Cuba embarks on digital revolution

Cuba is coming in to the modern world after decades of US embargo against Castro’s communist rule – and the Caribbean island is now staking its claim as the region’s new tech startup hub. Timothy Ashby and Rosemary Forsyth reflect on a recent UKTI delegation – and on the big challenges facing a country emerging from a different era.

One doesn’t usually associate Cuba with IT startups. Cigars, classic cars, salsa – yes. But a nascent technology centre? The answer is a resounding Si! Cuba has embarked on a technology revolution with the goal of becoming the Caribbean’s digital hub.

Classic CubaWe recently returned from the island, where as part of a UK Trade & Industry business delegation we met a number of tech entrepreneurs who could have stepped off the streets of Shoreditch rather than the crumbling architectural magnificence of Havana.

Despite major technological hurdles – particularly internet access – these “dot commies” are creating innovative applications across a range of industry sectors, developing games, robotics and off-shoring programming services for European and Latin American clients.

Twenty years ago the Cuban government anticipated the technology hurricane that would sweep the world. After the fall of the Soviet Union cut off aid to Cuba, Fidel Castro (still alive and blogging today at age 89) decided to launch a second revolution call the ‘Future Project’.

This had two objectives: to computerise the country and develop a software industry to contribute to economic development. In 2002, the University of Informatic Sciences (Universidad de las Ciencias Informáticas, or UCI) was founded – ironically, on the site of a Cold War Soviet signals intelligence base – to educate the vanguard of the Cuban IT revolution.

Since then, other Cuban universities have added technology sciences to their curriculums, now graduating an average of 5,500 IT engineers each year, a third of which have earned masters or doctoral degrees.

UCI alone has produced approximately 20,000 computer science graduates. On a per capita basis, Cuba is one of the poorest countries in Latin America and the Caribbean, yet it boasts a 100% literacy rate and invests 1.17% of GDP in technological research and development. In comparison, the US public sector invests less than 0.9% of GDP in IT R&D.

The number of IT professionals in Cuba is growing, with a rate of 1.8 scientists and engineers per 1,000 citizens, 47 universities and over 200 R&D centers.

The Cuban government has also embarked on a programme to train high school students in 24 IT specialities at technology centres, emblazoned with the slogan “Creemos en el Futuro” (“We Believe in the Future”).

These budding software engineers are becoming proficient in Java, Android, Windows, Linux-Unix and mobile technologies. Out of a total population of 11.3 million, some 40,000 teens with coding skills are graduated each year, of which 12% go on to university. Unfortunately for them, today’s Cuban high-tech industry employs only 5,000 workers, mainly in poorly paid government jobs.

cuba beachCuba’s young tech professionals have faced daunting obstacles: few and expensive connections, limited bandwidth, censorship, antiquated hardware, and minimal access to technical books and industry journals.

Although official internet penetration in Cuba is 25%, the reality is that most access is limited to a Cuba-only portion of the internet, which consists of a national email system, pro-government websites, and a few other services.

Less than 5% of the population can get on the full global internet through government offices, tourist hotels and the black market. Private enterprise in the technology sector was officially discouraged, regardless of the government’s promotion of an IT society and industrial policy to make Cuba a software engineering and development hub.

Nonetheless, these challenges have been embraced by Cuba’s Millennial generation, who told us on our visit that their country is becoming “a giant school for entrepreneurship,” with deficiencies in access to infrastructure, capital and information spurring remarkable creativity.

For example, most computers – often cobbled together from decades-old parts – are so slow that Cubans have learned to write lean software programs requiring little memory, thereby acquiring skills for creating mobile apps.

The thawing of Cold War relations between the US and Cuba is helping to change the IT environment. The opening of embassies in Washington DC and Havana is inspiring tech revolutionaries, as has President Obama’s policy to free IT trade and investment between the US and Cuban private sectors.

Google’s executive chairman Eric Schmidt led a delegation to Havana recently, NetFlix is offering service on the island, Cuba is Airbnb’s fastest growing market and we routinely communicate with our Cuban colleagues via LinkedIn. As Mark Zuckerberg says, “Cuba definitely fits within our mission,” and a recent poll found that more than 90% of Cubans who use social media prefer Facebook over other social platforms.

But the island’s technology infrastructure is the major impediment to IT sector growth.

Much of Cuban connectivity is based on the X.25 protocol, which is outdated and poorly suited to IP traffic. IT professionals must contend with 2,400 bps data transfers and constant redialing to make connections. Cuban technicians cannot go online and download the latest version of software or hardware, and technical books or industry journals are almost as prized as iPhones.

In a country where the average monthly salary is US$25, an hour-long cybercafé connection costs US$1.50 for the government-controlled national intranet (which has restricted content and an in-country email system) or around $7 to access the global web (generally used by government officials and tourists, although ordinary Cubans can use it if they can afford to do so).

This is also changing quickly, however. Cuba has a new fibre-optic cable connecting the island to Venezuela and Jamaica, providing download speeds up to 3,000 times faster than previously available (although still largely limited to the government intranet). Two of the submarine fibre-optic “pipes” that bypassed Cuba are expected to be connected to the island within the next year, and a US company has a licence to lay a cable from Florida.

Google Ideas executive Brett Perlmutter proposed to the Cuban government a way to skip cable and revolutionise the IT infrastructure directly through wifi connections and cellular phones.

havanaCrucially, in May, the US Congress introduced the Cuba Digital and Telecommunications Advancement Act (Cuba DATA Act) to encourage US companies to help Cuba build a 21st-century telecommunications infrastructure.

The Cuban government plans to have 50% of private homes connected to the internet by 2020 – an ambitious task on an island the size of England where the majority of vehicles in the countryside are still horse drawn and many farmers plough with oxen.

Cuba has the technological foundation to be – if not another India – at least a Caribbean version of Israel in terms of education and expertise. Cost-wise though, Cuba is stunningly competitive with other developing countries: software developers with advanced skills charge between $150-300 per month.

It is little wonder that executives from Microsoft, Dell and other mainstream tech companies are flocking to Havana, recognising the potential for the full range of tech services, from programming, to chip production and call centres. As we visited, Airbnb opened up its platform to Cuban rentals.

Cuba’s “dot commies” want more than to be a coding colony for the USA. They have developed their own versions of BuzzFeed, eBay and OpenTable, are experimenting with blockchain and developing killer apps such as mobile banking systems for billions of consumers in the developing world.

Watch out Silicon Valley and Silicon Roundabout – Silicon Island could be on its way soon.

Timothy Ashby is a lawyer and entrepreneur with over 30 years of experience in Cuba. He is the chief executive of Pembury Capital. Rosemary Forsyth is founder and general partner of The Forsyth Group – Executive Search.