One doesn’t usually associate Cuba with Information and Communications Technology (ICT) start-ups. Cigars, classic cars, salsa, yes, but a nascent technology center? The answer is a resounding sí! Cuba has embarked on ICT revolution with the goal of becoming the Caribbean’s digital hub.

I recently visited Cuba to update my 2001 article in the Harvard International Review, “Silicon Island: Cuba’s Digital Revolution.” I met with a number of tech entrepreneurs who could have stepped out of Kendall Square or Soho rather than the crumbling architectural magnificence of Havana. Despite major technological hurdles—particularly spotty and slow Internet access—these “dot commies” are creating innovative applications across a range of industry sectors, developing games and robotics, and off-shoring programming services for European and Latin American clients.

This article explores how Cuba’s technology revolution came about, the generational shift that is spurring economic and social change, and the challenges faced by the island’s tech-savvy Millennials. A crucial, indeed historic, factor in Cuban ICT development was the reestablishment of diplomatic relations between the United States and Cuba, and the Obama administration’s regulatory changes allowing greater trade and travel to the island. Finally, I look at what Cuba needs to develop its ICT sector, including infrastructure funding and repeal of the US embargo. Cuban tech entrepreneurs do not want their country to become an off shore manufacturing or call center colony for multinationals, believing Cuba has the potential to be a hub for technology innovation in its own right.

Anticipating the ICT Revolution

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 at age 89) decided to launch a second revolution called the “Future Project,” which had two objectives: to computerize the country and develop a software industry to contribute to economic development. In 2002, the University of Information 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 ICT revolution.

Since then, other Cuban universities have added technology sciences to their curricula, now graduating an average of 5,500 ICT engineers each year, a third of whom have earned masters or doctoral degrees. UCI alone has produced some 18,000 computer science graduates and created 15 software production centers working on a full cycle of research, development, and innovation. These centers deal with an array of issues such as free software, e-government, databases, images and digital signals, medical data, industrial computing, and citizen identification, among other applications.

On a per capita basis, Cuba is one of the poorest countries in Latin America and the Caribbean, yet it boasts a 100 percent literacy rate and invests 1.17 percent of GDP in technological research and development, on a par with Israel and about 30 times more than India. In comparison, the US public sector invests less than 0.9 percent of GDP in IT research and development. The number of Cuban ICT professionals keeps growing, with a rate of 1.8 scientists and engineers per 1,000 citizens (out of a population of 11.3 million), 47 universities, and over 200 research and development (R&D) centers. The quality of Cuba’s tech R&D has received global recognition—for example, the Center for Information and Technology Management (CIGET) of Sancti Spiritus was awarded the international standard ISO-9000 rating.

The Cuban government has also embarked on a program to train high school students in 24 ICT specialties at technology centers emblazoned with the slogan “Creemos en el Futuro” (“We Believe in the Future”). 100,000 computers have been distributed to schools throughout the island. Budding software engineers are becoming proficient in Java, Android, Windows, Linux-Unix, and mobile technologies. Some 40,000 teens with coding skills are graduated each year, of which 12 percent go on to university. For example, in the remote sugar plantations and cattle ranching province of Las Tunas, 660 kilometers from Havana and seemingly little-changed since the 19th century, over 50,000 students have graduated from 13 mid-level Information Technology centers, 2,628 of them in 2015.

Unfortunately for these eager graduates, the state-owned Cuban ICT industry currently employs only 5,000 workers, mainly in poorly paid government jobs. For decades, Cuba has produced a highly-educated, well-trained workforce of professionals, such as doctors and engineers, who have become taxi drivers and hotel chambermaids due to limited employment opportunities. Recognizing the great potential of Cuba’s human capital, and aware of the need to avert social discontent and “brain drain” (Cubans can now legally travel abroad), progressive-minded government officials are determined to take Cuba from the ideological mindset of the past into a new 21st century economic and social model.

A New Generation of Revolutionaries

While Fidel Castro may have started the tech revolution, his brother Raúl, age 84, should be credited not only for implementing the “Future Project” but for transforming Cuba’s economy and relations with the United States. One of Raúl’s first acts after taking over from Fidel as president in 2008 was legalizing previously banned home computers and allowing their sale along with mobile phones and DVD players. Raúl has cautiously adopted reforms to reduce the role of the state and allow a free market to grow. The results have been impressive—a third of Cuba’s 5 million people now work in the private sector (of whom nearly 500,000 operate their own businesses). The government’s goal is to have a majority of the workforce privately employed by 2020, and it believes that the ICT sector can provide a significant percentage of these jobs, second only to tourism and on par with agriculture. A key component of official industrial policy is to make Cuba a software engineering and development center.

In 2013, the government ministries responsible for developing the ICT sector were restructured. The Ministry of Informatics and Communications became the Ministry of Communications, with primary responsibility for supporting the government bureaucracy, while business functions were taken over by the postal service and a new “Computing and Communications Business Group.” The UCI was placed under the Ministry of Higher Education, and the Ministry of Industries was charged with developing Cuba’s newly created electronics industry.

Raúl Castro has also acted to give younger Cubans key roles in transforming the country’s economy and society. In 2013, he appointed electrical engineer and former Higher Education Minister Miguel Díaz-Canel, 55, as his heir apparent. Díaz-Canel (known as “MDC”) has his own Facebook page, is a Beatles fan, and has traveled the world to demonstrate that Cuba indeed “believes in the future.” He is reportedly passionate about social media and computer technology, stressing ICT’s importance to Cuba’s economic growth. Recognizing his country’s abysmal connectivity, MDC has pledged to make internet access available and affordable to all Cubans—a gigantic project 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. Remarkably, such medieval conditions exist side by side with modern technology. Internet connectivity requires electrical power, and Cuba has one of the world’s most innovative renewable energy programs. Overall, 96 percent of the population have access to electricity and some 2,500 rural primary schools rely on photovoltaic systems for lights, computers, television, and videos.

Barriers to ICT Sector Development

Cuba’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 percent, the reality is that most access was limited to a Cuba-only portion of the Internet that consists of a national email system, pro-government Web sites, and a few other services. Less than 5 percent of the population can get on the full global Internet through government offices, tourist hotels, and the black market, and broadband connectivity is available to only 1 percent. Private enterprise in the technology sector was discouraged, regardless of the government’s agenda to make Cuba a software engineering and development hub.

Nonetheless, these challenges have been embraced by Cuba’s Millennial generation, who believe 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 applications for the island’s 3 million cell phone users. Mobile use is growing rapidly: according to a recent poll, 61 percent of the Cuban population have cell phones and 800,000 new cellular subscriptions have been projected by 2018. Apple and Android devices are in widespread use although not sold openly in shops run by the state telecom monopoly Etecsa. Demand for mobile phones is so strong that when a discontinued Alcatel model went on sale in May 2015, long lines formed and customers slept on sidewalks for days, hopeful that supplies would last.

US-Cuban Rapprochement

On December 16, 2014, President Obama announced a new era in US-Cuban relations, a policy change that was welcomed by the Cuban government. Since then, the thawing of Cold War relations between the United States and Cuba is helping to change the ICT environment. The opening of embassies in Washington DC and Havana is inspiring tech revolutionaries, as has President Obama’s policy to free ICT trade and investment between the US and Cuban private sectors.

Despite the new era in diplomatic relations, the US embargo remains in force after more than half a century, banning most American investment on the island and Cuban exports to its northern neighbor. A major exception is Information and Communications Technology.

Under a White House policy called “Support for the Cuban People,” amended regulations allow commercial export of telecommunications products, including those for accessing the Internet, use of Internet services, infrastructure creation, and upgrades of a broad range of technologies. US companies such as Apple can now freely sell mobile phones, tablets, personal computers, TVs, radios, and digital cameras, as well as related software and services.

Of greater importance to the growth of Cuba’s ICT sector, the new regulations allow joint ventures with qualified Cuban tech entrepreneurs (both private individuals and cooperatives), as well as the import of their services to the United States. This includes software coding, website design, and the sale of dozens of innovative applications under development in Cuba. Often overlooked but of crucial importance to Cuba’s ICT development, the US regulations permit US companies to engage in “infrastructure creation”—a seemingly innocuous change that could allow US investment in private sector ICT infrastructure such as fiber-optic cables and digital transmitters.

What Cuba Needs to Develop Its ICT Sector

The Cuban government is grappling with the need for economic development based on ICT with the ideological strictures of a political system that is still constitutionally defined as a “socialist state guided by the principles of José Martí, and the political ideas of Marx, the father of communist states, Engels and Lenin.” Cuba seems to be inching towards a Vietnamese model of authoritarian capitalism—keeping controls on social media while trying to foster the rapid growth of a market economy.

The island’s technology infrastructure is the major impediment to ICT sector growth. Much of Cuban connectivity is based on the X.25 protocol, an archaic (1970s) system for Wide Area Network (WAN) communications which is inadequate for Internet traffic. ICT professionals must contend with 2.4 kilobytes per second (kbps) 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 US$7.00 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. Cuba has a new fiber-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 fiber-optic “pipes” that bypassed Cuba are expected to be connected to the island within the next few years. A US company has a license to lay a cable from Florida and has been seeking investors to launch the project.

Over the past year, 180 Internet cafes have opened across the island, with another 150 planned. 35 experimental Wi-Fi zones have also recently opened in public parks in Havana and several other cities, requiring only an account with the Nauta mobile telephone email service offered by Etecsa.

Etecsa claims that its mobile network already reaches 74.35 percent of the national territory, giving coverage to 83.63 percent of the population, yet admits that the network is still “under development” and publicly apologized to subscribers for the often deplorable service (such an apology from a state-owned monopoly would have been unthinkable just two years ago, and demonstrates a refreshing awareness of the market and need for customer service). Etecsa plans to offer a range of new Internet services, including mobile Web access and unrestricted home Internet access, but Cuba’s decrepit telecom infrastructure—especially aging and sparse cellphone towers—is lagging far behind customer demand for streaming video, photo-sharing, and 4G phones, and is constrained by lack of funding. Much of the island’s internet infrastructure is made from outdated Chinese components and will require large scale financing to upgrade.

In June 2015, the Ministry of Communications circulated an internal document titled “National Strategy for the Development of Broadband Infrastructure in Cuba.” Subsequently leaked by a Cuban blog (almost certainly with the blessing of Vice President Díaz-Canel and other senior officials), the paper outlined a plan to convert the existing low-speed switched services to faster broadband during 2015 and 2016. Although today only 16 percent of Cuban households have Internet access, the strategy calls for at least 50 percent of households (around two million) to have broadband connections by 2020, together with 80 percent of business entities (private and state-owned), and 95 percent of educational and health centers. Recognizing the cost barrier to Wi-Fi connectivity, the government also promised that monthly access to the broadband network at 256 kbps (considered adequate for streaming videos or Apple music, but still below the industry standard of 320 kbps) would not cost more than 5 percent of the average monthly wage of the Cuban population.

Cuban tech entrepreneurs generally welcomed the strategy document, but criticized it for proposing the use of first-generation ADSL technology using telephone landlines, which only reach one quarter of the population, and would have speeds ranging from 1 to 8 megabits per second.

Funding the ICT Future

To achieve the goal of becoming the Caribbean’s digital hub, Cuba must have access to large amounts of finance for ICT infrastructure development. Fortunately, the Obama administration’s decision to remove Cuba from the State Sponsors of Terrorism list has lowered barriers to Cuba’s ability to obtain economic and technical assistance from multilateral lenders along with commercial loans from banks. Cuba is in the process of rehabilitating its international financial standing (for example, restructuring its debt with the Paris Club of creditors), and is expected to join the International Monetary Fund (IMF) and the World Bank. The country has reportedly begin discussions with the IMF (membership of which is a precondition for joining the World Bank), and has been advised by the US State Department that the United States will not oppose its application.

In the near future, the Cuban government plans to obtain funding for national ICT projects from the World Bank’s private sector arm the International Finance Corporation (IFC), which has financed US$1.5 billion and facilitated another US$330 million for 84 ICT projects in 32 low-income countries (mainly for the extension of mobile and data networks).

Opportunities to Help Cuba’s ICT Development

The US embargo remains the single greatest impediment to Cuba’s overall economic development. The Obama administration plans to further liberalize trade and travel regulations, and various bills are pending in Congress to end all or parts of the Embargo. It is uncertain when trade and investment will be normalized, but this will probably happen by 2018, when President Raúl Castro will leave office.

Despite the embargo, the US business community and government can contribute to the development of Cuba’s ICT sector, and in doing so help to foster private sector growth. 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.

Although the legislation has not been passed, US ICT businesses are already active in Cuba. Google’s Executive Chairman Eric Schmidt led a delegation to Havana recently, and Google Ideas executive Brett Perlmutter proposed to the Cuban government a way to skip cable and revolutionize the Internet infrastructure directly through Wi-Fi connections and cellular phones. Cuban Internet users can now download Google toolbar, as well as the Chrome browser, applications, free games from Google Play and the free version of Google Analytics.

Google is also believed to have offered to expand the number of official internet cafes in Cuba with Wi-Fi access similar to Starbucks stores in the United States (and the first Starbucks is already planned for Havana). Reportedly, the deal was to offer the service at reduced cost, or free in exchange for “powered by Google” branding.

Google’s experiments with beaming internet connections from space could also save the cash-strapped Cuban government from investing in more ground-based fiber optic systems. Google and financial services company Fidelity recently invested US$1 billion in Elon Musk’s SpaceX venture, with the aim of providing internet service to underserved regions through a fleet of hundreds of small satellites—an attractive idea in a small country that “believes in the future.”

Netflix is offering service on the island, Cuba is Airbnb’s fastest growing market, Cubans are Tweeting, and I routinely communicate with Cuban colleagues via LinkedIn. Mark Zuckerberg says, “Cuba definitely fits within our mission,” and a recent poll found that more than 90 percent of Cubans who use social media prefer Facebook over other social platforms.

Cubans Will Control Their Tech Future

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 US$150-300 per month. It is little wonder that executives from Microsoft, Dell, and other mainstream tech companies are flocking to Havana, recognizing its potential as an offshore base for the full range of ICT services, from programming to chip production and call centres. The next step will be for the United States and other foreign investors to form joint ventures with Cuban tech entrepreneurs.

But Cuba’s “dot commies” want more than to be a coding colony or iPhone assembly location for foreign multinationals. They have developed their own versions of BuzzFeed, eBay, Yelp, Craigslist, and OpenTable, are experimenting with blockchain, and developing applications such as mobile banking systems for billions of consumers in the developing world. These youthful entrepreneurs plan to create world class mobile applications and innovative ICT platforms. Watch out Silicon Valley—Silicon Island is on its way.