Entrepreneurship in Cuba: What you need to know

Entrepreneurship in Cuba: What you need to know
Marguerite Ward | @forwardist

In the past five years, the number of self-employed Cubans has risen to
500,000.

Cuba-U.S. relations are still thawing, but that doesn't mean
entrepreneurs have to sit and wait idly by.

"For any entrepreneur right now, it's about making connections. Once
things open up, which I think will happen sooner rather than later, then
business can start," said Thomas Hayes, chair and professor of marketing
at Xavier University, who has traveled to Cuba multiple times over the
past three years.

Since President Barack Obama's visit in March, both big and emerging
businesses are waiting for a green light to enter the Cuban market. The
Cuban government currently allows self-employment in approximately 200
categories and has recently relaxed its trade policies. U.S. companies,
however, are still not allowed to set up shop.

While D.C. irons out the details with Cuban President Raúl Castro,
start-ups can start visiting Cuba to develop an understanding of the
culture, consumer needs and talk with their Caribbean counterparts.

Educators such as Professor Hayes can go to Cuba under guidelines for
the education field. "You can literally say, 'I'm going down for
cultural or educational reasons, and as long as you go to a museum or
gallery,' you can do it. You can make connections with Cubans," Hayes said.

The rules are different for businesspeople.
Bob Guild, vice president of Marazul Charters, which has organized trips
to Cuba for a long time, said that entrepreneurs have to fit into one of
12 categories of general licenses created by the Treasury Department's
Office of Foreign Assets Control (OFAC) for travel to Cuba. The two
categories most business travelers employing his company's charter
services use are "professional research and professional meetings" or
the newly created "people-to-people" exchanges category authorized by
President Obama.

There is another category for businesspersons actively selling goods in
Cuba, such as foodstuffs or medical goods, but that would not apply to
entrepreneurs traveling for general business research purposes.

"If you are just checking things out and want to see the possibilities,
simply travel under 'professional research,'" Guild said. He added that
this general license could also apply to individuals who studied for a
professional field while in school, did not pursue it, but are now
looking to get back into that field.

The "people-to-people" exchanges authorized by the government are the
most liberal of any Cuban travel authorization, Guild said. Authorized
by President Obama in March, it does not require group travel or a
professional background. It only requires the person who travels to Cuba
to develop a full schedule of meaningful interchanges and keep records
of those meetings for five years. While Treasury classifies these
"people-to-people" exchanges as "educational," Guild said they are not
limited to educators. Still, as it applies to businesspeople, this
category is not as clear-cut as the "professional" license.

But Guild did provide two points of caution: First, businesspeople
traveling under this license should have a serious intent. He said,
"We've all had meaningful exchanges with bartenders," but that should
not be the extent of a businessperson's intent.
The Treasury Department fact sheet on the people-to-people policy
states, "Individuals will be authorized to travel to Cuba for individual
people-to-people educational travel, provided that they engage in a
full-time schedule of educational exchange activities intended to
enhance contact with the Cuban people, support civil society in Cuba, or
promote the Cuban people's independence from Cuban authorities and that
will result in a meaningful interaction between the traveler and
individuals in Cuba."

And second, under a license to travel, Guild said that any
businessperson must decide whether a commercial visa from the commercial
attaché of the Cuban embassy is required. "There are two governments
involved here," he said.

If a businessperson is going to Cuba to set up a commercial operation,
there is a definitive need for a commercial visa. But if the person is
traveling for general research purposes, the visa may not be required —
but the second trip they make, to follow up on a more specific business
opportunity, would require it, Guild said, adding, "Use realism. It's a
judgment call."

Experts say that Cuban entrepreneurs are eager to generate more business.

"A lot of Cuban entrepreneurs are being successful, and they are
excited. Some of them are making money hand over fist," said Richard
Feinberg, author of forthcoming "Business: Building the New Cuban
Economy" and senior fellow in the Latin America Initiative at the
Brookings Institute.

The number of self-employed Cubans, or cuentapropistas, rose from
150,000 to 500,000 between 2010 and 2015, revealed the World Policy
Journal. The adult population of Cuba is 11 million, according to the
CIA World Factbook.

"Havana and other cities are blossoming with new restaurants and
bed-and-breakfasts; transportation services, including taxis and
trucking; as well as private construction firms and appliance-fixing
shops," Feinberg said.

The majority of start-ups recently launched by Cubans have centered
around tourism and the service industry, but there is a growing cadre of
internet-based content and publishing companies in Cuba, according to
multiple experts.

"I think there are a lot of other Cubans who want to get in the game,"
Feinberg said.

But questions remain on how new start-ups will function.

"To get the kind of high-growth entrepreneurship that can really create
high-quality jobs, have added value and drive socioeconomic prosperity,
you're going to need the institutions to get on board," said
Northwestern University's Kellogg School of Management professor
Benjamin Jones. "Will start-ups be able to scale?"

"I THINK THERE ARE A LOT OF OTHER CUBANS WHO WANT TO GET IN THE GAME."
-Richard Feinberg, senior fellow in the Latin America Initiative at the
Brookings Institute

Infrastructure, construction, telecommunications and business services,
like payroll and accounting, are areas experts say are ripe for development.

"There's an opportunity to make money [in Cuba]. When will it happen? I
wish I could say. I would hope within the next two years. But it's never
too early to make connections," Hayes said.

Kaveh Miremadi, a sanctions attorney with Price Benowitz, said the
contours of OFAC guidelines are not always easy to understand. Any
businessperson interested in traveling to Cuba but who has any doubts
about eligibility can submit a letter to OFAC asking for interpretive
guidance. He said it would be best to have a lawyer draft the letter and
that the filer should expect a lengthy wait before OFAC replies, as long
as two to six months.

Guild said in his experience it takes OFAC even longer to reply to
requests for interpretive guidance. With the new rules, in particular
the person-to-person exchange, an individual, or lawyer, should be able
to make a determination about travel to Cuba without taking this step.

OFAC guidelines for travel to Cuba are available here.

Marguerite Ward
News Associate

Source: Entrepreneurship in Cuba: What you need to know -
http://www.cnbc.com/2016/04/21/entrepreneurship-in-cuba-what-you-need-to-know.html