Will Anyone Want to Invest in Cuba?
By Ronal Quinones
HAVANA TIMES – The desperation of the Cuban authorities to obtain sources of financing has been evident in recent years, particularly after the impact of the Covid-19 pandemic.
However, the steps taken to attract foreign investors have not been the best and now new legislation is coming to the fore that could be the last nail in the coffin of the Cuban economy.
Under the title of the Expropriation Law for reasons of public utility or social interest, work is being done on a new regulation that seeks to strengthen State control over private assets and rights linked to heritage.
According to the website of the Ministry of Finance and Prices, the document was prepared “based on the criteria not only of experts and legislators, but also of citizens in the exercise of their rights to participate.”
As usual, the Ministry itself indicates that the initiative strengthens the legal environment of procedural and patrimonial guarantees, etc., but in reality, the backdrop is the forced expropriation of properties in accordance with vague “national interests.”
The Ministry ensures that the new legislation strengthens the legal guarantees for foreign investors established in Law 118, On Foreign Investment, of 2014, but in reality it weakens them.
According to the Cuban Constitution, the expropriation of property is authorized only for reasons of public utility or social interest and with due compensation. However, now the powers of those who decide on an expropriation are expanded, and the idea of the so-called national interests” is vaguer.
The bill must be approved by the National Assembly, but this is a mere formality because all the deputies belong to the Communist Party and vote unanimously.
Now, in addition to the Council of Ministers or its Executive Committee and the heads of agencies of the Central State Administration, the provincial Governor, the Provincial Administration Council, and the directors of the Offices of the Special Development Zones can propose expropriations.
In reality, they are trying to give legality to a process that was already taking place arbitrarily, and it extends to the local level, so it can affect not only foreign investors, but also Cuban citizens themselves.
Making it easier to “legally” expropriate
There are several small businesses or companies that would be subject to expropriation. In addition to those related to the exploitation or conservation of a public service, there is the State’s justification to use and conserve natural resources, to build educational, health, sports, cultural, and recreation centers. or other works or infrastructure “aimed at the collective welfare, or urban or rural development”.
Striking is Article 54, which states that “when the interest in expropriation derives directly from a public calamity or for reasons of ensuring internal order or in the interest of guaranteeing national defense and security, and there is an urgent need to occupy assets, the corresponding authority may take immediate possession of those assets necessary to satisfy that purpose, without prior formality or other diligence, regardless of whether the process to determine compensation is followed.”
In other words, you evict first and then we’ll see where we put you and how much we pay you.
It is also noteworthy that the Prosecutor, instead of a judge, decides directly when no person appears among those against whom said procedure is directed, or when the owner or holder is outside the country and has no person to represent him.
The latter becomes very relevant in the current context, marked by the massive exodus of Cubans who emigrate fleeing the crisis on the island. The vast majority of them leave behind goods and properties that are sometimes transferred to other owners without guarantees of legal security.
Taking this to the domestic level, those who have left the country in recent months or intend to do so in the future, run the risk that their properties will not be in the hands of heirs of any kind, because they will not legally have the same weight in a hypothetical expropriation process.
In addition, in the case of ordinary citizens, I would not be surprised if “uncomfortable” businesspeople were affected by this measure if they have an anti-government attitude. Others may be blackmailed to proceed against some of their employees who do not have the “correct” conduct.
In short, the Law protects the expropriator, contrary to what it is being made out to be. It is already known that the Cuban courts are never going to rule against the State, which on this occasion is represented by thousands of people with personal interests and questionable ethics.
In the case of foreigners, they will not have peace either. After investing their savings in a company, and surely after it is successful, it may suddenly be of “national interest”, and the investor would receive at most the initial investment to develop the enterprise, and must return to their country when their project is producing the expected dividends. Therefore, their efforts in Cuba turn out to be wasted time.
Sometimes it gives the impression that those who make the Law are kamikazes, because this is counterproductive for an economy that cries out for an injection of fresh currency. Instead of updating the 2014 legislation, they should repeal it, and assure each investor that their properties will be respected in any circumstance.
If the State considers any sector to be strategic, then it should invest in developing it, instead of taking advantage of other people’s money to rebuild an industry in ruins and then come back and take it away from the one who sacrificed time, brain cells and dollars to revive it.
With this type of legislation, even the few deluded people who still believe that they can do business with the Cuban government are scared away. I don’t know how they really intend to attract people to take on projects from their much-promoted Business Portfolio.