Apartheid en Cuba
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    Foreign Investment Law – More Apartheid

    Foreign Investment Law: More Apartheid
    JORGE A. SANGUINETTY | Miami | 2 Mayo 2016 – 12:02 pm.

    At first glance, the Cuban Foreign Investment Law (Law 118, April 2014)
    seeks to attract capital to the country in order to raise its production
    level, especially as regards exportable products. Attracting foreign
    capital is perfectly legitimate for any economy, but in the context of
    Cuba several observations are in order.

    All countries, even the richest, benefit from foreign investment; that
    is, the flow of capital from other nations to increase the productive
    capacity of the country (direct investment) or acquiring existing
    properties or equity instruments (financial investment). The Cuban
    economy needs these forms of investment, but especially direct
    investment, not only to solve its chronic production crisis, but for
    other reasons, all of them vital. One of them is to create an investment
    capacity capable of increasing the nation’s meager capacity to generate
    resources for investment. That is, the Cuban economy under the Castro
    regime has been unable to generate investments sufficient to ensure the
    replacement of those in place when they were expropriated, or to create
    enough well paid jobs. In other words, so-called Cuban socialism has not
    even been able to bring about the “simple reproduction” (Marxist term)
    of its economy, which should scandalize those who still believe in this
    type of economic organization.

    Another reason to attract foreign capital to Cuba goes beyond what is
    seen with the naked eye, and consists of attracting managerial talent of
    all kinds to an economy that not only lost a catastrophic proportion of
    its endowments of capital – physical financial, human and social – but
    also their management capacity.

    Expropriations of companies in 1960 were followed by a massive loss of
    managerial, administrative and technical staff, which affected all their
    operational aspects. These operations included their technical and
    production processes; the management of personnel and wages; financial
    administration and the handling of investments; and the organization of
    sales, inventory, distribution and marketing, among others. To keep the
    businesses running and prevent production stops, and the consequent mass
    unemployment they would entail, the expropriations were followed by the
    replacement of executive staff with people politically and ideologically
    aligned with the revolutionary government. But the new executive staff
    generally lacked their predecessors’ technical and administrative
    qualifications, the effect being immediate drops in production and
    efficiency levels at virtually all businesses. This deterioration of the
    nation’s productive capacity was the main reason that Cuba would need
    substantial subsidies from the Soviet Union, first, followed by
    Venezuela. Over time this dynamic of managerial degradation, in which
    loyalty to the Government took precedence over the quality of
    administration, worsened, and Cuba gradually lost the culture of
    production efficiency that had made it solvent and relatively prosperous
    until 1959.

    This was part of the legacy of inept economic management that Fidel
    Castro dumped on his brother Raúl. The Cuban economy now must recover
    not only a portion of the investments that have been mishandled and lost
    due to more than 50 years of administrative negligence, but also restore
    a substantial part of its degraded administrative capacity. Otherwise
    Cuba will once again lose the resources invested in physical capital, as
    it not complemented by the technical and managerial human capital needed
    – as has already occurred in several cycles since the beginning of the
    Castro era. Hence, the Foreign Investment Law not only serves to attract
    physical capital, but also the human capital to manage it, as has been
    the case with foreign investments in Tourism, which has important
    implications for Cubans.

    A notable feature of this law is that it excludes, subtly but
    categorically, Cuban residents on the island from participating as
    investors in the economy, but not necessarily those who reside off it.
    In this regard the law is ambiguous and subject to being applied at the
    Government’s discretion. The problem is that such a prohibition affects
    all Cuban citizens in many ways, whether or not they are entrepreneurs
    or investors. Castro’s expropriations were not limited to the private
    properties that existed before 1960, but included the rights of citizens
    to invest in their country, to create the wealth needed for development,
    to make decisions that directly affect them, and to enjoy the benefits
    of active participation in the nation’s economic affairs. But the new
    Foreign Investment Law excludes Cubans, who are not only to be barred
    from being investors in their own country, but also from being
    executives of these investments for an obvious reason: foreign investors
    will prefer to take their own executives to Cuba, because they trust
    them more than those assigned by the Cuban government, as called for by
    the Law.

    The Law’s Article 30.1 states that the employees under these foreign
    investments will be hired “by an employing entity proposed by the
    Ministry of Foreign Trade and Foreign Investment and authorized by the
    Ministry of Labor and Social Security.” With these restrictions Cubans
    are destined to not only be employees of state or foreign companies, but
    also to occupy lower-ranking jobs in their country’s economy. “The
    tourism apartheid that existed in Cuba for several years resurges, and
    legally, through this new official disposition.”

    Under these conditions the effects of the normalization of relations
    between Cuba and the US will depend on the degree to which the Cuban
    economy liberalizes, as determined by Washington and Havana. The
    unconditional lifting of the US embargo without Cuba liberalizing its
    economy will only aggravate the economic apartheid to which Cubans are
    subjected. As Cuban citizens are economically weaker, this means that
    they will have fewer opportunities to acquire political power. In other
    words, the Foreign Investment Law tends to confirm President Obama’s
    dilemma, as described in a a previous article in this publication: if he
    liberalizes too much (lifting the embargo) without Castro introducing
    internal reform, he will not achieve the (secondary) objective of
    improving political conditions for Cubans. Even worse, he’ll end up
    lining the pockets of the Castro family and its entourage, bolstering
    their political power and possibly dismantling the self-employed sector,
    which they won’t need if new investments generate sufficient employment.
    The US Congress may want to consider these points before lifting the
    embargo without getting anything in return.

    Source: Foreign Investment Law: More Apartheid | Diario de Cuba –

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