When Carlos Fernandez-Aballi and his fellow Cuban entrepreneurs were hatching a business plan, they knew they wanted their product to be sustainable, technology-driven and a substitute for something the island currently imports.
To the group behind Sazon Purita, the road to riches seemed to be paved with garlic — specifically garlic grown in Cuba and then dehydrated and sold in small packets. Garlic finds its way into most Cuban dishes, and the spice is so coveted that some garlic farmers have become millionaires.
“Garlic is a big business in Cuba. It is like white gold,” said Fernandez-Aballi, who got a degree in engineering design from the University of Bristol in the United Kingdom and then, after returning to Cuba in 2006, earned a Ph.D. A head of garlic that costs 20 to 30 cents at harvest can rise to 10 pesos by the end of the year, he said, so dehydration made sense.
The young entrepreneurs designed the dehydrating equipment themselves, and in 2013, Sazon Purita became Cooperativa Industrias Purita. The enterprise is now run by 14 cooperative members.
In Cuba, there have been agricultural cooperatives for decades. Although their numbers have been falling, there are still more than 6,000. More recently, the government has been turning over beauty salons, barber shops, restaurants and other service businesses to workers to run privately as cooperatives because they’re considered a drag on the government’s limited resources.
Most non-agriculture co-ops are conversions of former state enterprises, said Ted Henken, a Baruch College sociology professor who studies Cuban entrepreneurship. The number of cooperatives is still tiny: Only about 500 have been approved, and at mid-year, 347 were in operation.
About 23 percent of cooperatives are start-ups like Purita, Henken said. Fifty-nine percent of non-agricultural cooperatives fall into the commerce and food, technical and personal services categories, and about 10 percent, including Purita, are categorized as light industries, he said.
It turns out the Purita entrepreneurs were on the right track with dehydrated spices, but they couldn’t get enough garlic at certain times of the year to make the business feasible. “Everyone wants to keep garlic in storage” until later in the year and speculate, said Fernandez-Aballi.
Sourcing its produce from organic farms and small urban agriculture producers, the co-op branched out last year to 14 products — including dehydrated parsley, chives, coriander, tarragon, basil, rosemary and oregano, and even dehydrated peanuts, bread crumbs and fruit. They also process garlic when they can get it.
Currently, the cooperative is producing 18 tons of dried peanuts and 1.4 tons of dehydrated spices, but it has the capacity to become far larger and produce up to 100 tons of dried garlic annually. It’s in the process of ramping up to produce 20 tons of dried fruit and spices.
The cooperative received a business loan from a Cuban bank for 985,000 Cuban pesos, the equivalent of about $41,042, and it has a small organic farm that produces some of its spices.
Purita has been selling its spices in small cafes and cafeterias around Havana, but in late July, it made a breakthrough: The government agreed to stock Sazon Purita-brand products in five Mercado Ideales, peso retail stores in Havana.
But the cooperative has even bigger plans. Eventually, it would like to sell its 100 percent natural dehydrated products in the United States. “We believe it’s possible,” said Fernandez-Aballi.
Under the commercial opening to Cuba outlined by the Obama administration, independent Cuban entrepreneurs are allowed to sell some products in the United States, but at the moment, the list of permitted products doesn’t include prepared foods.
Fernandez-Aballi said the Cuban government is preparing a packet of laws that will help private enterprise, including making it easier for cooperatives to link to companies abroad. “The goal is not to put the brakes on the process,” he said.
Organizing the co-op and working through the many obstacles a private entrepreneur faces in Cuba hasn’t been easy, acknowledged Fernandez-Aballi. “We just put our heads down and smiled,” he said, “but now we have friends assisting us with the process.”
“He’s a highly educated guy,” said Henken. “He’s also well connected and perhaps well protected.”
Among the problems the cooperative members have had to work through are overestimating their capacity, which necessitated a renegotiation of their loan. Cuba’s unwieldy dual currency system where 24 Cuban pesos equal one Cuban convertible peso has been difficult, as has finding professional packaging for the spices. Packaging spices can be tricky, said Fernandez-Aballi. If not done properly, the spices can rehydrate.
“All this slowed us to a point where we have a cash deficit problem,” said Fernandez-Aballi. But the cooperative is slowly digging out. Next year, he said, Purita products will be professionally packaged.
Fernandez-Aballi presented the Purita case study during an Association for the Study of the Cuban Economy meeting in Miami on July 30. Afterward, Arch Ritter, a Carleton University economist and co-author with Henken of the book “Entrepreneurial Cuba: The Changing Policy Landscape,” said, “I’m worried about your cash deficit.” But at the same time he praised the Purita group as “confirmed entrepreneurs.”
Talent and entrepreneurship are abundant in Cuba, Ritter said. There are currently about 500,000 privately employed Cubans.
The current wave of entrepreneurship, Ritter said, began to take root in the early 1990s during the special period, a time of economic crisis in Cuba after the collapse of the Soviet bloc. Cubans had to begin to come up with their own income and start small side businesses to survive. They began selling what they didn’t need or want from their ration books or engaged in black market activities.
Fernandez-Aballi, 31, missed most of that era. When he was eight, his family left Cuba to live in Caracas, where his father held a post in UNESCO. From there, he went to England to study engineering before returning to Cuba in 2006. Fascinated by renewable energy technology, he got his Ph.D. and began teaching at CUJAE, Havana’s technical university.
He was always attracted to entrepreneurship and technology, he said. The first venture Fernandez-Aballi was involved in was a transnational cooperative based in Barcelona that included Cuban, Spanish and Belgian associates. Founded with international prize money, its goal was to create low-cost, technologically appropriate housing with local materials for the homeless and low-income people.
“The taxes in Spain ate us away,” he said. “Thirty-thousand euros in prize money was not enough. We didn’t understand that then, but we do now. You probably need three times that amount to start something in Spain.” Also, trying to manage a transnational concept with Cuba’s poor Internet access was too hard, he said.
Before hitting on the garlic idea, he and his associates thought about starting a catering enterprise but realized there were too many holes in the Cuban supply chain to make it feasible. “Garlic is everywhere,” said Fernandez-Aballi. They started the business after coming up with a prototype dehydration machine in early 2012.
The cooperative members meet once a month to make group decisions and vote. Each has a vote regardless of their contribution to the co-op. Profits are supposed to be shared according to the complexity, quality and quantity of work by each individual.
“We’re not pretending to be a company,” Fernandez-Aballi said.
By Mimi Whitefield, ArcaMax
September 3, 2015
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