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Cuba’s 21st Century Communism Lures Capital

By: Belén Marty - @belenmarty - Jun 25, 2014, 11:01 am

EspañolIn order to promote mutual exchange among industry professionals, Cuba organized the CubaIndustria 2014 International Convention and Exhibition, held from June 23 to 27 at the Pabexpo fairgrounds in Havana.

Nearly 2,000 guests attended the meeting, including 400 businessmen from 29 countries. The event was chaired by Commander Ramiro Valdés Menéndez, member of the Communist Party Political Bureau, and vice president of the State and Ministers Councils.

Cuba seeks to attract foreign investment
Cuba seeks to attract foreign investment. (Reinier Davalos Peña)

According to the official site, the event is meant to address the strengths and weaknesses facing Cuba’s industry, how to achieve more interaction between Cuban producers, and where the country stands in the world in the practical application of science and technology.

The Organizing Committee’s intention is to gather entrepreneurs, technology firms, cooperatives, and both national and international industrial research centers. Through various workshops and discussions, CubaIndustria aims to function as a nexus between industries and potential alliances.

Minister of Industries Salvador Pardo Cruz stressed the importance of these strategic alliances to lower the country’s high import rate and increase exports, according to the official Cuban News Agency (CNA).

During the convention’s opening ceremony, Pardo Cruz said “trade is vital” to attract investment into the centralized Cuban economy. He added that “one of the main objectives is to promote business management, technology sharing, innovation, and human capital, as well as best practices for increasing industrial productivity and services.”

The Communist Party official also said they will be looking to promote productivity and efficiency in the iron, steel, chemical, and electronics industries. These sectors will benefit from special attention in the development “integrated projects for the production chain.

US Embargo: Cause of Cuba’s Economic Decay?

Raúl Castro, Fidel’s brother and president of the State and Ministers Councils, called for examining the causes of the island’s economic hardships. “We should be optimistic, because that has always been the spirit of the Revolution,” Raúl urged the rest of the Communist Party ministers during their meeting on Saturday.

Adel Yzquierdo Rodríguez, minister of Economy and Planning, tried to address the roots of their economic problems. Rodríguez said they can be found in “planned foreign earnings that were not achieved; adverse weather conditions; and internal weaknesses that our economy continues to face.” He added that this is then compounded by “the complex international situation and worsening of the economic, commercial, and financial embargo imposed by the United States government.”

Cuban Foreign Investment Act

The CubaIndustria convention is being organized within the framework of Cuba’s Foreign Investment Act, signed into law in late March of this year and effective as of June 28. The new law encourages investments by foreigners and Cuban expatriates alike, and provides substantial tax cuts and legal protection for entrepreneurs willing to invest in Cuba. However, tax incentives only apply to joint public-private ventures, thereby excluding companies financed exclusively by foreign capital.

In addition, the law states that investment projects still require exclusive approval of the Castro regime, and as of yet does not allow for investment by Cubans residing on the island.

Pardo Cruz told CNA that this legislation “is one of the most significant strategic actions taken to update the national economic model, because the resulting investment will contribute to the sustainable growth of GDP.”

The minister also explained the benefits of this investment law when coupled with the Special Development Zone of Mariel (ZEDM). He says foreign investment will accelerate the modernization of the steel industry, among others, and thus reverse the current trend where imports exceed exports.

José Azel, professor at the Institute for Cuban and Cuban-American Studies at the University of Miami and author of Tomorrow in Cuba, cautions others about investing in the communist island. “In Cuba, foreign investors have to partner with the Cuban government, which expects companies to generate revenue for the state based on their own rules. If the enterprise does not reach the officials’ expectations, the government can arbitrarily terminate the agreements and find another naive investor for the project. There is no independent judiciary where an investor can file a claim,” alerted Azel in the Miami Herald.

According to Heritage Foundation’s Index of Economic Freedom, Cuba is among the five least-free economies in the world, next to North Korea, Zimbabwe, Venezuela, and Eritrea. Forecasts predict the island’s economy to rise just 1.4 percent, below the estimates provided by the minister of Economy and Planning, Adel Yzquierdo Rodriguez.

Translated by Daniel Duarte.

Belén Marty Belén Marty

Belén Marty is the Libertarian Latina, a journalist based in Buenos Aires, Argentina. She has lived in Guatemala, Jordan, the United Arab Emirates, and the United States and is a former candidate for local office with Argentina's Libertarian Party. Follow @BelenMarty.