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I would appreciate if i can receive the completed assignment by the 6th February 2013 as it due for submission on the 7th February 2013.
Read the case study below and answer all the questions that follow:
Emerging entrepreneurship in Cuba by Marilyn M. Helms
Oswaldo Cuesta Rodriguez sat smiling in the center of the front seat of the 1957 Dodge convertible as his dad Alexis sat behind the wheel. Both were waiting on the first group of tourists who wanted to see the sights in Havana, Cuba. The father and son team worked for the government, like almost all businesses in communist Cuba, but Alexis himself completely restored the old -yank tank- with spare parts from various Russian cars and other items he could cobble together to keep the car running to delight the growing number of tourists. Oswaldo (or -Waldo- for short) had heard in the school hallway one day after his English class ended that even more tourists might be joining the ranks of tourists from Mexico, Canada, England, Spain, and other parts of Europe. While Waldo had no access to the internet or any international newspaper, television, or radio to learn about plans in the USA by the Obama administration to allow Americans wider travel access to communist-led Cuba, he knew his home was already a popular and growing destination for tourists. While Waldo could not find the tourists homes on a map of the world, he knew these visitors loved the tropical weather, riding along the famous Malecon seawall, hearing the jazz music, photographing the old Spanish architecture, sampling the famous Cuban cigars and hearing stories of the American mobs presence in Cuba in the 1950s when casinos, parties, and gambling once ruled the island. At 19, Waldo had no direct knowledge of this past time of fun and frivolity that was once Cuba. He only knew that he and his Dad needed the tourists peso tips to help feed his family. Alexis continued to tell him stories from his own father and grandfather, which Waldo memorized and then translated into English for the delight of the tourists who could not get enough stories about old Havana.
Waldo had worked for some American tourists already. They were becoming easier to spot for him. They were always smiling and laughing and enjoying themselves and somehow seemed different in both spirit and behavior from the other tourists. Some were in Havana and other parts of Cuba on medical, humanitarian, or religious visits where they worked to improve the crumbling buildings or aid the struggling Cuban people. Others seemed to be sneaking into the country illegally from other places, particularly from countries in the Caribbean, to have a look at old Havana while trying to avoid being caught by the US Treasury Department. While Waldo had little knowledge of geography and the government purposefully kept him and other Cuban citizens in the dark on how close other countries were, Waldo did know that these visiting tourists represented the chance at a better life for him. if his Dad and he started their own private tour business in the future, he had to hone his language and interpersonal skills to survive in the topsy-turvy world of Havana, Cuba he called home. The Republic of Cubas history Cuba was the largest island in the Caribbean and Havana its largest city. The USA was a mere 90 miles from Cuba and other nearby neighbors included the Bahamas, Mexico, the Cayman Islands, Jamaica, Haiti, and the Dominican Republic. Christopher Columbus found Cuba and claimed the island for Spain and it remained a territory until the Spanish-American war ended in 1898. In 1959, Fidel Castro overthrew the dictatorship of Fulgencio Batista and installed his communist regime that still rules today, although headed by his brother Raul since 2008. Many of the eleven million citizens were descendants from the aboriginal people or African slaves who were brought to the island during the Spanish rule.
Fidel Castro and his new revolutionary government began their take-over of Cuba by expropriating private property of the citizens, nationalizing public utilities, and controlling the former private sector. Castro closed the largely US mafia-controlled gambling industry and turned hotels and banks into housing for Cubans. All media were controlled by the state and those who disagreed with his communist regime were imprisoned, executed, or fled to Spain or the US Fidel Castro created a system of neighborhood spying he called the
Committee for the Defense of Revolution to ensure citizens followed the communist doctrines and laws. By
1962, after the Cuban Missile Crisis and failed Bay of Pigs Invasion, the US Government imposed an embargo on Cuba severing all diplomatic and commercial ties to the island and limiting US travel. With only limited
Soviet support, the life in Cuba was difficult for citizens. Today, Cuba had limited aid and support from China, Venezuela, and Bolivia and the citizens were largely poor and had little to no human rights or freedoms. Jobs, housing, education, and medical care were provided by the government but food shortages were common and conditions were poor ( With the 2011 health problems of Hugo Chavez, Venezuelas president, there was also insecurity that Cuba will no longer have support from Venezuela. Their aid had been the biggest single factor in helping the communist island emerge from the slump following the loss of aid from the former Soviet Union (The Economist, 2011).
Current reforms
Yet changes were taking place within Cuba. Eventually, the government could lay off as many as 1 million workers. Currently, 143,000 Cubans had been authorized to work in the private sector (Rodriguez and Haven, 2010). The goal was to create 450,000 more non-state jobs in 2011 by issuing more licenses for self-employment, expanding the number of categories for permitted work, and loosening restrictions for these work categories. Restrictions for obtaining bank credit and doing business with state entities would be lifted (Tamayo, 2010b). Analysts wondered if this was the first crack in an otherwise frozen Cuban system (Guerrero, 2010). Given the challenges Cuba faced, what would be the effect of recent reforms to allow more private businesses and entrepreneurship? Could Cubans, whose basic survival depended on finding a clever, illegal way around the many government restrictions, move from having a guaranteed government job to starting their own businesses and if so, what small businesses were likely to succeed?
While people-to-people Cuban travel visits were approved in 1999 under the Clinton administration, these visits disappeared in 2004. The then Bush administration felt strongly in maintaining the ban on tourism that was part of the original US embargo. Some Cuban-exiled families in Miami and other parts of Florida in particular felt more travel to Cuba would not promote democracy on the island but would only provide much needed hard currency for the communist regime. Yet the Obama administration had recently eased travel to Cuba and Cuban officials expected as many as 500,000 US visitors, mostly Cuban-Americans visiting relatives. These newly approved -people-to-people tours required a schedule of educational activities and could not simply be frivolous sightseeing visits- (www.cbsnews. com/stories/2011/05/21/politics/main20065037.shtmI).
In Cuba, very little had been done since the revolution other than lengthening land leases to 99 years to appease foreign investors. It would appear the current level of political stability in Cuba, however, was not yet at a crisis level, but after massive layoffs, political stability may soon be in question. While some observers may feel the announced reforms were attempts to move Cuba to more of a market economy model similar to China, there were some distinct differences. The Cuban move toward privatization seemed to be motivated by a recognition that Cuba was out of options in turning around a struggling centralized economy. The subsidies from other communist countries were the only reason the communistic model had functioned at all. To remove over 500,000 workers from the government payroll seemed a sign the government was now willing to consider other options. State-trained Cuban Economist Oscar Espinosa Chepe applauded the new reforms but agreed Cuban authorities would need a complete ideological reform to allow private-property reform and other initiatives to work successfully (Weissert, 2010). Layoffs of government employees would certainly create short-term unemployment but could lead to higher long-term wages for those in the private sector (de Cordoba and Casey, 2010). Changing the culture for new venture creation in Cuba would require a change in the mind-set by individuals as well as require access to low-cost capital, tax incentives or exceptions, and the availability of management advice, business incubators, and other conditions to foster business creation. Social and environmental issues too must change.
Currently, 591,000 workers were reported to be employed in the private sector in Cuba, either self-employed or working for a foreign company operating in Cuba, like most of the Spanish-run hotels. There were 143,000 of the 591,000 who were self-employed, in the limited private enterprise previously allowed under Fidel Castro.
The major obstacles limiting entrepreneurship were the excessive taxes, the lack of access to credit and foreign exchange, the ban on advertising, limits on hiring and excessive government regulation and red-tape (de Co.rcioba and Casey, 2010). Cuba had approved 178 activities for those who wanted to be self-employed such as toy repair, music teacher, carpenter, or pirCata salesperson. While the categories would likely be expanded, these endeavors would generally be classified as -salary substitute- or -lifestyle- companies (Timmons and Spinelli, 2009) that were unlikely to create inherent economic value. One additional reason cited for slow economic growth in the past was that foreign investment had historically been restricted to joint ventures with the government (de Co.rdoba and Casey, 2010). Foreign capital had been only allowed in narrow segments of the overall economy and typically this had been in the management of tourist hotels by the Spanish.
There had been a conflict between those who wanted economic freedom and the governments desire to control. Creating a system with increased taxes and other financial obstructions would not allow private enterprises to work. Already the privatized barbers who were now renting their former state-run barber and beauty shops complained about their high taxes. According to Carmelo Mesa Lago, University of Pittsburgh professor and noted expert on the Cuban economy, the government should delay collecting taxes until new private businesses were established and profitable (Tamayo, 2010c). The problems that many forecast for the new Cuban economic system were excessive government-imposed control, increased taxes, and fees which would hinder economic activity. A concern was that the government may want to be involved in the private management of the enterprise with such activities as pricing, determining where cooperatives could sell their products, and requiring that only the government provided the agreed-upon supplies like fertilizer and transportation (Tamayo, 2010c). In 83 small business categories, announced in April 2011, Cubans would be allowed to create small businesses and hire workers other than family members. Under the announced reforms, Cubans could also buy and sell homes and cars for the first time since 1959 (Wickham, 2011).
President Raul Castro said more than a million state jobs needed to be eliminated and he also said more private enterprises would be allowed to help use some of the unemployed workers and provide new sources of income for the country from their taxes. Yet some Cubans harshly criticized the government layoffs and were worried that for the first time since 1959 they will no
longer be guaranteed a job, no matter how small the salary (Darlington, 2011). Cuba had some signs of hope. The economy was more diversified producing oil, tourism, nickel, and even the remittances from Cuban-Americans to relatives on the island were important sources of foreign change. Cuba too sought investments from China, Brazil, and India. Raul Castro has shown signs of easing land to private farmers and issuing more licenses and hopes to make the island more attractive for Cuban-Americans to retire too. A specially built drilling rig from China was due to Cuba by the end of 2011 to help locate some of the 4.6 estimated billion barrels of oil under deep waters off Cuba ((The) Economist, 2011).
Nascent entrepreneurship
Waldo thought about the hot spots in Cuba his tourist clients wanted to see. They loved the popular beach resort in Varadero, the writer Ernest Hemingways secluded home, salsa dancing, drinking daiquiris and mohitos in the Floridita bar Hemingway loved, touring the Hemingway marina, visiting the home of Victor Hugo and seeing Cuban rum made in the -ron- factories. The tourists wanted to hear stories about Havanas US mob-controlled nightclubs and casinos and see where Frank Sinatra, Sammy David Jr and Greta Garbo stayed. Tourists knew the old American cars from the 1950s that rode on the ferries from Florida were still in use on the streets of old Havana. Antique car collectors too were anxious to see the colorful vintage autos. Waldo wondered if conditions in Cuba were changing. Could boats and planes of exiled Cubans be really coming back to Cuba from their homes in Miami? Waldo hoped so, but if not, he had other ideas. While he did not tell his father, Waldo secretly wanted a US sponsor to take him to America to live and to study business. He had begun to think about such a possibility after entertaining two US business professors on their recent summer trip.
Electricity was not plentiful in Cuba, hence the limited lighting. Cuba used 110 volt electricity, but tourist hotels all used the two-pin European 220 volt plugs throughout. There are no payphones or phone cards.
This cars runs on lead gas and there was much pollution. The streets were filled with horse-drawn carriages (for tourists), motorcycles with side cars, small Coco-Taxis which were three small seats inside a coconut-shaped shell driven by a person on a motorcycle, Russian cars of all descriptions, buses from Russia and China. Antique US cars from the 1950s serve as taxis. There are separate taxis for Cubans and tourists. There were no fast-food restaurants or US franchises in Cuba.
Cuba had two peso currencies since the dual system started in 1994. The old rnoneda naciona I or National Money (CUP) was used by the government to pay the citizens who in turn used their pesos to purchase the limited food and goods available. The other convertible pesos (CUC) were for tourist use in the country and to buy items at stores, hotels, and restaurants. The regular pesos exchange rate to the convertible peso was 24:1. There is no western commercialization, no product ads, and no billboards showcasing new goods or services. We soon learned shops were nearly empty and there were long lines to obtain food rations. Black market commerce thrived as people were preoccupied by their day-to-day survival.
The school children start each day with a chant that -we would be like Che. Ernesto Che Guevara was an Argentine doctor who met Castro in Mexico in 1955 and joined Fidel in the Sierra Maestra mountains of Cuba to plot the overthrow of the Batista Government in 1959. Che then ran the Cuban economy and was President of the National Bank. He had extreme Marxist views that led to state control and central planning. He was a guerrilla fighter against imperialism and capitalism yet his famous face was on many t-shirts and other tourist items. Ches likeness was on the Ministry of the Interior building where he once worked. The steel words under the outline of his face read -Hasta la Victoria Siempre- or -Until the Everlasting Victory Always.- The tallest building in the center of the square features a monument of Jose. Castro transformed Cuba from capitalism to Marxist-Leninist socialism and nationalized all means of production as his revolution attempted to create a classless society with a single political party rule over the 14 provinces and one municipality of Cuba.
When the former Soviet Union broke up and Cubas economy began to suffer even more severe shortages of food, fuel, and other products in 1991,there is a move to adopt entrepreneurship. During this time there were blackouts and no fuel for trucks, buses for over five years. Cuba lost some 80 percent of trade and the equivalent of $5 billion in subsidies in grain and oil. Soviet-made cars, televisions, and refrigerators were no longer available in Cuba. This led to extreme rationing, power cuts, the closure of many factories due to lack of fuel. Recently, Cuba imported goods from Spain, Venezuela, Canada, and France. Their key crops were sugarcane and cigars. They received humanitarian aid from the US including food and medicine. The US embargo too meant most medicines were limited. Child care was subsidized at 14 Cuban pesos per month. Men worked from age 19 to 76 while women stopped working at age 67. The law required compulsory, free education until age 19 and those under age 19 did not work. Primary and secondary school and even the bachelors degrees were paid for by the government and Cuba boasted a high literacy rate. Parents were being ticketed and even jailed if kids did not go to school. There were even special boarding schools for the handicapped. During the revolution there were special educational programs for older people to learn to read and write. The government administers tests to determine who would be in specific careers. The Cuban Government looked for those with a particular attitude for special political careers. Hospitals, were in every municipality. In fact a large former bank building built by the US mob in the 1950s was being used as a hospital in Havana. A hotel from the mob days was now used as housing. Almost nothing new had been built since 1959.
The private businesses which were mostly restaurants or were construction trades like plumbers and carpenters are beginning to emerge. These newly-allowed businesses paid taxes and applied for special permissions to the government. Various inspectors, for example, check a house that was used partially as a tourist restaurant. About $200 CUP per month fee plus a 35 percent tax on earnings on new private businesses is payable and the government was now making it easier to legally run a private business. Professionals cannot work within their own profession as a self-employed person. A doctor too can become a taxi driver but cannot practice private medicine. The self-employed make more money than the state- employed population who were no longer guaranteed a job in todays Cuba. Cubans work Monday to Saturday and were off Sunday but two Saturdays per month were also free time. There were no checking accounts in the country and banks were only for savings accounts. Only the rich had credit cards on Cuban banks but few stores use credit cards. Cuba was gradually opening to capitalism. The self-employed businesses or cuentra propistas which translates to your -own account- now included service businesses like tailors, mechanics, in-home paladares or restaurants, plumbers, barbers, electricians, bicycle taxis, and casa particulars or homes that rent rooms.
Obstacles to entrepreneurship were many and included the restrictions, licenses, fees, regulations taxes, and the fact they must only hire family members. This limited the growth and size of the
business. Receipts must be made available to the government at all times. There was no way to legally obtain raw material supplies. The expensive trading license and high-income tax limited new venture creation but the entrepreneurial talent was driven by sustenance and survival. More Cubans were -unofficially- self-employed than officially applied for licenses from the government to operate their microenterprises. Banning private business activity forced it underground and generated untaxed income. Private businesses cannot advertise. Now citizens could have cell phones, could go into hotels, and road repairs is improving. There were still ration cards to purchase food. Sick people, elderly, and babies had special rations for milk or meat though most of the country subsisted on black beans and rice, the country had no communication with the outside world, no news other than the Granma newspaper published by the government, and only political books.
Most of the people of Cuba are either atheistic or belong to the Santeria religion. The Santeria religion worshiped animals and other natural forces which had been assigned a Catholic saint. Santeria was also called the Regla de Ocha and there were 400 gods or orishas, each having a saint as a counterpart. The religion used dolls and various feathers and parts of animals in their sacrifices. Those converting to the religion wore white clothing for a year. Santeria merged the Yoruba religion brought by slaves imported to work the sugar plantations with Roman Catholic and Native American traditions.
Source: Helms, M.M. (2011) Emerging entrepreneurship in Cuba Emerald Emerging Markets Case Studies Vol. 1 No. 3, pp. 1-15
Question 1 (25)
-Oswaldo decided to continue getting a salary from the Cuban government, and at the same time operate the tourism initiative along entrepreneurial lines-. In the light of the above statement discuss intrapreneurship and the circumstances under which Oswaldo operates
Question 2 (25)
-Obstacles to entrepreneurship were many and included the restrictions, licenses, fees, regulations taxes, and the fact that they must only hire family members.-In the light of the above statement, discuss the challenges that entrepreneurs face in emerging economies such as Cuba and suggest the role that government and the private sector can play in reversing the situation.
Question 3 (25) -Castro transformed Cuba from capitalism to Marxist-Leninist socialism and nationalized all means of production, as his revolution attempted to create a classless society with a single political party rule, over the 14 provinces and one municipality of Cuba.-
In the light of the above statement critically discuss factors of production and the role of both the informal and formal sector in rebuilding the Cuban economy and creating an enabling environment for entrepreneurial spirit.
Question 4 (25) -There is no western commercialization, no product ads, and no billboards showcasing new goods or services. We soon learned shops were nearly empty and there were long lines to obtain food rations. Black market commerce thrived as people were preoccupied by their day-to-day survival.-
in the light of the above circumstances, discuss the role of franchising in the restaurant and tourism development in Cuba.
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