Cuba - obstacle course for foreign investors

Cuba: obstacle course for foreign investors
By Carlos Batista | AFP

Foreign investors still face an obstacle course in Cuba despite the
passage of a new, more liberal law aimed at attracting capital from
outside the communist-ruled island.
Cuba's National Assembly unanimously approved the law on Saturday,
offering tax and other incentives to foreign investors, who are seen as
crucial to reviving the country's stagnant economy.
But even as he pitched the new law, Foreign Trade and Investment
Minister Rodrigo Malmierca acknowledged to lawmakers many impediments to
foreign investment remain.
He ticked them off in a speech to the assembly: "The economic,
commercial and financial blockade imposed by the American government,
the foreign debt situation, the past errors in terms of investment and
the restrictions imposed by the lack of foreign currency."
The US embargo, in place since 1962 and denounced daily by Havana and
annually by 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 in Cuba and threatens sanctions against companies who do
business in Cuba, whether they are US subsidiaries or foreign companies
that also operate in the United States.
Nevertheless, US President Barack Obama "holds out the possibility of
creating licenses to allow particularly Cuban-Americans to invest in and
promote the nascent Cuban private sector," says Arturo Lopez-Levy, a
Cuban academic at the University of Denver.
There are some exemptions to the embargo, obtained notably by the
powerful American agro-business lobby, and some Cuban exiles have
expressed interest in investing in sugar production in Cuba.
"The American government should seriously think about it, because Cuba
is a market that some Americans greatly wish to reconquer," said Esteban
Morales, of the University of Havana.
- Inertia and bottlenecks -
The high cost of servicing Cuba's foreign debt is another problem
limiting the island'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, Japan and 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 foreign investment 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 new one authorized the creation of
enterprises with 100 percent foreign capital.
But in practice every foreign company operating in Cuba does so through
joint ventures 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 their personnel, who must be hired through a state-run agency.
"This measure should have been eliminated," said Morales, because it
both goes against workers' rights and undermines productivity and
healthy management.
Lopez-Levy, for his part, regrets that the new law fails to specifically
allow remittances from Cubans living abroad to be used and treated as
foreign investment.
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 to four million in the public sector -- benefits hugely from
remittances.
Addressing them in the new law would have created a legal framework for
business associations 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
business associations between the Cuban diaspora and those on the
island, he said.
"It is a simple economic reform which incomprehensibly has been put
off," said Lopez-Levy.

Source: Cuba: obstacle course for foreign investors - Yahoo News Maktoob
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