Cuba is undergoing a fundamental process of change. It began in 2011 with the approval by the Cuban state of the Guidelines for Economic and Social Policy, known as the Lineamientos. In comparison with the market-based reforms that occurred in many other countries in the 1990s, this blueprint for updating the nation’s economy is limited in scope. In Cuba, however, it has far-reaching implications.
The Lineamientos offer the managers of state industries greater discretion over the use of resources and increased decision-making power. They also enable the formation of “non-state enterprises” by self-employed people and by private cooperatives. Citizens can now legally buy and sell real estate and automobiles, and they can contract to provide services. Entrepreneurs and cooperatives can (at least in principle) access goods at wholesale prices. More than 465,000 people have been authorized to work on their own, and more than 200 non-farm cooperatives are now up and running. A mixed economy of private, cooperative, state, and foreign enterprise—all of it unfolding within a socialist framework—is taking shape.
Increased levels of commercial activity, of course, often bring unwanted side effects such as pollution and social inequality. In Cuba, state leaders are acutely aware of the dark underside of economic change, but the state lacks the resources to redress most of these negative externalities. To help confront that challenge, some of the country’s newly minted entrepreneurs and cooperative leaders have begun to conduct business on a social enterprise model. In every part of Cuba, they are exploring the boundary between the private economy and the social economy—between private interest and collective well-being.
Cuba engenders a wide range of responses, from utopian to dystopian. For many people, Cuba has been a beacon that shines brightly on behalf of social justice. For others, it has been a tropical gulag. But the reality in Cuba today requires us to look beyond those stereotypes. The country’s emerging market enterprises, though hampered by serious constraints, could provide a laboratory for the application of socially responsible business models.
Exploring New Models
In Cuba, there are essentially three forms of property: private, cooperative, and state. For each of those forms, efforts are now under way to promote socially responsible business.
Private enterprises | It was the state—in the person of Eusebio Leal Spengler, the Historian of the City of Havana—that planted the seed of social entrepreneurship in Cuba. The Historian’s Office is a cross between a municipal government, a real estate developer, and an NGO. Under Leal’s leadership, it has developed an approach to preserving the cultural, architectural, and social heritage of Old Havana that has unleashed an entrepreneurial spirit while also promoting social solidarity and environmental protection. Over time, Old Havana has become home to a thriving (by Cuban standards) private economy with a social economy component.
The leading social entrepreneur in Old Havana is Gilberto “Papito” Valladares Reina, owner of a barbershop and beauty salon called ArteCorte. His enterprise encompasses a business, a museum that honors the profession of haircutting in Cuba, and a school for teaching that profession to young people. Above all, it is a catalyst for community change. With the support of the Historian’s Office, Valladares has invested a portion of the profits generated by his business in various neighborhood improvements. To date, ArteCorte has facilitated the restoration of local housing stock, the construction of a children’s playground, and the development of both a soccer mini-field and a senior day-care facility. Restaurateurs and other entrepreneurs, drawn by the excitement of the ArteCorte project, have begun arriving in the neighborhood as well.
Cooperative enterprises | The Lineamientos have also opened up opportunities for cooperative organizations to address inefficiencies in the state’s productive and commercial apparatus. Like private entrepreneurs, cooperatives are in many cases providing higher-quality products and higher worker pay than state-owned entities do. They are also helping to fill environmental and social needs. Recycling cooperatives, for example, are finding new ways to engage people in recycling efforts. Members of these cooperatives collect a broad range of items (paper, plastic, glass bottles) and then sell them to state-run salvage companies. As a consequence, neighborhoods are becoming cleaner and landfills are filling up more slowly.
Framing the conception of enterprise success to include external stakeholders is a hallmark of many cooperative ventures that are now emerging in Cuba. Consider Cooptex, a formerly state-owned textile cooperative with 60 members. Cooptex, based in Havana’s Marianao neighborhood, is experimenting with practices that allow some of its member seamstresses to work from home so that they can meet their family responsibilities. The leaders of Cooptex are also exploring ways to produce inexpensive goods for pensioners and other lower-income populations.
Cuba engenders a wide range of responses, from utopian to dystopian. But the reality in Cuba today requires us to look beyond the stereotypes.
Although Havana remains the hub of social enterprise activity in Cuba, the trend is beginning to spread to other parts of the country. When the Lineamientos made non-state enterprises possible, a young architect named Mayra Arencibia and a group of his colleagues formed a cooperative for the purpose of restoring the architectural patrimony of Matanzas, a city known as the Athens of Cuba. Along with providing professional preservation and reconstruction services, cooperative leaders intend to create opportunities for aspiring young artisans and for restorers of stained glass, murals, ironwork, furniture, and other antique items.
State enterprises | Although the number of people employed by private and cooperative enterprises is growing, the scale of their economic activity is dwarfed by that of the state sector. The state oversees more than 80 percent of the Cuban economy, and Cuban political leaders have made it clear that they will keep essential industries substantially under state control. For that reason, the future of socially responsible enterprise in Cuba will depend largely on how state enterprises adapt to the Lineamientos and to the mandate by Cuban leaders to achieve socialist ends through market-oriented means.
Many state sector managers are, in principle, fully on board with that mandate. But they must cope with obtuse central-planning mandates, stifling bureaucracy, outdated infrastructure and technology, low productivity, limited authority to hire and fire employees, and a distorted customer demand structure—along with the expectation that they will turn a profit, despite all of these challenges. In addition, state sector managers are barred from engaging with external stakeholders in the kinds of efforts (education and health projects, for example) that are a mainstay of corporate social responsibility (CSR) activity in capitalist countries. These limitations on the ability of the state sector to engage in CSR-like activities will continue to thwart the development of a socially responsible enterprise culture in Cuba.
Developing New Indicators
Five years ago, we initiated the Socially Responsible Enterprise and Local Development in Cuba project (SRELDC). Its purpose is to support a broader understanding of how enterprises can operate in Cuba. Toward that end, we have created a space for learning and exchange, and for experimentation with socially responsible enterprise models. The project has gained substantial support among Cuban scholars, government officials, and citizens. It has also benefited from the energetic contributions of NGO, corporate, government, and academic participants from Canada, Europe, and Latin America.
One of the most encouraging results of SRELDC has been the formation of the Red ESORSE (Network of Solidarity Economy and Socially Responsible Enterprises), an all-Cuban group that is examining models for applying socially responsible enterprise to the different forms of property in Cuba. Earlier this year, the Red ESORSE began to develop a Cuba-specific set of social responsibility indicators for various types of enterprises. These indicators, based on those developed by the ETHOS Institute of Brazil, resemble Global Reporting Initiative indicators but are more appropriate to developing countries.
The Red ESORSE is working closely with cooperatives in part because that form of property appears to be the one most likely to adopt socially responsible business models. For one thing, the solidarity exigencies of the cooperative model are generally in alignment with the principles of social responsibility. For another, cooperative enterprises in Cuba tend to be larger, better funded, and more business-savvy than small-scale entrepreneurial ventures. But the Red ESORSE is also making a special effort to adapt its ETHOS-based indicators to fit Cuban state enterprise realities. This more locally relevant set of indicators will provide a useful vehicle for dialogue with state enterprise managers, and it will mark a first step toward enabling real CSR activity at state-owned firms.
As Cuba moves to implement economic and social change, that process is unlikely to be linear. Instead, it will be punctuated by fits and starts—and by occasional retreats. In Cuba, after all, the “party line” is still more important than the “bottom line.” An optimal outcome will require conscious design and bold steps by Cuban political leaders. It will require easing the economic sanctions that the United States has imposed on the island for several decades. It will require resilience and tenacity on the part of Cuba’s entrepreneurs. And not least, it will depend on the support and guidance of the global socially responsible enterprise community.