Following the recent announcement by Miguel Díaz-Canel about ongoing discussions between Cuba and the United States, it was Vice Prime Minister Oscar Pérez-Oliva who stepped forward to proclaim that Cuba will now allow its nationals residing abroad to invest in businesses on the island. This decision, however, speaks volumes about the naivety of those making such declarations.
Pérez-Oliva made this statement in an exclusive interview with NBC, which quickly gained international attention. Despite the lack of detailed explanations, he mentioned that "Cuba is open to establishing smooth commercial relations with U.S. companies" and that these ties could also be formed with Cubans living in the United States and their descendants. However, specifics on how this ambitious goal would be achieved were conspicuously absent.
A History of Unfulfilled Promises
It's crucial to understand that the narrative is not as simplistic as black and white; instead, it resides in a complex spectrum of grays. The question remains: how can one so boldly deceive?
Cuba has been open to foreign investors for many years. The country has welcomed investments from various nations since the enactment of Law 118 in 2014, with initiatives like the Mariel Special Development Zone and investments from Canadian and Dutch mining interests, as well as Spanish tourism ventures, indicating the flow of foreign capital. Yet, there's nothing groundbreaking here.
Nevertheless, the results have been disappointing. Investors are hesitant to place their money in a nation whose economy is constitutionally Marxist-Leninist, prohibiting private wealth accumulation. Although official figures are scarce, Cuba's foreign investment track record falls short compared to the Dominican Republic or Costa Rica.
The Economic Reality in Cuba
The crux of the issue is that Cuba lacks a stable and predictable framework for property rights, with market forces replaced by centralized planning. This economic model dissuades foreign investors who have opportunities in other nations. Therefore, expectations from Pérez-Oliva's proposition should be tempered until a more concrete plan is outlined.
Secondly, if Pérez-Oliva intends to attract investors from the United States, he's off to a rocky start by blaming the embargo for hindering Cuba's efforts to overcome its current energy crisis. He is well aware of the root causes of the humanitarian crisis gripping Cuba's economy and what needs to be done to move past it. Attacking the only potential helper, the northern neighbor, isn't the solution.
Despite this, Pérez-Oliva sticks to the script, asserting that the "embargo and U.S. hostility toward Cuba are undoubtedly hindering the development of necessary changes and the establishment of ties with the United States." Yet, doesn't Cuba also need to make strides to earn this relationship? Isn't there a pressing need for political and institutional change toward a system of freedoms, free press, absence of political prisoners, and separation of powers?
Challenges in Building Trust
The Cuban leader continues to emphasize that the "embargo deprives the Cuban economy of access to financing, technology, markets, and, in recent years, limits access to oil." In reality, there is no embargo. Cuba engages in trade, receives investments, and hosts tourists from countries worldwide, but its failure to pay its debts diminishes its appeal to businesses.
While the regime claims to be genuinely open to fostering smooth commercial relations with U.S. companies, only time will tell if this materializes. What should not be underestimated is the challenge of attracting capital from Cuban expatriates, whether in the United States, Spain, France, or elsewhere.
The communist regime lacks a suitable framework for engaging with the over 2 million Cubans in a diaspora that has little reason to collaborate with those responsible for their displacement over the past 67 years. More than mere announcements are needed to establish this new relationship framework, which remains absent.
Pérez-Oliva is among the high-ranking officials appointed by Díaz-Canel to promote a series of economic "transformations" aimed at creating a dynamic environment for economic activity. These reforms span various sectors but fail to address the fundamental issue: Cuba's political and institutional system, a communist dictatorship, must shift toward democracy, freedom, a free press, liberation of political prisoners, and separation of powers. Only a democratic nation can become attractive for foreign investment.
Furthermore, the 2019 Constitution does not provide a framework conducive to economic activity as seen in other countries. Without constitutional reform, foreign investment in sectors like tourism, infrastructure, energy, and mining, which are on the regime's agenda, will remain elusive.
Understanding Cuba's Investment Landscape
Why is Cuba's investment environment considered unstable?
Cuba's investment environment is seen as unstable due to a lack of a predictable framework for property rights and the replacement of market forces with centralized planning. This discourages foreign investors who have more reliable options elsewhere.
What obstacles do Cuban expatriates face when investing in Cuba?
Cuban expatriates face challenges such as a lack of trust in the regime, the absence of a conducive investment framework, and historical grievances against the government that led to their displacement.
How has Cuba historically approached foreign investment?
Cuba has been open to foreign investment since the enactment of Law 118 in 2014, attracting investors from countries like Canada, Spain, and the Netherlands. However, the results have been unsatisfactory due to economic instability and policy constraints.