Cuba: Obstacle course for foreign investors

Foreign investors still face an obstacle course in Cuba despite thepassage of a new, more liberal law aimed at attracting capital from outside thecommunist-ruled island.Cuba's National Assembly unanimously approved the law on Saturday, offering taxand other incentives to foreign investors, who are seen as crucial to reviving thecountry's stagnant economy.But even as he pitched the new law, Foreign Trade and Investment Minister RodrigoMalmierca acknowledged to lawmakers many impediments to foreign investmentremain.He ticked them off in a speech to the assembly: "The economic, commercial andfinancial blockade imposed by the American government, the foreign debt situation,the past errors in terms of investment and the restrictions imposed by the lack offoreign currency."The US embargo, in place since 1962 and denounced daily by Havana and annuallyby an immense majority of the UN General Assembly, is solidly embedded in US law.It prohibits Americans and Cuban residents of the United States from investing inCuba and threatens sanctions against companies who do business in Cuba, whetherthey are US subsidiaries or foreign companies that also operate in the UnitedStates.Nevertheless, US President Barack Obama "holds out the possibility of creatinglicenses to allow particularly Cuban-Americans to invest in and promote the nascentCuban private sector," says Arturo Lopez-Levy, a Cuban academic at the University ofDenver.There are some exemptions to the embargo, obtained notably by the powerfulAmerican agro-business lobby, and some Cuban exiles have expressed interest ininvesting in sugar production in Cuba."The American government should seriously think about it, because Cuba is amarket that some Americans greatly wish to reconquer," said Esteban Morales, of theUniversity of Havana.- Inertia and bottlenecks -The high cost of servicing Cuba's foreign debt is another problem limiting theisland's capacity to borrow and adding to its need for direct foreign investment.The last official figure put Cuba's foreign debt at $13.6 billion in 2010.Since then, Cuba has managed to cancel part of its foreign debt with Russia, Japanand Mexico.While Malmierca did not explain what he meant by "the errors of the past," Lopez-Levy said that the new law faces many of the same pitfalls as the 1995 foreigninvestment law it replaced."The 1995 law was never applied in full because of inertia on the part of the administration and because of several bottlenecks," he told AFP.For example, the old law like the newoneauthorized the creation of enterprises with100 percent foreign capital.But in practice every foreign company operating in Cuba does so through jointventures in which the state has a majority stake.To these problems, the Cuban government adds another: the hiring of personnel.Under the new law, as in the old, foreign investors have no direct control over theirpersonnel, who must be hired through a state-run agency."This measure should have been eliminated," said Morales, because it bothgoesagainstworkers'rightsandunderminesproductivityandhealthymanagement.Lopez-Levy, for his part, regrets that the new law fails to specifically allowremittances from Cubans living abroad to be used and treated as foreigninvestment.The remittances amount to about $2.6 billion a year, making them Cuba's second most important source of foreign revenues, on a par with tourism.The nascent private sector, which today employs some 450,000 people -- compared tofour million in the public sector -- benefits hugely fromremittances.Addressing them in the new law would have created a legal framework for businessassociations between the Cuban diaspora and those on the island, he said."All these businesses should receive breaks and incentives, notably in terms of taxes,because of their positive social impact," said Lopez-Levy.Addressing them in the new law would have created a legal framework for businessassociations between the Cuban diaspora and those on the island, he said. "It is a simple economic reform which incomprehensibly has been put off," saidLopez-Levy.