HAVANA — His company was among the first to be registered in Cuba in 2021, when the communist-ruled country began allowing private enterprise, which had been banned since 1968.

Now, as the government tightens control over the private sector, Gabriel Mosquera Mourlot, 24, fears he could lose the wholesale business he runs, importing products such as pasta, rice, chicken and appliances into a country known for chronic shortages, then selling them to companies in the eastern province of Santiago and the capital, Havana.

“I don’t think private companies are going to evolve,” Mosquera said in a Havana hotel lobby. “On the contrary, we’re going to ‘de-evolve.’”

The wave of new restrictions on Cuba’s burgeoning private sector, which has flourished since the government allowed private businesses three years ago, has alarmed many businesses. Private stores are a lifeline for those who can afford to buy food there. By some estimates, the private sector has overtaken the state as the largest employer.

Many private sector advocates, especially in the United States, saw it as a tool for political change in Cuba, something the government vehemently rejects. Then-President Barack Obama made strengthening the private sector a central plank of his policy of engagement with the country.

The Cuban government blames the private sector for runaway inflation and corruption. The regulations imposed on top of an existing bureaucracy have left many, like Mosquera, feeling insecure and worried about the future.

Restrictions apply to the growth area

The latest round of restrictions targets the private wholesale industry, an area that has exploded in business in the past three years, by limiting who they can sell to. Previously, the government was the island’s only source of imports.

But the government says the private sector has grown so rapidly that it will import $1.5 billion worth of goods by the end of the year—comparable to the country’s imports, which are estimated at $1.7 billion to $2 billion. As it is, private-sector entrepreneurs must use a state company to import. Soon they will have to use another state company to sell.

Other recent measures include price caps on six popular products, such as chicken and vegetable oil. Some companies lost money when they came into effect in July.

Private businesses will soon be forced to pay for goods from Cuban bank accounts, which is nearly impossible. Cuban banks have very limited amounts of hard currency to exchange, and many businesses around the world avoid using Cuban banks because of the U.S. embargo. Most Cuban businesses use third-country bank accounts to pay suppliers.

Only Cubans and Cuban-resident foreigners who spend more than six months a year on the island can open businesses, limiting Cuban-American investors. And a new national institute will oversee private companies.

The wave of restrictions comes as Cuba’s economy spirals due to fewer tourists and tightening U.S. sanctions that began under Donald Trump and have continued under President Joe Biden. Inflation, shortages of medicine and food in state-owned stores, and hours-long power outages in many parts of the country due to fuel shortages have made daily life difficult.

Private stores offer relief to those who can afford it, such as Cubans who receive remittances from family abroad. They remain out of reach for Cubans who rely on a government salary or pension. The economic crisis has led to the emigration of more than 1 million Cubans, about 10% of the population, between 2022 and 2023, according to government data.

Many economists agree that the private sector already plays an important role in the economy and is essential to improving economic conditions.

“The government should be doing the exact opposite,” said Ricardo Torres, a lecturer at American University in Washington who previously worked at the Center for the Study of the Cuban Economy at the University of Havana. “They should be taking action to encourage the private sector and give it the security it needs to invest more, expand and create more jobs.”

He believes the restrictions are being imposed because the government wants to blame the private sector for high inflation in the public eye, something many economists disagree with, and show that it is doing something about it. He said he believes the government wants to restrict the private sector because it is growing rapidly at a level the government is not comfortable with. Meanwhile, state-owned enterprises, a fundamental component of the Cuban economic model, are less productive.

“They are afraid of the private sector because it is autonomous, makes its own decisions and they see it as a threat,” Torres said.

Cuba’s government did not respond to a request for comment on its new policy. Officials have acknowledged in the past that the country needs a private sector, but have said the regulations are necessary to curb inflation, which they blame on the private sector, and to root out corruption. Prime Minister Manuel Marrero told a National Assembly session in July that the regulations are intended to control the private sector, not shut it down. He has referred to entrepreneurs as “millionaires” in the past, a term that has rankled the communist government.

Cuban President Miguel Díaz-Canel said at the same session that “there is not and will not be a witch hunt” against the private sector. He also said the private sector must contribute to the national economy as part of its “responsibility to society.”

The government reiterated that businesses are still limited to 100 employees and that an individual cannot own more than one business, meaning growth is limited. Business approvals and registrations ceased in May.

Cuba’s long path to private enterprise began in 1978, when the government began allowing very basic private businesses, such as home-based hairdressers. They called it “trabajo por cuenta propia,” avoiding terms associated with capitalism. Over the decades, the industries in which people could operate were gradually expanded. It wasn’t until 2021 that the government officially lifted a ban on private enterprise that had been in place since 1968. Since then, the government has registered more than 11,200 small and medium-sized businesses, known in Cuba as Mipyme. There are more than 596,000 small businesses that are not Mipyme. All of them are private sector and operate under strict regulations.

For Cubans, even Biden’s move to allow Cuban entrepreneurs to open U.S. bank accounts has proven fruitless. So far, it doesn’t appear that any U.S. bank has allowed Cubans to open accounts, according to Ricardo Herrero, executive director of the Cuba Study Group.

“With the presidential elections approaching and the fact that it will take several months for banks to prepare a compliance program for the Cuban market, everyone seems to be adopting a wait-and-see attitude,” he said.

If Trump wins, Cuba is expected to be placed back under maximum-pressure sanctions, making banks reluctant to open accounts for Cuban entrepreneurs. If current U.S. policies continue under a Democratic administration, some banks may be willing to open commercial bank accounts for Cuban entrepreneurs. Personal bank accounts are already available to Cubans.

The small-business owner, a man in his 30s who wanted to keep his last name a secret because he feared the government would misinterpret his comments, co-owns a small store with a partner where he sells food and household items such as detergents.

He says the hope he had when he opened the store in Havana’s Vedado neighborhood a few months ago is fading with the new restrictions.

“It doesn’t help us grow, and in the long run it will set us back and hurt us and society,” he said. “The government should not get involved in things that should be under our control.”

Orlando Matos reported from Havana and Carmen Sesin reported from Miami.