September 12, 2010

[SHOUMIT SARKAR]

Toaster Business in Cuba

In a popular move by Cubas new president, Raul Castro, Cubans will soon be allowed to buy computers and DVD players. If they can afford to, that is. This quote, truly describes the situation of the Cuban masses after Raul Castro was elected to be the president on Cuba. Let me start off on buying toasters in Cuba. Seeing as Cubans get paid a state common of approximately $15 a month, it might take Cubans a while to save up for the new appliances which will only be available in pesos convertibles (CUC). CUCs are very similar to the American dollar, rather than the national peso, which is worth 24 times less, and in which workers are paid. Based on the improved availability and stability of electricity, the government has approved the sale of some equipment which was prohibited, during the rule of Fidel Castro. Other sought-after appliances now available and previously only obtainable on the black market include electric pressure cookers, rice cookers, electric bicycles, toasters and microwave ovens. Obviously due to obvious reasons, we chose Detroit over Havana. I will now be explaining some of the reasons why we DIDNT choose Havana. Havana, a small island situated in the Caribbean, has huge economic problems with several trade sanctions with the US and Hugo Chavez paying over half of Cubas economic debt and annual expenses. The Cubans have roots of poverty and inequality dates back to colonialism. All of the land is owned by the government, with all allocations of land handed out to wealthy people and local corporations. Over 55% of the economy is based on exports. Now Ill talk about Cuban land. Cuba is actually very rich in resources, mainly in oil. It produces over 60,000 barrels per day with an extra 53,000 from its neighbor, Venezuela. To make a basic toaster (I mean, what else can Cuba sell?), oil, nickel, mica, copper and iron are needed. Now we need to see HOW Cuba GETS these, and HOW Cuba makes the toaster with these. Let me just catch you up with some basic Cuban history. Before the 1950s, Cuba was a paradise for Americans. They had money and with money, (this is the picture before Fidel Castro came in) they could do basically anything. This contributed heavily to the economy. When Fidel came in, BOOM! Changes in his regime included Limited size of landholdings Nationalized private property and businesses. No freedom of press Full control of government

Results included More communism More confrontation with US 1 Morphy Richards

September 12, 2010

[SHOUMIT SARKAR]

You may wonder why Im explaining so much on the Cuban Revolution. Well, because, this is the main reason why starting an international business in Cuba is so controversial. Even so, Cuba has recovered well with the help of Raul Castro but is not stable enough yet to start a toaster business (Almost all electrical appliances had been banned since Fidel Castro came in power, and the ban on toasters will be lifted during 2010). So for the toaster, basically, only oil is available in vast amounts. Copper Mines closed due to reclining prices. Very little copper imported. Not sufficient enough. Iron Trade closed with US since 2009. Trade with Europe and Asia very expensive with high interest rates. Along with that, there is a lack of adequate transport. Ships that stop at Cuba will not be able to stop at US for the next 6 months. Nickel 3 plants still open despite deflation and not much in demand

Looking at enterprise, Cuba has a very high literacy rate at over 98%. Still all education systems are run by Marxist ideologies. Education is free but high in quality with compulsory education from the ages of 6-16. This could prove for factors of enterprise. If we look at a few labor statistics, basically everything is controlled by the government. There is one paid month vacation with an average household income of around US$15 per month. There is very little income tax with the self employed getting taxed heavily. If land is allocated to our company, remember, IF, over 60% of our profits are going to the government. I mean that wouldnt be very fair to us, right? Almost of the labor force WILL be chosen by the socialist government with only around 20% of our labor force will be private. Another con which would be a major blow to our business is that all prices and rations are set by the government, no matter if were making a loss or profit. AND EVEN if we manage to get raw materials, transportation would literally be another road-block. The only good highway is The Central Highway. Very few people own cars. Without this single highway, getting from one corner of the island to the other can be very hard indeed. Road safety is another major concern. With all of the points I mentioned above, Detroit, USA, would be a much better option for selling toasters Thanks You

Morphy Richards