Cuba Courts Foreign Capital but Investors Aren’t Interested

Earnings on foreign investment have totaled 1.91 billion dollars out of a projected 12.5 billion, only 9.5% of what the government had forecast.

14ymedio bigger14ymedio, Havana, December 9, 2020 — The official press ran a story in which it made passing reference to one of the most significant changes in the government’s economic policy of the last few years: the end of the requirement that the state be a majority or equal shareholder in joint venture projects. It was announced in a brief paragraph at the end of an article on the 2021 Business Opportunities Portfolio to explain what could be a big step towards privatization of foreign investments.

By contrast, the ruling party opted for a splashy headline: “More than 500 foreign investment projects in Cuba” The figure is correct but it tells only half the story. Though presented as a great triumph, the number actually falls far short of projections made in 2014 when the foreign investment law was passed.

“From November of last year to November of this year thirty-four new businesses were approved… for a total of 1.885 billion dollars,” reported the minister of Foreign Commerce and Investment, Rodrigo Malmierca. These were mainly in food production, tourism, construction, mining, energy and  manufacturing. “We do not feel these are the results we need,” he admitted without specifying exactly which “approved” projects have been completed.

When the Mariel Special Development Zone opened at the end of 2013, the government forecast it would generate at least 2.5 billion dollars annually and a total of 12.5 billion in its first five years. But according to official statistics, at the end of the first five-year period, only a total of 1.19 billion dollars had been collected, 9.5% of what had been projected.

In an attempt, so far unsuccessful, to attract the attention of foreign investors, Malmierca presented on Tuesday a traditional portfolio of offerings at the 2020 Cuban Business Forum. This year’s selection included 503 projects worth a total of 12 billion dollars. The event, which this year was virtual, ended on Thursday.

When the new measure was unveiled, it became clear that the government was taking a step back and allowing foreign companies to be majority stakeholders in businesses such as tourism, biotechnology, pharmaceuticals, and retail. The minister admitted that the government’s lifting of previous restrictions was intended to be part of a series of “general adjustments to provide more flexibility.”

The government still requires “majority participation by the Cuban state with respect to extraction of natural resources and the provision of public services.”

This was not the only surprising “flexibilization” the minister announced. He also said that the Government now promotes “the participation of investment funds,” a financial instrument heretofore demonized by the ruling party. He added that companies who supply all of a project’s investment capital can set up business in technology and science parks like one that already exists in Havana.

Additionally, there will be a small, unspecified investment opportunities for Cubans living abroad, provided they are willing to settle for a small slice of the pie. As Malmierca pointed out, these will be “small-size projects” to attract investment from small and medium-sized companies” and “from Cubans living abroad.”

The minister’s statements reflect a desire to improve liquidity and introduce reforms in order to encourage foreign companies to enter the Cuban market. They were made at an event focused exclusively on foreign trade. There are no similar investment opportunities for Cubans living on the island, who remain divorced from the macroeconomy of their own country.

“What we have here is, without a doubt, probably one of the most significant structural changes to the Cuban economy, especially in that it precludes Cubans themselves from participating in a process over which the regime wants to retain control,” writes Cuban-based economist Elías Amor Bravo in a post published on Wednesday entitled “Has the privatization of the Cuban economy begun yet?”

Amor Bravo believes the annual Foreign Trade and Investment event calls attention to claims that the U.S. embargo is damaging the nation’s economy. “One way or another, this hubbub of international activity might have something to do with that situation, which the Cuban regime never tires of denouncing any chance it gets. If there really were an economic blockade [as the Cuban government calls the US embargo], the number of these projects would not be increasing year after year,” he says.

From this Amor Bravo draws two conclusions. First, Cuba’s means of production is for sale, “but only to foreigners, who will take over as majority stakeholders.” Second, Cubans will continue being poor and, even worse, “will watch as the ruling communist political class sells off the nation’s assets, which they used to tell us were collective, to foreigners.”

In other words, according to Elias Amor Bravo “the Castro’s piñata party has already started [but] Cuban’s aren’t anywhere near the piñata.”


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