought, but it strengthened tremendously the hand of the hardliners,” said Garcia, who was not at the lunch meeting.

Yes, the growth of the pymes has been extraordinary, but Garcia said he is “not encouraged” because ultimately they will be viewed as a threat.

“Clearly it is a system that prizes and values political control, complete control and influence, of the communist party and does not want a rival power source, which is what a thriving economy, a thriving capitalist private sector, does,” he said. “It creates a force that is indirectly powerful politically because it has economic strength. It has the ability to endorse causes and efforts separate from the decisions that the community party would make.”

The best outcome, Garcia theorizes, is for the new entrepreneurial class to lower ambitions, not score too many sales, not serve too many customers and not make too much money.

“Ironically, they are better off by not being too successful,” he said.

Cuba entrepreneurs seen as Trojan horses on both shores of the Florida Straits

The skepticism, the pymes owners gathered in Doral conceded, is understandable. They acknowledged their fates and fortunes are wedged between hardliners who want an orthodox communist society and reformists willing to ease the government’s grip.

That reality is not lost on Garcia, the former congressman.

“The Cuban government can shut this down at any time,” he said. “You have to work within that reality.”

The paradox is that pymes are seen as Trojan horses on both sides of the Florida Straits. Ideological communists perceive them as a threat to the Cuban Revolution, now in its 64th year. Anti-communist exiles in South Florida suspect they are a front for the Castro brothers’ successors.

Herrero with the Cuba Study Group said bringing the pymes into the U.S. banking system would allay some of the local pessimism.

The pymes would have to comply with banking know-your-customer vetting rules, which guard against money laundering and other financial misdeeds. Plus, it will be harder to paint pymes as communist government patsies the more they operate outside Cuba’s financial network.

Beyond that, growing Cuba’s entrepreneurial class is in the best interests of both Washington and Havana, he said.

Their success would alleviate the “horrendous” economic situation in Cuba, given that the country is financially broke and teetering toward becoming a base for Russian organized crime, he said.

“The legalized private sector wants relations with the U.S. and the Cuban-American community. It’s their natural market,” Herrero added. “This is a prime opportunity for us to play on the ground and help develop a formal and vibrant private sector in Cuba and not cede the ground to those who want to hand off Cuba to Russia, and help them turn it into a hub for money laundering and organized crime, which is what the Russians want to do.”

Originally published in The Palm Beach Post on September 16, 2023. Photo credit: Reuters.