B-Schools Explore Business In Cuba

“DOING BUSINESS IN A COMMUNIST COUNTRY IN TRANSITION IS NOT AN EASY TASK”

But this is one successful, albeit risky, story.  “It remains to be seen whether the Cuban government will continue to move towards greater liberalization of new businesses and regulations that support not only their existence but also their expansion and partnership with state entities,” believes Rodriguez-Graniel.

Hugo Cancio, CEO of Feugo Enterprises, shared similar sentiments at Wharton’s Summit. “Doing business in a communist country in transition is not an easy task. You need PPV — passion, perseverance, and vision — to do business in Cuba.”

A team of students from the University of California Berkeley’s Haas School of Business also traveled to Cuba this past semester to examine Casa Particular (think the Cuban AirBnB). According to Kristiana Raube, the executive director of the International Business Development Program at Haas, the biggest issue for Casa Particular and other small business owners is bandwidth.

“If you are trying to open a small hotel, how do you get people there when you have little or no internet access? A lot of families in Cuba use their American cousins to handle the web traffic and then speak via phone to arrange the visits,” Raube says.

Only about five percent of Cubans have unrestricted access to the internet. High taxation also predictably causes entrepreneurs participating in Casa Particular to under-report profits. “The government takes 10% of monthly revenues and 10% of annual revenues as a lump sum. So as to be expected, the revenue is often under-reported,” says Raube.

Overall, Raube says the jury is still out on investing in Cuban enterprises. “The obvious issue is there are a lot of unknowns,” Raube says. “From a U.S. perspective, it is still unknown if investments will actually make sense. If you are talking within Cuba, there are a lot more interesting and promising things happening.”

EVERYTHING IS NOT ALWAYS WHAT IT SEEMS

Rodriguez-Graniel also has words of caution for anyone looking at conducting business in Cuba. “On our trip, we would sometimes see presentations that were not constructed on true facts. A lot of things could be manipulated. There is a problem on who has the best access to information and where the information comes from.” A lot of information that is presented to foreign visitors is filtered through the party line.

Still, Rodriguez-Graniel says the fledgling and sometimes-offbeat entrepreneurial spirit is something entrepreneurs in other countries should adopt. “What is undeniable is the exceptional hope, enthusiasm, and creativity with which these entrepreneurs fight for their business ideas and the well-being of their families. These are important lessons that young entrepreneurs in other countries with greater ease of doing business, such as the United States, should pursue and adopt,” he says.

And for those aiming to enter the market soon, Rodriguez-Graniel has some advice. “The first step in studying business opportunities in Cuba would be to look at things Cuban people need and be savvy in your political dialogue and then strike as first mover.”

DON’T MISS: WHARTON’S BIG PUSH INTO STARTUPS