For the past 27 years, if you wanted to pay for something in Cuba, there were two different currencies you could use: the convertible peso (CUC) or the regular peso (CUP). Starting this month, the CUC is out. The Cuba government wants to make things simpler — and hopefully bring in more foreign investment in the process.
But the switch is expected to cause a lot more economic hardship for a while, especially skyrocketing inflation. A big fear is that Cuba’s fledgling private sector, or cuentapropistas, might not survive. Monday on The Sunshine Economy, WLRN’s Tim Padgett spoke with one private entrepreneur in Cuba — Marta Deus — about her determination to stay in business.
In these uncertain times, you can rely on WLRN to keep you current on local news and information. Your support is what keeps WLRN strong. Please become a member today. Donate Now. Thank you.
Here are some excerpts from their conversation:
PADGETT: Deus spoke with me by phone last week from the island, but only after our interview was delayed an hour because she was still in a long line at her bank, changing convertible pesos, or CUCs, for regular Cuban pesos, which are now Cuba's sole currency. Like most Cubans, she'd seen the signs in Cuban shops warning they were no longer accepting CUCs for payment, even though the government said the convertible pesos wouldn't be phased out for another six months.
DEUS: There were supposed to be many of the state-owned restaurants, or the gas stations, where you could go with the CUC or the CUP and you could pay with both currencies. On TV the government said you can pay everywhere with both currencies. But the reality is that’s not the reality. You have to pay with CUPs. And many of them, all these people are changing their money very quickly because they need it, because they need to to pay for many daily things, and they don't have another way.
Navigating that currency confusion is crucial for Deus. She runs three private businesses that employ a total of almost 40 people. There's an accounting firm called…
Deus Expertos Contables.
A restaurant and market food delivery service called…
Mandao.
And a bilingual business magazine called…
Negolution.
That's a combination of the Spanish word “negocio,” meaning business, and “revolution.”
READ MORE: Cuba Starts 'Monetary Ordering.' But Will Cubans See More Economic Chaos?
Like most economists, Deus is convinced Cuba's communist revolution has no choice now but to accommodate an entrepreneurial revolution.
We are like more than 30% of [Cuba’s] working population, which is something very important. So we need to survive in this moment because it's our responsibility to make this country better in the long term.
Toward that end, Deus believes Cuba's long overdue currency reform is a good thing. It’s execution so far, however, is another thing.
I think in the medium and long term it will be positive. It shows, like, the maturity of our government, to finally decide to make the unification of the currency that is so needed for us. But what I’m also saying is they should be more prepared – for example, some measures beforehand to help this to be less traumatic for the private sector. It’s been difficult for me to sleep for many days. (laughs)
The first thing I would ask for is a small and medium businesses law — a real legal structure for us that would make it easier for Cuba's private sector to get investment from here, from abroad, to survive this moment.Marta Deus
Keeping Deus awake at night are things like a lack of guidance on whether her businesses should still be taking the outgoing convertible pesos as payment — especially since the state-run enterprises that her private companies sometimes need to buy goods and services from may not be accepting those CUCs anymore.
We have to give clients options because they still have CUCs. So that makes a super-complicated situation because there are many changes coming in one moment. Our businesses, we have to be super-flexible and change prices maybe every week or every month. We have to be very creative. It's a lot of work – many meetings thinking about what are the strategies we have to take.
THE RIGHT BET
Deus says private businesses like hers could be more flexible, creative and strategic if the Cuban government would simply take off their regulatory handcuffs and include a more comprehensive private sector code as part of the currency reform. Five years ago, Cuba did give private businesses legal recognition.
And last summer, in response to the economic tailspin cause by the pandemic, the government said cuentapropistas could import and export. But they still have to do it through state-run companies — greatly weakening the import-export incentive. And they still can’t access Cuba’s wholesale markets or formal sources of capital and credit, at home or abroad.
You need real changes that adapt to the new situation. I think the first thing I would ask for is a small-and-medium businesses law. A real legal structure for us that would make it easier for us to get investment from here, from abroad.
My three companies, for example, are all in my name. All the responsibility is in my name. But if I want to grow I can’t go to the bank. If I find an investor, I can’t put [that investment] in my businesses. It’s very complicated here to get money to open a business. You can have an idea, but you need to have some money. So if you open that, I mean, it’s super important.
As part of the currency reform, the Cuban government last month announced that foreign investors for once can have majority or in some cases complete ownership of certain Cuban businesses. But most economists say under the current conditions, it's unlikely foreign investors will be flocking to the island any time soon. So Deus feels the regime is betting on the wrong economic horse.
Your bet is on the foreign investment law, but I think it's not the right bet. The right bet is the [Cuban] private sector, because the private sector is more dynamic.
Dynamic, but under serious threat. This year, thanks largely to the pandemic, the number of Cuba's private enterprises has dropped by more than a third.
