Cuban-Americans and the new foreign-investment law

HAVANA – One of the aspects that generated most expectations during the discussions over the recent law on foreign investment in Cuba was the possibility that the émigrés, particularly Cuban-Americans émigrés, might invest in the country.

Like the 1995 law, the new law does not exclude this possibility, although I don’t know of any case where that has happened.

The reason given is the alleged reticence of Cuban authorities to accept investments from the Cuban-American community, but in truth I don’t know of any Cuban-American who has applied to do it, simply because the United States’ blockade against Cuba forbids it.

Like its predecessor, the new law is intended to encourage and regulate major investments from abroad. As minister Rodrigo Malmierca reported to the National Assembly of the People’s Power, and as reported by the daily Granma, “attracting foreign capital will be directed toward large and needful projects and will prioritize serious partnerships and entrepreneurs in good financial standing who, of course, are not involved in actions of any kind against Cuba.”

[For more about the new law, read “The new foreign investment law, in brief” and “Investment law: Yes to cooperatives and foreign capital” which appeared in Progreso Weekly last week.]

Although some large Cuban-American entrepreneurs could fit into this definition, I doubt very much that they’d risk investing in this country while the current U.S. policy against Cuba exists, so we’ll be in a situation that’s quite similar to the one so far.

The good news is that part of this sector might be compelled to use its influence to change the existing policy.

The new law does not contemplate foreign investment directed at the small businesses that exist in this country, where the participation of Cuban-Americans is a tangible fact.

The problem is that — perhaps because of political prejudice — the Cuban law doesn’t even recognize the existence of small private enterprises, which is why these forms of property are stuffed in the bag labeled “self-employed workers,” without their specifics being recognized.

As a result of this, the investments of Cuban-Americans and émigrés in other countries do not have an effective legal backing and are accounted for as “remittances for consumption,” which perverts their nature and distances them from the very Cuban policy intended to encourage these businesses as another factor of the country’s economic revitalization.

Clearly, considered individually, these investments do not bring in great capital, high technology or foreign markets. Nor are they aimed at strategic sectors of the economy, but, as a whole, they represent respectable figures and opportunities and the logic of a socialized market like the Cuban market is that, long range, much of the earnings is funneled to the country’s priorities.

Although the lack of data and the statistical inaccuracies prevent an exact accounting of the remittances’ volume, most of the analysts estimate that they constitute an income higher than $2 billion per annum and about 50 percent is invested, or will be invested, in the development of small businesses.

If, as the Cuban officials have just stated, Cuba needs between $2 billion and $2.5 billion in foreign investment to reach the levels of development that the economy needs, it is easy to understand the potential of these investments once a policy is established to stimulate them.

To ignore the existence of these investments has harmful implications for the transparency of the small businesses that are developed in the country and even contradicts the interest in limiting the concentration of wealth.

Paradoxically, through relatives, friends or partners, today a Cuban émigré can be the de-facto owner of a chain of restaurants, a car rental network, or several farm businesses, and can accumulate considerable capital from these or other businesses without any legal mechanism that controls his investment. This leaves both the investor and the Cuban State unprotected and discourages such enterprises.

The investments from émigrés, especially Cuban-Americans, in the small Cuban businesses also have political effects to a degree that transcends their economic value.

In the first place, these people have shown that they’re not stopped by the blockade and, in fact, they’re engaged in a massive rebellion against its measures, complicating its implementation. On the other hand, these investments change the nature of their relationship with Cuba in terms of the spirit of the new immigration law.

The new law on foreign investment is, no doubt, one more step toward the reforms that Cuban economic model requires, and the State’s intervention in it is a guarantee that they will correspond to the interests of the nation, as envisioned by those who oppose savage capitalism and neoliberal shock therapies.

To conciliate these interests with Cuba’s relationship with the émigré communities and to encourage their participation in the nation’s progress is also part of this process. From my point of view, there is also advancement in that direction, in correspondence with the exigencies of reality.

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