Cuba's private sector struggles under U.S. oil embargo

Havana, Cuba – On a Friday late last month, every outdoor table at the Oishi food stall in Pabellon Cuba, an exhibition center in the capital's heart, was packed with customers eating burgers and pizza. Yet the stall's owner, 46-year-old Miguel Salva, phone glued to his ear, looked like a broker amid a crash. “The fuel crisis is a real nightmare for us,” he said after hanging up.

Since late January, when the U.S. under President Donald Trump imposed an oil embargo on Cuba, blackouts and fuel shortages have dealt a heavy blow to small family businesses like Salva's. Oishi's main site was a restaurant in the Regla district, where power cuts have stretched to 15 hours or more daily. Salva has a backup generator, but gasoline prices have soared from roughly $1 per liter ($3.80 per gallon) earlier this year to $10 on the black market, after the Cuban government stopped diesel sales in February and severely rationed gasoline. “I had to close the restaurant. I cried for days,” Salva said.

Across the way, Pincharte sells fried rice and charcoal-grilled skewers. Unlike Oishi, Pincharte never had a fixed location; it operates mobile, hauling grills and refrigerators from fair to fair in a diesel truck. “Without fuel, our costs have multiplied eightfold,” said Elianis Aguero, 31, a co-owner. “Right now, no business is profitable if it depends on fuel.” This year, both Pincharte and Oishi plan to switch to renewable energy, investing in solar panels and electric vehicles. But the price of e-tricycles has jumped 50% due to surging demand. “This year will be a year of resistance,” Salva said.

Widespread impact across the private sector

“The oil embargo affects all of Cuba's private sector – logistics, marketing, imports and exports, even production capacity,” said Eric Almeida, 41, president of the consulting firm Quota, based opposite Pabellon Cuba. Before the crisis, shipping a container from the port to Havana cost $100 to $150; now it's no less than $600. “That cost makes the final product more expensive for customers and stalls the entire commercial process.” Quota has also been hit as clients are forced to cut nonessential spending. Almeida estimates his net income this year will drop 50%-60% from pre-crisis forecasts. The only silver lining, he says, is that the crisis has forced the Cuban government to loosen its grip on the private sector.

Growth amid crisis

Over the past three months, the Cuban government has issued new regulations to create more opportunities for the private sector, trying to ease longstanding state centralization. For instance, it has allowed larger tax exemptions on imports of solar panels for all business types and announced that all Cubans living abroad can open small and medium-sized enterprises (SMEs) on the island, instead of only those residing in Cuba or with “effective migratory residency” (requiring more than 180 days of stay) as before. Agricultural marketing rules have also been relaxed; previously nearly all sales went through a single state purchasing company, but now the private sector is allowed to invest in the distribution chain.

Perhaps the most significant change came in March with a new law allowing the formation of mixed limited-liability companies, enabling private capital to merge with state enterprises for the first time. This opens the door for the private sector to invest in industries once controlled by the state, such as sugar and precious mineral mining, excluding health, education and the military. Cuba's private sector began to grow in the 2010s and accelerated sharply in 2021 when the government authorized SMEs as an outlet for the economic crisis and goods shortages caused by U.S. sanctions and the COVID-19 pandemic. Some 10,000 SMEs are now active, contributing 15% of GDP, 31.2% of national employment, 55% of retail sales and 23% of state tax revenue, according to an September report by Cuban economist Ricardo Torres Perez based on official data. “SMEs emerged amid crisis after crisis,” Almeida said.

‘Minimum’ fuel imports

On February 6, the Cuban government allowed private businesses to import fuel, previously a state-only privilege. Weeks later, the U.S. Bureau of Industry and Security authorized exports of U.S. oil and gas to eligible private entities in Cuba. “There are private importers bringing fuel into the country for their own businesses and part to sell on the market. But the volume imported so far is very small,” said Argelio Abad, First Deputy Minister of Energy and Mines, at a March 20 press conference. According to Reuters, from February to March, Cuba's private sector imported about 30,000 barrels of fuel (roughly 4.8 million liters) from the U.S. Yet Jorge Piñon, a researcher at the University of Texas at Austin's Energy Institute, says Cuba needs about 100,000 barrels per day to run its power grid and meet normal transport demand, while it produces only 40% of that.

Importing a 25,000-liter (6,600-gallon) container costs $45,000 to $50,000, plus a 13% commission to the state importer and Unión Cuba-Petróleo, the sole authorized handler. Though at roughly $2 per liter – five times cheaper than on the black market – the investment is “unstable” as the Cuban government and the Trump administration are in negotiations; if a deal is reached, this price will become expensive compared to pre-embargo levels. Small businesses like Oishi, Quota and Pincharte can hardly access fuel because they cannot afford a whole container, and current rules prevent them from pooling together or buying from other SMEs that have imported fuel. “This year is very tough,” Aguero said. “One way or another, it's hard for the private sector to survive.”