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Foreign investment: a model, an ideology, and a nation

Overcoming the Cuban economic crisis calls for major investments. But the capital is still not there. The economy's subordination to ideology and a lack of political will are to blame.

La Habana

Surmounting the crisis in which the Cuban economy is mired will require major investments, but the measures undertaken thus far to attract capital have not worked, as the economy's subordination to ideology, and a lack of political will, have impeded this.

Laws and decrees

In 1982, when Cuba depended on Soviet subsidies, Decree Law 50 was enacted to attract foreign investment. The nature of this legislation, presumptuous and flouting international requirements, made it impossible to obtain the desired results: to develop socialism with Soviet subsidies and capitalist financing.

In 1995, when the Soviet Union collapsed, a new tack was taken when Law 77 on Foreign Investments was enacted. In 1996 special trade zones were created through Decree-Law 165, which exempted investors from paying tariffs on their imports. Both pieces of legislation, however, retained the main restrictions. And the result was immediate: of some 400 existing companies, by 2002 half had abandoned the country.

In 2013, through Decree Law 313, the Mariel Special Development Zone (ZEDM)  was created, with the aim of boosting the economy. Located on a seaway through which some 60% of international trade passes, the ZEDM could have had an impact on the island similar to that of England's occupation of Havana in the eighteenth century, which brought Cuba firmly into the fold of Western Civilization, and spelled the decline of Haiti, as it was Cuba that became the world's leading producer and exporter of sugar and coffee. The refusal to introduce structural changes and the ongoing dispute with the United States prevented this, however,

In 2014 Foreign Investment Law 118 was promulgated, more advanced than the previous legislation, but also with restrictions indicative of an invisible red line, traced out of an ideological obligation. And the results were the same.

The roots of the failure

For sustained GDP growth of 5 to 7%, investments in the amount of some 2-2.5 billion dollars per year are required, which even the Government itself has acknowledged. What was achieved with the series of laws and decrees was encapsulated in one sentence by the Minister of Economy and Planning in December 2016: "foreign investment continues to be very low."

The causes boil down to: 1- The seizures of property held by American and Cuban owners between 1959 and 1968, who were never compensated; 2- The denial of Cubans' right to participate as investors; 3- The primacy granted to state ownership, despite its proven ineffectiveness; 4- Impediments thwarting Cubans from running small businesses, mainly service-related, which continue to lack legal personality, and are saddled with multiple obstacles, all in order to avert the materialization of a middle class; 5- The subordination of  judicial bodies to the Party-State-Government, which places investors in  legal jeopardy; 6- The prohibition against the free hiring of labor; and 7- Ignorance of the right to the free unionization of workers: a principle enshrined in the Constitution of the International Labor Organization (ILO), appearing in Convention 87 of said institution, upheld in the Universal Declaration, international agreements, and the American and European conventions on Human Rights.

The solution

Until the injustices committed with the aforementioned appropriations are rectified, and Cubans are given rights to participate as economic agents; and as long as we continue to contend that the US blockade is the main culprit, we will not emerge from our economic stagnation, and growing regression.

This requires a level of political will that has been absent thus far. One of its manifestations took place in 2014, when the failures of the Cuban model, and US policy towards Cuba, led to the resumption of diplomatic relations. As that step did not result from a victory by either party, but rather their mutual failure, they were forced to change. 

The implementation of several sets of measures backed by President Barack Obama did not produce more results because Cuba, instead of taking advantage of this situation to introduce structural changes, limited itself to allowing nationals to stay in hotels reserved for tourists; buy computers, DVDs and mobile phone lines; sell their house or car; and leave the country without having to ask the state for permission. These measures lacked true political will and demonstrated a regressive tendency in the area of human rights.

The refusal to democratize the country can be traced to the regime's subordination to ideology and its clinging to power. External contradictions make it possible to cover up internal ones. In the absence of the difference, internal contradictions would displace external ones. And that undercuts ideology, thereby endangering those in power.

The foregoing explains why, despite the emergent détente, in 2016 the Cuban Government presented before the UN General Assembly, for the 26thtime, a draft resolution against the US embargo. 

In 1992, when Cuba presented the first resolution against the embargo, only 59 countries supported it. In 2016, with the abstention of the United States and Israel, and the favorable vote of the rest of the countries, that channel was exhausted, as General Assembly resolutions are not binding, but rather only recommendations. It was then necessary to take advantage of the atmosphere of rapprochement for bilateral negotiations, but this involved those seizures pending compensation. 

The economy's subordination to ideology, and the regime’s political determination to remain in power, have negated Cubans' professional preparation, entrepreneurial disposition, and the capital they have scrapped to accumulate thanks to family remittances, and their small businesses.

In light of all the above, the passage of a new investment law, not preceded by "Foreign", is urgent. The choice is clear: the model and its ideology are saved, or the nation. And the model is unworkable.

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