Tag Archives: Foreign Investment

FOREIGN INVESTMENT IN CUBA MIGHT BE AT RISK IF U.S. ALLOWS LAWSUITS OVER CONFISCATED PROPERTY

BY MIMI WHITEFIELD

Miami Herald, FEBRUARY 20, 2019 12:00 AM

Original Article: Confiscated Property

Cuba’s efforts to attract foreign investment to boost its ailing economy were limping along even before the Trump administration raised the possibility that it might allow lawsuits in U.S. courts against foreign companies that do business on the island using properties confiscated from Americans or Cubans who later became U.S. nationals.

Now with the clock ticking on a U.S. decision on whether to allow U.S. nationals to sue for monetary damages, Cuba’s investment climate might be about to take another hit.

“I think this would be another layer of concern for potential foreign investors and could chill investment in Cuba considerably,” said Jason Poblete, a Washington area attorney who specializes in federal regulatory matters. “It would be an added complication.”

Every U.S. president since 1996 has routinely suspended Title III — the lawsuit provision — of the Helms-Burton Act fearing fallout from important U.S. allies such as the EU countries, Canada and Mexico whose investors in Cuba could be targeted. Like clockwork, presidents have waived the lawsuit provision every six months for more than two decades. The Trump administration has suspended it three times already.

But in January Secretary of State Mike Pompeo informed Congress that this time, beginning on Feb. 1, there would be only a 45-day suspension of Title III. “This extension will permit us to conduct a careful review of the right to bring action under Title III in light of the national interests of the United States and efforts to expedite a transition to democracy in Cuba,” the State Department said.
The review is being conducted at a time when U.S.-Cuba relations are increasingly frayed and will take into consideration “factors such as the Cuban regime’s brutal oppression of human rights and fundamental freedoms and its indefensible support for increasingly authoritarian and corrupt regimes in Venezuela and Nicaragua,” the State Department said.

Analysts say that indicates that the administration wants to make the case that this goes beyond property rights and foreign investment in Cuba and also has a national security dimension.

The decision could come soon, on or around March 2, because the secretary of state must give Congress at least 15 days notice before a suspension of Title III is to begin.

In a process that ended decades ago, the United States certified 5,913 claims for Cuban properties that belonged to U.S. citizens and were expropriated shortly after the 1959 revolution. Those claims plus interest are valued at about $8 billion in today’s dollars.

But under Helms-Burton, also known as the Cuban Liberty and Democratic Solidarity Act, Cubans who were not U.S. citizens at the time their properties were seized also would be able to file suit if a foreign investor in Cuba is “trafficking” in their former properties.

That would include investors who have joint ventures or partnerships with Cuban entities and companies that use or benefit from disputed properties. It also could target foreign companies that have management contracts for properties with underlying claims.

Excluded from the Title III definition of trafficking are any transactions and uses of confiscated property “incident to lawful travel to Cuba” as well as any property that is used for the delivery of international telecommunications to Cuba.

Those who lost their homes and smaller property owners also would be precluded from filing lawsuits if the value of their confiscated property didn’t exceed $50,000 at the time it was taken.

“It would not be easy to make a Title III claim. It requires time, money and emotional capital,” said Poblete. “This is complex litigation.”

Helms-Burton, which was signed into law in 1996 in the heat of Cuba’s shoot-down of two civilian planes piloted by Cuban Americans, notes that the Cuban government “is offering foreign investors the opportunity to purchase an equity interest in, manage or enter into joint ventures using property and assets, some of which were confiscated from United States nationals” in an effort to gain “badly needed financial benefit.”
Cuba, once wary of foreign investors, has said it needs to attract $2.5 billion annually in foreign investment to meet its development targets, but so far it has fallen short of that goal. From October 2017 to October 2018, for example, Cuba approved 40 new projects, representing a potential investment of $1.5 billion.

For 2018-2019, Cuba has announced it is opening up 525 projects, everything from opportunities in the tourism sector to building pharmaceutical, LED lighting and food processing plants, to potential foreign investors. This $11.6 billion portfolio of investment opportunities is the largest Cuba has ever released, beating the previous wish list for $10.7 billion worth of investment in 465 projects.

After the Cuban economy grew by just over 1 percent in 2018, Cuban leader Miguel Díaz-Canel said that “Cuba’s fundamental battle” is economic and that one of Cuba’s urgent needs is attracting more foreign direct investment.

But not everyone is convinced that Cuba is doing enough if it truly wants to attract foreign investors.

“The Cubans might say that foreign investment is a central part of their economic strategy but they haven’t created a climate that is attractive for foreign investment,” said Richard Feinberg, a professor at the University of California San Diego’s School of Global Policy and Strategy and a Brookings Institution fellow.

“The domestic market is stagnant if not shrinking. For companies interested in repatriating profits? There are already delays in Cuba repatriating profits,” he said.

Potential investors also have complained of a lengthy, cumbersome process for evaluating investment proposals, although Cuba said it is streamlining the approval process. It also has opened a Special Economic Development Zone in Mariel that offers special tax and customs breaks and allows up to 100 percent foreign ownership.

 

“The biggest disappointment with Díaz-Canel so far is that the economy is in serious straits. The Cuban people would like to see light at the end of the tunnel,” Feinberg said.

But in the event that Title III lawsuits are allowed to go forward, he said, “the business climate in Cuba would go from a temperature of 0 to minus 5 degrees. That may be a bit dramatic but already there’s just a trickle of foreign investment coming in.”

Cuban Foreign Minister Bruno Rodríguez said earlier this week that Cuba is ready if the United States applies Title III: “We have a program, with a predictable plan for the economy until 2030. The Cuban economy has a strong international anchor.”

Even if the U.S. government decides after its review to continue the suspension of Title III, “the threat itself has a chilling effect,” Feinberg said. “For companies contemplating a new investment in Cuba, they must do their due diligence and make sure there is not an underlying claim.”
“This isn’t really about property,” said Phil Peters, president of the Cuban Research Center. “It’s an attempt to squeeze the Cuban economy to hopefully push Cuba over the brink” and bring political change.

If Title III is activated, a person or entity trafficking in confiscated property would get a three-month warning and then would be liable for monetary damages up to three times the value of the property plus interest as well as court costs and reasonable attorneys’ fees.

European hoteliers and Canadian mining operations are expected to be among the biggest targets if Title III goes forward. Investors from as many as 20 countries could be the targets of Title III lawsuits, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council.

But U.S. trading partners are expected to push back against the extraterritorial nature of Title III.  “The EU, Canada, the UK, and Mexico have what are called blocking regulations on their books to countermand an action under Title III,” said Pedro Freyre, a Miami lawyer who represents cruise lines and other U.S. companies doing business in Cuba.

Such blocking regulations, he said, wouldn’t allow defendants to participate in discovery, would block compliance with any U.S. court orders and wouldn’t allow for the enforcement of a judgment. “They generally allow for claw-back as well, which means the defendant would be allowed to sue the claimant for damages and attorney’s fees,” Freyre said.
The EU also could revive a World Trade Organization complaint it filed when Helms-Burton first became law but which it later withdrew.

“The foreign companies will argue that the United States doesn’t have jurisdiction,” said Robert Muse, a Washington attorney who specializes in U.S.-Cuba relations. “This would be a hard-fought issue.”

Sherritt International

 Nickel Mine and Concentrator, Moa, Cuba; Jointly Owned by Sherritt International and Cuba. A “Helm’s-Burton” Property

 

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ORDER FROM CHAOS: WHAT WILL BE RAUL CASTRO’S LEGACY?

Richard E. Feinberg, Nonresident Senior Fellow – Foreign PolicyLatin America Initiative

Brookings, December 4, 2017

Original Article: Order from Chaos
In many ways, Raúl Castro’s 10-year presidential rule, ending in February 2018, has been utterly disappointing. Cuba’s economy is stagnant and economic reform has stalled. Political power remains highly centralized and secluded. The island’s educated youth are fleeing in droves for better opportunities abroad. And the Trump administration is renewing U.S. hostility.

Nevertheless, during his decade in power Raúl Castro oversaw historic shifts in Cuban foreign and domestic policies. Raúl initiated some policy innovations, deepened and consolidated others, and merely watched while forces beyond his control drove other changes. Regardless, these changes have paved the way for the successor generation of leaders—if they dare—to push Cuba forward into the 21st century.

MORE FRIENDS

Fidel’s younger brother, now 86, can be especially pleased with his achievements in foreign affairs. Cuba had been a colony of Spain, a dominion of U.S. capital, a cog within the Soviet-dominated Council for Mutual Economic Assistance (COMECON) system. Now, for the first time in its 500-year history, Cuba has escaped the grip of a single world power.

Today, Cuban traders circumnavigate the globe, engaging both state-directed and free-market economies. The top trading 10 partners in goods in 2016 were (in rank order): China, Venezuela, Spain, Canada, Brazil, Mexico, Italy, Argentina, Germany, and Vietnam. The next tier of merchandise trading partners (between $275 million and $100 million) includes the United States, France, Algeria, the Netherlands, Russia, and Trinidad and Tobago. No single country accounts for more than 20 percent of total merchandise trade.

This trade diversification began in the 1990s following the collapse of the Soviet Union, but Raúl’s economic team extended and consolidated it. Under Raúl, Cuba also expanded the number of countries that purchase its main service export—the labor of educated professionals, especially in the medical field. While Fidel initiated large-scale service exports to Venezuela, Raúl followed suit with Brazil and dozens of other developing countries.

In the last 10 years, Cuba has also diversified the sources of foreign investment. For example, in the economy’s bright spot, international tourism, investors hail from Spain, France, Canada, Germany, Switzerland, Canada, China, and Malaysia, among other locations.

A small island economy cannot hope to be fully autonomous; it must adapt to global constraints. But by diversifying its economic partners, Cuba has minimized its vulnerability to external dictates, and maximized its own margin for maneuver. This diversification of economic partnerships has paid handsome diplomatic dividends. Cuba has become an accepted participant in various Latin American forums and diplomatic initiatives; overcame its exclusion from the Summit of the Americas leaders’ meetings; gained membership in the Central American Bank for Economic Integration (CABEI); and gained access to resources at the multilateral Andean Development Corporation (CAF). President Donald Trump is alone in his efforts to damage the Cuban economy through comprehensive economic sanctions.

BREAKING IDEOLOGICAL BARRIERS

The slow, halting pace of economic reform has discouraged many Cubans, especially recent university graduates. Conservative forces resisting change remain strong within the Cuban Communist Party. Nevertheless, Raúl leaves a legacy that could greatly facilitate the work of reformers in the future. (I will further evaluate the economic reforms and pathways forward in a February 2018 Brookings policy brief.)

Raúl’s legacy lies not in standard measures of economic performance, such as per capita GDP growth, labor productivity, or investment rates, where results have varied from disappointing to disastrous. Rather, Raúl’s legacy in economic policy lies in breaking once forbidding ideological barriers. True, Raúl’s public statements often have been contradictory and shifting, as he apparently sought to balance conflicting tendencies within the Cuban Communist Party. But in key areas, Raúl demolished or at least cracked these obstacles to change: rejection of globalization (a favorite Fidel bugaboo), fear of foreign investment, and hostility to private business and markets. He also transformed relations with the United States.

In daily life, Cubans have left behind the comfort of social uniformity and relative economic equality for the more tumultuous worlds of greater social heterogeneity and income inequalities.

Raúl is no cheerleader for globalization. But he set aside his brother’s heated denunciations of multinational corporations and “exploitative” markets. Instead, he went about the practical business of building economic relations with a multitude of governments and foreign corporations. Without much pomp and circumstance (although there was the occasional ribbon-cutting), Raúl advanced the process of normalizing Cuba’s integration into global markets.

Raúl’s decision to normalize diplomatic relations with “the historic enemy,” the United States, dramatically revised his regime’s foreign policy doctrine. The hegemon just across the Florida Straits was no longer an imminent, existential threat, readily justifying economic deprivations and tight political restrictions. Notwithstanding the altered attitude in Washington today, so far a number of the concrete gains from the Obama era détente remain in place, notably the facilitation of travel (commercial airline flights and cruise ships) and the generous flows of remittances to many Cuban families, whether for household consumption or business start-ups.

Of the reforms most directly attributable to Raúl, the suppression of the special (and expensive) permit to travel abroad was among the most important to many Cubans. As a result, most Cubans can freely leave the island (provided they can acquire an entry visa elsewhere), to be enriched by their contact with foreign lands and ideas. Greater access to mobile technology and rapidly expanding social media, permission to sell homes and cars, and more freedom to stay in once-forbidden tourist hotels have also improved life for many Cubans during his tenure.

De facto, by building commercial partnerships worldwide, and by accepting the freedom to travel, Cuba has now embraced core components of globalization.

OPENING TO FOREIGN INVESTMENT

To stave off complete economic collapse in the early 1990s, Fidel had invited in limited foreign investment. El Comandante en Jefe made these concessions holding his sensitive ideological nose and again closed Cuba’s borders once he felt politically secure. In sharp contrast, Raúl has publicly chastised his ministers for not accelerating foreign capital inflows (although he hesitated to fire them).

Periodically, the government releases a “Portfolio of Opportunities for Foreign Investment.” Each edition is fatter and glossier; the 300-page 2017-2018 version features 456 projects with a cumulative price tag of $11 billion. Yes, most projects have remained on paper, victims of bureaucratic foot-dragging and red tape; but these documents are products of an inter-agency process whereby many ministries and state enterprises join in a collective waving of hands to the international commercial community.

In a 2011 official document outlining proposed reforms, foreign investment was derided as “complementary,” a secondary afterthought. In contrast, when addressing Havana’s annual international trade fair in 2017, Raúl’s minister for foreign trade and investment sang a very different tune: “Today foreign investment ceases to be a complement and has become an essential issue for the country.”

Mariel, the new economic development zone facing the Straits of Florida, has gotten off to a slow start, having approved over three years only 26 projects worth about $1 billion. However, 15 of these projects have broken through another ideological barrier: allowing 100 percent foreign ownership.

LEGITIMIZING PRIVATE PROPERTY

Fidel disliked and distrusted private property. In 1968, for example, he nationalized remaining mom-and-pop businesses. In contrast, over the last decade the government has issued hundreds of thousands of licenses to small-scale private businesses. Raúl has also encouraged some 200,000 Cuban families to farm as homesteaders (although not all survived). In addition to these authorized private businesses, many Cubans augment their income in more-or-less tolerated gray-market activities. Altogether, as much as 40 percent of the Cuban workforce have at least one foot in the private sector.

Recently, Raúl criticized private business for illicit activities, and the government halted the granting of new business licenses. Nevertheless, these concessions to anxious Communist Party stalwarts appear to be a temporary pause. The ideological foundations, and public constituency, for the acceptance and eventual expansion of a market-driven private sector have most likely been set too deep for a full-blown counter-revolution to succeed.

SOCIAL RELAXATION

This increase in economic pluralism has unleashed public debates on economic policy. Criticism of government performance is widely voiced with less fear, even if journalists and academics are still careful not to directly confront senior authority.

Another major shift that accelerated during the last decade: the evolution of Cuban society from socialist uniformity toward a more heterogeneous mix of property relations, income levels, and social styles. While legal statutes remain to be written, property can now be private (often in partnership with diaspora capital), cooperative (in numerous variations) and foreign-owned, as well as state controlled.

Income inequalities have become more visible, even if less jarring than in other Latin American and Caribbean nations. Many Cubans still honor social solidarity. But the transition toward a more normal, relaxed, and individualistic society is unmistakable. On Havana’s streets, Cuban youth—increasingly exposed to international tourists, travel opportunities and the worldwide web—sport the variety of hairstyles, tattoos, music, and other signatures of global youth.

These ideological adaptations do not guarantee speedy policy changes, much less their faithful implementation. The Cuban government is grappling with a severe foreign exchange crisis, and the sudden, unanticipated chill in bilateral relations imposed by the United States. All the more reasons for the next generation of Cuban leaders to build upon the diversity of international economic associations and the new ideological currents unleashed during the reign of the second and last Castro brother—and to launch their island state into deeper phases of global integration and economic transformation.

Richard Feinberg

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NESTLE, CUBA LAY FIRST STONE FOR $55 MILLION COFFEE AND BISCUIT FACTORY

Reuters, November 28, 2017.

Original Article: Cuba Nestle

By Sarah Marsh

HAVANA (Reuters) – Cuba and Swiss firm Nestle on Tuesday laid the first stone of a $55 million coffee and biscuits factory joint venture in the Mariel special development zone, the latest major foreign investment in the Communist-run island.

Nescor is Cuba’s third joint venture with Nestle and reflects President Raul Castro’s drive to attract international capital to help update the Soviet-style command economy and stimulate growth.

Cuba created the zone around the Mariel port just west of Havana four years ago, offering companies significant tax and customs breaks. Its aim to replace imports with Made in Cuba goods has become all the more pressing because aid from socialist ally Venezuela is falling, resulting in a cash crunch.

Nestle Vice President Laurent Freixe said in an interview after the symbolic stone-laying ceremony that negotiations with Cuban partner Coralsa and Mariel authorities had taken just 18 months, a “record speed”.

The factory would be operating at the end of 2019 manufacturing coffee products, said Freixe, head of Nestle’s Americas division. Biscuits and other culinary products would come later. The company exports goods to Cuba and the other two joint ventures are one producing ice cream and the other bottled water and other beverages.Nescor goods would be destined both for the Cuban market and tourists visiting Cuba, while it could eventually also export Cuban coffee, Freixe said.

Nestle last year already exported Cuban coffee as a limited “Cafecito de Cuba” edition of Nespresso single-use brewer pods, including to the United States.

“It sold at an impressive speed,” said Freixe. “Within a few days that line was sold out, which shows the potential.”

Before being able to export Cuban coffee, Nestle would first need to help Cuba increase its harvest, Freixe said, which has steadily declined since the 1959 revolution.

The new factory could double Nestle’s turnover in the country over the medium term from $135 million currently, he said.

So far, Cuba has approved 31 projects for the Mariel zone including nine with multinationals, Director Ana Teresa Igarza said at the ceremony. There was no longer the same flurry of business interest in the zone as when it was created but the interest that remained was more serious, she said. Mariel was on the list of Cuban entities that the administration of U.S. President Donald Trump banned U.S. firms from doing business with.Just one U.S. company, Rimco, the Puerto Rican dealer for heavy machine maker Caterpillar , has signed a deal with Mariel to open up shop there, getting approval just on time before the new U.S. regulations were issued earlier this month.Igarza declined comment on whether Mariel continued to negotiate with other U.S. companies but said it would be open to doing so.

Mariel, April 2015. (Photo by Arch Ritter)

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CUBA: CARTERA DE OPORTUNIDADES DE INVERSION EXTRANJERA, 2017-2018

MINCEX, November 2017

Original Document: MINCEX:  CARTERA DE OPORTUNIDADES DE INVERSION EXTRANJERA 2017-2018

Great opportunities for foreign investors in Cuba!

After nationalizing all foreign investment as well as domestic private enterprise – right down to the street vendors and shoe shine boys in the 1960 to 1968 period –  Cuba is now  courting foreign investors.

Here is the current document from MINCEX listing the possiblde investment opportunities for foreign enterprises,. It was sent courtesy of Jose Luis Rodriguez, (former Minister of Economics and Planning, former Director and currently with the CENTRO DE ESTUDIOS SOBRE LA ECONOMIA MUNDIA).

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Slim pickings. CLUELESS ON CUBA’S ECONOMY

HAVANA. The communist regime can no longer rely on the generosity of its allies. It has no idea what to do

The Economist.  Print edition | The Americas. Sep 30th 2017

GABRIEL and Leo have little in common. Gabriel makes 576 Cuban pesos ($23) a month as a maintenance man in a hospital. Leo runs a private company with revenues of $20,000 a month and 11 full-time employees. But both have cause for complaint. For Gabriel it is the meagre subsistence that his salary affords. In a dimly lit minimá (mini-mall) in Havana he shows what a ration book entitles one person to buy per month: it includes a small bag of coffee, a half-bottle of cooking oil and five pounds of rice. The provisions cost next to nothing (rice is one cent per pound) but are not enough. Cubans have to buy extra in the “free market”, where rice costs 20 times as much.

Leo (not his real name) has different gripes. Cuba does not manufacture the inputs he needs or permit enterprises like his to import them. He travels abroad two or three times a month to get them anyway. It takes six to eight hours to pack his suitcases in such a way that customs officials don’t spot the clandestine goods. “You feel like you’re moving cocaine,” he says.

Making things easier for entrepreneurs like Leo would ultimately help people like Gabriel by encouraging the creation of better jobs, but Cuba’s socialist government does not see it that way. In August it announced that it will stop issuing new licences in two dozen of the 201 trades in which private enterprise is permitted. The frozen professions include running restaurants, renting out rooms to tourists, repairing electronic devices and teaching music.

This does not end Cuba’s experiment with capitalism. Most of the 600,000 cuentapropistas (self-employed workers), including restaurateurs, hoteliers and so on, will be able to carry on as before. But the government mistrusts them. Their prosperity provokes envy among poorer Cubans. Their independent-mindedness could one day become dissent. Raúl Castro, the country’s president, recently railed against “illegalities and other irregularities”, including tax evasion, committed by cuentapropistas. He did not admit that kooky government restrictions make them inevitable. The government “fights wealth, not poverty”, laments one entrepreneur.

A Santeria Message

Trump’s mouth, Irma’s eye

The clampdown on capitalism comes at a fraught time for Cuba. Mr Castro is due to step down as president in February. That will end nearly 60 years of autocratic rule by him and his elder brother, Fidel, who led Cuba’s revolution in 1959. The next president will probably have no memory of that event. Relations with the United States, which under Barack Obama eased its economic embargo and restored diplomatic relations, have taken a nasty turn. President Donald Trump plans to make it more difficult for Americans to visit the island. Reports of mysterious “sonic attacks” on American diplomats in Havana have further raised tensions.

Hurricane Irma, which struck in early September, killed at least ten people, laid waste to some of Cuba’s most popular beach resorts and briefly knocked out the country’s entire power system. With a budget deficit expected to reach 12% of GDP this year, the government has little money to spend on reconstruction.

These are blows to an economy that was already in terrible shape. Cuba’s favourite economic stratagem—extracting subsidies from left-wing allies—has had its day. Venezuela, which replaced the Soviet Union as its patron, is in even worse shape than Cuba. Their barter trade—Venezuelan oil in exchange for the services of Cuban doctors and other professionals—is shrinking. Trade between the two countries has dropped from $8.5bn in 2012 to $2.2bn last year. Cuba has had to buy more fuel at full price on the international market. Despite a boom in tourism, its revenues from services, including medical ones, have been declining since 2013.

Bound by a socialist straitjacket, Cuba produces little else that other countries or its own people want to buy. Farming, for example, is constrained by the absence of markets for land, machinery and other inputs, by government-set prices, which are often below the market price, and by bad transport. Cuba imports 80% of its food.

Paying for it is becoming harder. In July the economy minister, Ricardo Cabrisas, told the national assembly that the financial squeeze would reduce imports by $1.5bn in 2017. What appears in shops often depends on which of Cuba’s suppliers are willing to wait for payment. GDP shrank by 0.9% in real terms in 2016. Irma and the drop in imports condemn the economy to another bad year in 2017.

The government does not know what to do. One answer is to encourage foreign investment, but the government insists on pulling investors into a goo of bureaucracy. Multiple ministries must sign off on every transaction; officials decide such matters as how many litres of diesel will be needed for delivery trucks; investors cannot freely send profits home. Between March 2014 and November 2016 Cuba attracted $1.3bn of foreign investment, less than a quarter of its target.

Faced with a stalled economy and the threat of shortages, the government is trying harder to woo investors. It has agreed to let food companies, for example, repatriate some of their profits. But anything more daring seems a distant prospect. Cuentapropistaslike Leo are waiting impatiently for a planned law on small- and medium-sized enterprises. That would allow them to incorporate and do other sorts of things that normal companies do. It will not be passed anytime soon, says Omar Everleny, a Cuban economist.

An even bigger step would be a reform of Cuba’s dual-currency system, which makes state-owned firms uncompetitive, keeps salaries in the state sector at miserable levels and distorts prices throughout the economy. Cuban pesos circulate alongside “convertible pesos” (CUC), which are worth about a dollar. Although for individuals (including tourists) the exchange rate between Cuban pesos and CUC is 24 to one, for state-owned enterprises and other public bodies it is one to one. For those entities, which account for the bulk of the economy, the Cuban peso is thus grossly overvalued. This delivers a massive subsidy to importers and punishes exporters.

A devaluation of the Cuban peso for state firms is necessary for the economy to function properly. But it would bankrupt many, throw people out of work and spark inflation. Countries attempting such a devaluation usually look for outside help. But, because of American opposition, Cuba cannot join the IMF or World Bank, among the main sources of aid. Fixing the currency system is a “precondition for further liberalisation”, says Emily Morris, an economist at University College London.

It is unlikely to happen while Cuba is in the throes of choosing a new leader. The process has sharpened struggles between reformers and conservatives within the government. Mr Trump’s belligerence has probably helped the latter. Most Cuba-watchers had identified Miguel Díaz-Canel, the first vice-president and Mr Castro’s probable successor, as a liberal by Cuban standards. But that was before a videotape of him addressing Communist Party members became public in August. In it, Mr Díaz-Canel accused the United States of plotting the “political and economic conquest” of Cuba and lashed out at media critical of the regime. Perhaps he was just pandering to conservatives to improve his chances to succeed Mr Castro. If those are his true opinions, that is bad news for Leo and Gabriel.

State Food Distribution Center:  the rationing system. (2015)

Mobile Self-employed Food Vendor.  (2015)

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New Publication: CUBA: LOOKING TOWARD THE FUTURE

CUBA: LOOKING TOWARD THE FUTURE

William LeoGrande, Guest Co-editor; Arien Mack, Journal Editor

TABLE OF CONTENTS

William M. Leogrande, Introduction: Cuba Looks to the Future                235

 

PART I: UPDATING THE ECONOMY

Ricardo Torres Pérez, Updating the Cuban Economy: The First 10 Years                                                                                                                            255

Archibald R.M. Ritter,   Private and Cooperative Enterprise in Cuba’s Economic Future                                                                                                                           277

Richard E. Feinberg,  Bienvenida—Maybe: Cuba’s Gradual Opening to World Markets                                                                                                                          305

Katrin Hansing,  Race and Inequality in the New Cuba: Reasons, Dynamics, and Manifestations                                                                                                               331

 

PART II: FACING POLITICAL CHALLENGES

William M. Leogrande,  Updating Cuban Socialism: The Politics of Economic Renovation                                                                                                                     353

Margaret E. Crahan, Cuba: Religion and Civil Society                                          383

Rafael Hernández, Intellectuals, Civil Society, and Political Power in Cuban Socialism  407

Ted A. Henken, Cuba’s Digital Millennials: Independent Digital Media and Civil Society on the Island of the Disconnected                                                                                     429

 

PART III: ENGAGING THE WORLD

 

Philip Brenner And Teresa Garcia Castro,  A Long Legacy of Distrust and the Future of Cuban-US Relations                                                                                                    459

Carlos Oliva Campos And Gary Prevost,  Cuba’s Relations with Latin America   487

Mervyn J. Bain, Havana, Moscow, and Beijing: Looking to the Future in the Shadow of the Past                                                                                                                                          507

 

 

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WHAT TRUMP’S NEW CUBA POLICY MEANS FOR AMERICAN BUSINESS

By Mimi Whitefield

Miami Herald, June 23 2017

Some U.S. executives that do business with Cuba breathed a sigh of relief after President Donald Trump outlined his new Cuba policy in Miami because it won’t have much impact on their companies. But others have pressed the pause button until they see how the new regulations implementing the changes are written.

Lawyers who help firms navigate the thicket of laws and regulations governing the embargo and dealings with the island have been combing through a memorandum that Trump signed on June 16 as well as three pages of frequently-asked questions issued by Treasury’s Office of Foreign Assets Control (OFAC) and a White House fact sheet to get a sense of the new policy.

Until the regulations are written, that’s all they have to go on. Trump has mandated that the regulation-writing must begin by mid-July.

“Until the regulations change, everything is status quo,” said Yosbel Ibarra, a Miami lawyer on Greenberg Traurig’s Cuba practice team.

How long it will take to write new rules is anybody’s guess, but it isn’t an easy task because multiple agencies and departments will be involved. Some key posts that would have oversight over the new policy also have yet to be filled by the Trump administration, according to lawyers.

Don’t expect a rush by U.S. companies that have proposals pending before the Cuban government to get deals inked before the new rules go into effect, say lawyers and business consultants.

“The way corporations are, when they know rule-making is underway, they are always going to hold up until the regulations are written,” said Robert Muse, a Washington lawyer who specializes in U.S.-Cuba law. “They are not going to set themselves at the far end of the branch based on a Q&A from OFAC.”

There will be important changes in the new policy: it bars most business by U.S. companies with Cuban entities owned or controlled by the military or intelligence services and cuts out people-to-people trips to Cuba by individuals. Group travel in that category is still OK – although there is expected to be more scrutiny of all Cuba travelers to make sure the purpose of their trips isn’t tourism.

The prohibition on doing business with the military is significant because since the 1990s, the Cuban military has been taking control of ever larger chunks of the economy, partly because military managers are viewed as more efficient. Many officers have been sent abroad for business training.

Now the military conglomerate GAESA controls an estimated 40 to 60 percent of the economy, with heavy involvement in the tourism industry, logistics and retail operations.  The military’s Gaviota Tourism Group, for example, controls or has joint ventures with foreign partners in 64 hotels and villas, including many resort hotels as well as the Saratoga, a favorite of visiting Congressional and business delegations, and the new luxury Gran Hotel Manzana Kempinski in Havana.

Even though former President Barack Obama opened up more opportunities for U.S. companies to do business in Cuba, not that many agreements have been finalized. Most are in the transportation sector, the telecommunications industry (notably roaming agreements and Google’s deal to install its servers on the island) and in the hospitality sector.

Some of the U.S. companies have inked deals with military entities. Telecommunications projects, for example, go through ETECSA, the state communications company that is controlled by the military, and Starwood Hotels & Resorts, now a part of Marriott International, has signed an agreement with Gaviota, the military tourism company, to manage a Cuban hotel as a Four Points by Sheraton.

But the administration has said it doesn’t want to hurt American businesses that have engaged in lawful commercial opportunities with Cuba and those agreements will be grandfathered into the new Cuba policy. That’s also true of any other projects that are in place prior to issuance of the new regulations.

Meanwhile, the coming prohibition on doing business with the Cuban military has prompted calls from clients who want to make sure exactly who their Cuban counterparts and business partners are, said Ibarra.

But even companies looking at business that seemingly have nothing to do with the Cuban military are wary.      “I’ve already had a client from New York call and say I guess I’m not going forward [in Cuba],” said Charles Serrano, a Chicago business and travel consultant who has taken clients on more than 130 trips to Cuba.

He is helping four other companies that have signed agreements, have submitted proposals or are in negotiations. But Serrano, managing director of The Antilles Strategy Group, said: “This will slow the interest of American businesses in exploring opportunities in Cuba. They calculate risk based on real things.”

The next battleground is how the new regulations are written.   “After the announcement there was a little sense of relief because companies now know more or less what the landscape will look like and the direction policy is going,” said Pedro Freyre, chairman of Akerman’s international practice, which includes clients doing business or trying to do business in Cuba. “But now the next level of anxiety is about what the regulations will look like. Depending on how they are crafted, they could shut down a lot of business activity.”

Hardliners can be expected to make the case that the rules should be written so as much U.S. business activity as possible is precluded. But the Cuban Study Group, which includes executives and professionals who favor engagement, wants the administration to narrowly interpret what it means to do business with the Cuban military.

“There is a vast difference between a Fortune 500 company forming a joint venture with the Cuban military and a U.S. humanitarian worker buying a water bottle at a government-run store,” said the group in a statement. Among the military’s holdings are retail stores where visitors often buy bottled water.

“Nothing stops business like uncertainty,” said Ibarra. “The more clear and transparent the new regulations are, the better.”

Eventually, the State Department is expected to publish a list of military concerns that are off limits for U.S. companies.

Despite military links to airport and seaport operations in Cuba, the new policy allows cruise lines from the United States to continue to call at Cuban ports, U.S .airlines to keep on flying and limited legal trade, under exceptions to the embargo, to keep flowing.  “Carnival Corp. is pleased that the policy changes announced by the Trump administration will allow our ships to continue to sail to Cuba,” said spokesman Roger Frizzell. He said Carnival plans to review how the tightening of travel rules potentially might affect its passengers.  But he said all cruise passengers since Carnival’s social impact line Fathom inaugurated the first regular cruise service by a U.S. line to Cuba in March 2016 have been traveling under permissible categories for travel to Cuba.  Carnival Corp. has discontinued its Fathom service to Cuba, but its Carnival Cruise Line currently calls in Cuba and its Holland American Line plans to begin sailing there in December.

Other cruise lines also have jumped into the Cuban cruise market. With current sailings and service that is planned, nearly 200,000 travelers are expected to sail from the United States to Cuba this year.

American Airlines, which offers 70 flights weekly to six Cuban cities, doesn’t expect too much impact from the new Cuba policy. Because all but one of its flights — a Charlotte-Havana route — depart from Miami, they have proved popular with Cuban Americans whose travel is not restricted by the new policy.  “Because Miami is the heartland of Cuban exiles, we have a strong market of passengers visiting family and friends in Cuba,” said Martha Pantin, an American spokeswoman.  Since it began regular scheduled flights to Cuba last year, American has opened a ticket office in Havana, begun selling tickets at the Havana airport and installed self-service kiosks there too. “By July, we expect to have self-service check-in at all the airports we serve in Cuba,” said Pantin.

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CHINA PILES INTO CUBA AS VENEZUELA FADES AND TRUMP LOOMS

Reuters, Tue Feb 14, 2017 | 8:17 PM EST

Original Article: China piles into Cuba

CUBA ISN’T WAITING AROUND FOR U.S. WHEN IT’S GOT CHINA

By Marc Frank | HAVANA

From buses and trucks to a $500 million golf resort, China is deepening its business footprint in Cuba, helping the fellow Communist-run state survive a crisis in oil-benefactor Venezuela and insulate against a possible rollback of U.S. detente.

Cuban imports from China reached a record $1.9 billion in 2015, nearly 60 percent above the annual average of the previous decade, and were at $1.8 billion in 2016 as the flow of oil and cash slowed from Venezuela due to economic and political turmoil in the South American country.

China’s growing presence gives its companies a head start over U.S. competitors in Cuba’s opening market. It could leave the island less exposed to the chance U.S. President Donald Trump will clamp down on travel to Cuba and tighten trade restrictions loosened by his predecessor Barack Obama.  A deterioration in U.S.-China relations under Trump could also lead Beijing to dig in deeper in Cuba, some analysts say.

“If and when the Trump administration increases pressure on China … China may decide to double down on its expanding footprint in the United States’ neighborhood,” said Ted Piccone, a Latin America analyst at the Brookings Institution think tank.

China, the world’s second largest economy, sells goods to Cuba on soft credit terms. It is Cuba’s largest creditor and debt is regularly restructured, though amounts and terms are considered state secrets.  While Cuba does not publish investment data, the state press has been abuzz with news of Chinese projects lately, covering infrastructure, telecoms, tourism and electronics.

Yutong (600066.SS) buses, Sinotruk (3808.HK) trucks, YTO (600233.SS) tractors, Geely (0175.HK) cars, Haier (1169.HK) domestic appliances and other products are prominent in Cuba, where the main U.S. products on display are cars dating back to the 1950s, thanks to the ongoing economic embargo.

Cubans flock every day to hundreds of Huawei supplied Wi-Fi hot spots and the firm is now helping to wire the first homes.

“Business is really booming, more than we could have ever imagined,” said the manager of a shipping company which brings in Chinese machinery and transport equipment and who asked not to be identified.

The foreign ministry in Beijing described China and Cuba as “good comrades, brothers, and partners,” and said the relations “were not influenced by any third party,” when asked whether U.S. policy was encouraging China to deepen its presence.  “We are happy to see that recently countries around the world are all expanding cooperation with Cuba. I think this shows that all countries have consistent expectations about Cuba’s vast potential for development,” Chinese Foreign Ministry spokesman Geng Shuang told reporters.

The U.S. State Department and White House did not immediately respond to requests for comment.

INCREASED INVESTMENT

Over the past two decades, China has become a major player in Latin America and the Caribbean, second only to the United States in investment flows and diplomatic clout.  But the Asian giant was reluctant to invest in Cuba because of the poor business climate and fear of losing opportunities in the United States, according to Asian diplomats in Havana.

That began to change after Obama moved to normalize relations two years ago and Cuba sweetened investment rules, sparking new interest among U.S. businesses and competitors around the world.  China was well placed because the local government preferred doing business with long-term friends offering ample credit to work with state-run firms.

In return, Cuba has shared contacts and knowledge about the region, and taught hundreds of Chinese translators Spanish.

A report on the government’s official Cubadebate media web site last month said the two countries agreed to strengthen cooperation in renewable energy and industry, with 18 Chinese firms taking part in a three-day meeting in Havana.

Plans for several projects were signed, including a joint venture with Haier to establish a renewable energy research and development facility, the report said.  A few weeks earlier, Cuba opened its first computer assembly plant with Haier with an annual capacity of 120,000 laptops and tablets, state media reported.

Other projects include pharmaceuticals, vehicle production, a container terminal in eastern Santiago de Cuba, backed by a $120 million Chinese development loan, and Beijing Enterprises Holdings Ltd. (0392.HK) venture for a $460 million golf resort just east of Havana.  Shanghai Electric (601727.SS) is providing funds and equipment for a series of bioelectricity plants attached to sugar mills.

Barrio Chino, La Habana

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CUBAN AMERICAN LOST HIS BUSINESS BID AFTER OBTAINING PERMANENT RESIDENCE IN CUBA

Saul Berenthal

BY NORA GÁMEZ TORRES, Miami Herald, 9 January 2012

Original Article: CUBAN AMERICAN LOST HIS BUSINESS BID

Saul Berenthal was to become the first Cuban American investor on the island with a plan to assemble tractors to help small farmers. But his full embrace of his Cuban roots backfired.

The tale of Cleber LLC, a U.S. company that wants to assemble farm tractors in the Mariel Special Development Zone near Havana, is one example of the questions the island’s government will have to face if it wants to attract investments from the Cuban diaspora.

President Barack Obama described the proposal in March by Cleber, owned by Cuban American businessman Saul Berenthal and his partner, Horace Clemmons, as the first business with 100 percent U.S. capital authorized to invest in Cuba in more than half a century.

The goal was to assemble — and in the future produce from the ground up — a line of tractors for small-scale farmers under the Oggun brand, using Cuban labor for the benefit of the Cuban people, Berenthal told the Granma newspaper, official voice of the Cuban Communist Party, in April.

The paper published a report on Berenthal and Clemmons, and praised their idea of using the Open Source Manufacturing Model, which allows easier sourcing of materials. The Juventud Rebelde newspaper earlier published a report on the U.S. investors all but predicting the Cuban government would approve their project.

But Berenthal was told during the Havana International Fair, a business exhibition held Oct. 31-Nov. 4, that the proposal had been rejected.  Berenthal told el Nuevo Herald that the project “was not canceled. More than anything else, it was not authorized.”

The real reason for the rejection was that Berenthal, a 73-year-old retired software engineer who was born in Cuba and lived in the United States since 1960, had obtained permanent residence in Cuba, according to a knowledgeable source who asked for anonymity to speak about the issue.

“Saul got enthusiastic,” the source told el Nuevo Herald.

Berenthal’s “repatriation” put the Cuban government in a difficult position: accept the project, even though it would break its own ban on large investments by Cubans who live on the island, or reject it using an indirect argument. Officials chose the second option.

Berenthal said the government told him the proposal did not meet the Mariel requirements on technology and worker safety.

Berenthal said his repatriation had nothing to do with the government’s decision “because they were aware from the beginning” of his efforts to become a permanent residence. He added that the rejection of the Mariel project “does not mean we will not continue with the project. They suggested we contact the Agriculture Ministry.”  Berenthal’s legal residence on the island — which gave him the right to buy property and obtain free medical care, among other perks — put him at odds with laws that forbid Cubans who live on the island from establishing medium or large-scale companies.

The Justice Ministry’s web pages notes that the Cuban government does not recognize dual citizenship and follows the principle of “effective nationality.” That means a person with dual citizenship, such as Cuban Americans, can exercise only one when they are on the island.  “That does not mean a Cuban citizen cannot have another citizenship, but the valid one here is ours,” the ministry notes.

Although the Cuban constitution does not recognize the right of citizens living abroad to return and reunite with their families, they can be allowed to re-establish permanent residence and recover the benefits the government cancels for those it considers to have emigrated. Cubans with U.S. citizenship who return and re-establish permanent residence are therefore considered to be Cuban citizens only, subject to Cuban laws and regulations.

The Cuban ambassador in Washington, José Ramón Cabañas, told an interviewer in October that more than 13,000 Cubans living in the United States had been approved for repatriation in the previous two years. More applications were being processed, he added.

The impact on the U.S. status of Cubans who repatriate “is zero,” said immigration lawyer Wilfredo Allen. “The problem is that Cuba controls you.”

That control means, as in Berenthal’s case, that those 13,000 Cuban Americans who returned cannot invest their money in Cuban companies — even though the country’s Foreign Investment Law leaves open the possibility that Cubans with other nationalities may invest in areas such as tourism or energy.

Private sector workers in Cuba, known as cuentapropistas (self-employed), are licensed only to work for themselves and cannot legally establish companies to expand their work beyond a small scale. Larger enterprises are allowed only for the government and foreigners.

According to a report on the foreign investment law produced by the National Organization of Cuban Law Firms, “Cuban citizens residing in the country cannot participate as partners in a joint venture.” The report added: “This law is designed to favor ‘foreign investors’ or Cubans living outside the country.”

Cuban American economist Carmelo Mesa Lago said those restrictions are counterproductive, especially at a time when the island’s economy is shrinking.

Cuba’s Economy Minister Ricardo Cabrisas has said that only 6.5 percent of investments planned for 2017 are tied to foreign capital. The Cuban government estimates that it needs $2.5 billion in annual investments for economic growth.

“It is totally crazy. The level (of foreign investments) they are receiving is absolutely minimal,” Mesa Lago told el Nuevo Herald. “The government needs investments in all sectors. They have set priorities and have more interest in big investments than in medium investments, and that is totally absurd.

“They need all kinds of investments,” he added. “Cubans who have the capacity to invest, based on their profits … that should be allowed.”

 

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Oficina Nacional de Estadisticas y Informacion, ANUARIO ESTADISTICO de CUBA 2016; SECTOR EXTERNO and CUENTAS NACIONALES

Attached are the Chapters of the ANUARIO ESTADISTICO DE CUBA 2015 on the National Accounts and the External Sector.  The Chapter of the ONEI Anuario on the External Sector includes information up to and including 2015, data that has not been available for the last few years.

These are not yet up on the ONEI web site but were sent by Dr. Jose Luis Rodriguez, Minister of  Economics and Planning from 1998-2009.

Attached here is the complete document.

ANUARIO 2016, CAPITULO 8:    onei-aec-2015-sector-externo

ANUARI0 2016, CAPITULO 6:   onei-aec-2015-cuentas-nacionales

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