Can Cuba Overcome the Prejudice against Investment?

January 5, 2017 |

by Fernando Ravsberg  (Photos: Raquel Perez Diaz)

The need for foreign investment to improve technological processes is urgent in all Cuban companies.

HAVANA TIMES — Ending the year, President Raul Castro announced to the legislature that financial constraints in 2017 “could even get worse in certain circumstances” but even then we would be able to get the “GDP growing at a moderate rate around 2%.”

One of the key reasons for economic decline in 2016 was insufficient foreign investment which barely reached 6.5%. This didn’t play a “fundamental role in the country’s development,” explained Cuba’s Minister of Economy and Planning, Ricardo Cabrisas, to legislators.

Raul Castro recognized the fact that “there had been excessive delays on a frequent basis in the negotiations process” on behalf of some Cuban decision-makers and he called on them to “overcome their out-dated mentality once and for all which is full of prejudice against foreign investment.”

He repeated that “we aren’t heading towards capitalism, that is completely off the table, that is what our Constitution says and will continue to say,” but he added that “we shouldn’t be afraid or put obstacles in the way to what we can do within the country’s existing legal framework.

Cuba is advancing at an incredibly slow rate. Even though reforms were supported by millions of Cubans in People Assemblies, only 21% of them have been applied 5 years later, without there being a public explanation for the causes of such delays.

Nothing better exemplifies bureaucratic slowless than the Mariel Special Development Zone. If things continue at the present rate, it will take 50 years for the government to respond to all of the foreign companies who have expressed interest in investing today.

The Mariel Special Development Zone is the best example of this, only 19 investments have been made in 2 years, while hundreds of foreign companies are waiting for a response. They act as if the country doesn’t need money, technology, knowledge, markets and jobs.

And this level of slowness is repeated across the entire investment process, including what happened to a project which had been given priority due to its social importance. In spite of the fact that this project had been personally requested for by Raul Castro, bureaucracy meant it took a year alone just to figure out where it would be located.

Former Economy Minister, Jose Luis Rodriguez, claims that Cuba needs to grow at “a stable rate above 5% per year, which will inherently imply that foreign investment needs to be above 20%.” However, in an underdeveloped country, with very few natural resources and in great debt, the bulk of investment can only come from abroad.

There is a huge need for this investment; however, there is a huge gap between analyses and decision-making, between the economy’s urgency and the calm nature of bureaucrats who are processing these investments, between the Cuban people’s needs and the limited opening to self-employed labor or between low productivity and the lack of autonomy at state-run companies.

Shortages of imported goods hit people hard in 2016, even though people’s real needs were much less than they were during the 1990s in Cuba.

Cuba is at the middle of many crossroads, it needs to pay off its foreign debt if it wants international credit, it needs to change its energy model so that it doesn’t rely solely on oil, it needs to increase food production, saving on imports and increasing people’s buying power so that they can get by to the end of the month without having to steal.

Because stealing bleeds the economy dry at a surprising rate. According to Beatriz Johnson Urrutia, a representative from Santiago de Cuba, half of the oil supples were being diverted and sold on the black market in her province. She explained that just by controlling the three main distribution centers increased the availability of oil two-fold.

Ironically, those who “are afraid” of Capitalism being restored on the island, are the same people who are opening up the way to it. If socialism isn’t able to create wealth to keep what has been earned up until now and convert Cubans into a prosperous people, people will try and do this by other means sooner or later.

The tourism boom has created a deficit of millions of liters of beer and Cuba still doesn’t allow internationally renowned breweries to open up factories here.

Even those who ideologically support the Cuban Revolution are “materializing” it in its social achievements. However, education, healthcare, culture or sports have extremely high and increasing cost which needs to be funded by economic sectors which are in desperate need of investment and modernization.

Without foreign investment, there won’t be any economic progress. Without progress, there won’t be any financial resources. Without financial resources, the Revolution’s social achievements won’t be sustained. Without its social achievements, the Revolution will die. And Socialism will also disappear along with the Revolution.

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What's your opinion?

  • Moses Patterson

    The Revolution DIED long time ago. Socialism has only existed as a concept.

  • N.J. Marti

    Well, my travels to the Island have informed me that Socialism as an organizing principal is done in Cuba. Just the words remain. What they have is an absurd collection of state controls that lead to shortages of everything. For anyone who wants to copy the Cuban model, the failed state of Venezuela should be fair warning.

  • bjmack

    It’s redundant and the system continues to break with obvious results. Amazing how stubbornness can result in such a disastrous on-going policy.

  • CUBAQUS

    The “resentment” against investment is easily overcome when you take a Cuban “partner” from the elite and its companies. For a price lots of things can be done in Cuba. Whether one wants to get involved with what are corrupt and extortionary processes is a moral decision each investor needs to make.
    From workers rights violated by expropriation of most of the dollar salaries to the legal uncertainty of property right of any investor to the corrupt practices as having to pay to get payed: all part of the system. All a problem for investment and growth.