Cuba's Private Sector

The recent rise of the private sector in Cuba is especially striking in a country that defines itself as socialist, with an economy historically dominated by the state. It is worth remembering, however, that private activity never fully disappeared after 1959. Even after the so-called “Revolutionary Offensive”, small farmers, cooperatives, artisanal trades, and domestic services survived. These were marginal spaces, besieged by the gigantic state apparatus, yet essential to keeping entrepreneurial culture alive. As in other socialist regimes, an underground economy also flourished, driven by chronic shortages, which helped preserve skills, networks, and modest capital.

The crisis of the 1990s forced the authorities to recognize this potential, opening an unprecedented space for self-employed workers. While inertia predominated in agriculture, in urban activities initiatives emerged that increasingly resembled small businesses. Raúl Castro’s reforms expanded the catalog of permitted occupations, the hiring of employees, and achieved greater social and even international recognition, in part thanks to the thaw with the United States during the presidency of Barack Obama.

The decisive leap came in 2021, when for the first time in half a century the creation of private national companies was authorized. Micro, Small, and Medium Enterprises (MSMEs) emerged in the midst of a recession, accompanied by persistent inflation and widespread shortages. Despite this hostile environment, the sector has grown rapidly: by mid-2024 more than 11,000 MSMEs were registered, many of them linked to commerce, food production, and professional services. This process has also been fueled by the diaspora and remittances from abroad, which provide financing and access to inputs. In more than a few activities the private sector dominates: retail trade, transportation, importation of consumer goods, household services, and even food production.

This report seeks, in a few pages, to provide metrics on the size and performance of this non-state framework, and to place its role in an economy that is collapsing under a decaying model without a clear replacement yet emerging. The central conclusion is twofold: the private sector will not solve Cuba’s multiple problems on its own, but it is an indispensable part of any sustainable solution.

Under current conditions, however, the private sector’s potential remains severely limited. Short-termism and the obsession with control characterize economic policy and have led to clear distortions: rising prices, dependence on the informal foreign exchange market, and an emphasis on quick-turnover operations rather than long-term projects.

Beyond economics, the very act of creating and sustaining a business implies citizen empowerment: greater autonomy, responsibility, and the ability to set one’s own goals. It is the seed of a more independent and resilient society. For this reason, the underlying issue goes beyond regulation: it is about accepting that the Cuban State can no longer relegate the private sector to a secondary role in a system where state enterprises have ceased to be engines of dynamism. The challenge is to build a true entrepreneurial ecosystem, transparent and development-oriented, with a social focus.

The Cuban private sector is no longer a footnote: it exists, endures, and expands in the midst of adversity. Sooner or later, reality will prevail. The vitality of the entrepreneurs demonstrates that, despite all obstacles, Cuba can no longer be understood without them.

The full report, which was originally published by the Cuba Study Group, may be downloaded below.

Cuba's Private Sector - Pressure Valve or Engine of Development.pdf