In The Mystery of Capital, Peruvian economist Hernando de Soto analyzes the inability of many poor countries to capitalize on the wealth they already possess. His analysis of the secular economic and social backwardness of the so-called "Third World" differs from that of other authors in that De Soto shows us that these countries do not so much need foreign investment as an institutional framework that allows them to leverage and convert existing indigenous capital into productive capital.
De Soto focuses on housing as a very valuable asset that, due to a lack of securitization, owing to the absence of any urban development policy, is an extremely illiquid asset that keeps the resources of millions of families trapped, unable to unleash its potential as capital (means of production) within commercial enterprise.
Unlike in Latin America, where it is estimated that between 40 and 80% of people live illegally occupying land that they cannot legalize, in Cuba, 85% of homes have legal deeds, and most are totally free of debt.
While in Latin America the impossibility of converting these houses into capital is due, fundamentally, to the State's inability to organize urban development by enforcing property rights, in Cuba, the Government has implemented urban legislation, but at the cost of doing away with the right to property itself, a direct way of ending freedom: the house is yours... but it's not.
These days, when Castroism is once again banking on a rescue by foreign investors in order to hang on, extending its nets to see if it can also trap unwary Cuban emigrants, it could well have looked inward to try to unleash its national capital, but its authoritarianism prevents it from granting such freedoms.
And we are not referring to those tired clichés that Raúl Castro and his accomplices always repeat: "make savings a daily battle," "the fastest way to resources is saving," "saving resources of all kinds continues to be one of the main sources of the country's revenue"... as if the key to saving were hunger.
The real, and probably the greatest, source of resources in Cuba lies in the mobilization of its real estate capital so that, in addition to providing housing, it could finance productive services.
But mobilizing real estate capital goes beyond the possibilities of simply buying and selling; it implies the development of a financial market specialized in mortgage operations that accepts housing as collateral for loans and investments, that mediates and matches terms and risks between capital providers (homeowners) and savings demanders (businesspeople with dissimilar projects), and mobilizing real estate value towards business, without the loss of its use being a necessary condition.
Of course, Cuban state-owned banks are unable to provide this service, but, under the right conditions (that is, when Castroism disappears) many financial specialists will find on the island a very fertile ground to, through this real estate, property homogeneously distributed among Cubans, bolster the rest of the country’s economic activity.
In fact, already today, even though houses can only be sold (fraudulently, most often, to avoid the regime's voracious fiscal terms), this operation is already being used to come up with the $7,000 to $10,000 per person that the voyage to the southern border of the U.S. costs.
If we were to calculate the number of people with access to $10,000, $20,000 or $30,000 who decide to leave Cuba before investing that money here, we would find that this island suffers from the highest proportion of migrants who could be entrepreneurs anywhere in the world. The lack of freedom and the misery that this causes have convinced these Cubans that migration, despite its terrible emotional and family cost, is their best investment.
When a Cuban, regardless of his profession, does the numbers and realizes that $10,000 is equivalent to a full salary accumulated during almost half of his working life, what he wants is to escape, not to invest.
But, following Hernando de Soto's line of argument, let us return to the idea that Cuba has enormous economic potential in the widespread securitization of its urban development assets ? although, unfortunately, due to 63 years of economic ineptitude and no private property, it cannot be exploited without foreign investment and expertise to build a financial market that manages to energize this stagnant wealth.
It is good to know, however, that many Cubans, today destitute, have in their hands (if not prevented by anti-financial prejudices) an instrument with which to unleash that proverbial entrepreneurial capacity that could turn this island into the Switzerland of the Caribbean, once Castroism takes its place on the dunghill of history.