Informacion economica sobre Cuba

Cuba's foreign investment law: 'New' indeed, but barely

By José Manuel Pallí, esq.

Now we can comment on Cuba's new foreign investment law — Ley 118/ 2014

— since its "official version" is now published at the Gaceta Oficial de

Cuba, together with a Reglamento or regulatory law and other companion

governmental resolutions that should further help in interpreting its

significance and clarify its intent.

If you put a copy of Ley 77/95, the old foreign investment law which

this new one supersedes, alongside Law 118/ 2014, you'll probably think

they are twins. The language is almost the same in a huge percentage of

the provisions contained in both laws, which are essentially, well, the

same. And there is a very good reason for these similarities: The 'old'

law was not a bad law at all, in terms of the protection it afforded

(affords, since the new one will not be in force until late June) to

foreign investors.

Of course, that protection can only be effective to the extent the

attitude of those enforcing the law leads them to do so enthusiastically

and fairly, without arbitrariness of any kind. Whether that will be the

case with the implementation of this new foreign investment law in Cuba,

only time will tell. But I do sense that there is a generalized

conviction among decision makers in Cuba that they do need the tool

foreign investment could be, in terms of helping the Cuban economy grow

and develop, and they need it now, and I believe that conviction should

prod their enthusiasm.

There is one area where the new law may well open an entirely new world

of opportunity to foreign investment in Cuba, while at the same time

improving dramatically the quality of life of Cubans in the island (and

Cubans, el cubano de a pie, are the main constituents any Cuban law

should serve and please, even if a foreign investment law should also

please foreign investors): Foreign capital may now be used to build (and

repair) housing units — viviendas — to be used as such by José Q Cuban

citizen, which is to say the majority of natural persons who reside

permanently in Cuba.

Chapter VI in the old law dealt with investments in real property

(Inversiones en bienes inmuebles), and, in article 16, it allowed such

investments, provided the real property in question is used to house

"natural persons who were not permanent residents in Cuba" (Article

16.2(a)), thus keeping the Cuban people right to housing out of reach to

foreign capital, and away from the benefits foreign investment could

bring to the quality of their houses (and safety: no more crumbling

buildings).

Chapter VI of the new law has one section, Article 17, that reads

exactly the same as article 16 of the old law, but it omits the

provision (restriction) whereby foreign investment was ruled out if the

real property in play was used to house everyday Cubans. Article 17.2(a)

now says foreign investment is possible in housing and buildings

(viviendas y edificaciones) that are private domiciles (dedicadas a

domicilio particular) or for touristic ends, period.

It does not say flatly that someone can, as a builder who wants to be a

foreign investor in Cuba, build (or improve by way of urgent structural

repairs) housing for the consumption of the Cuban people in general. But

I read in the deletion of the condition (only if the real estate is used

to house those who are not permanent residents in Cuba) found in the

equivalent article of the old law as a strong indication that that is

the case, assuming the approval of the governmental entity who will have

to authorize the investment in question is obtained.

In future columns I will go into some murky aspects regarding how that

real estate asset (the land) where the housing is to be emplaced finds

its way into the entity or vehicle of choice of the foreign investor,

the enterprise that actually makes the investment, when that entity is

capitalized. I will also delve into what's new (mostly the changes in

tax treatment and the use of incentives) in this foreign investment law,

and what smacks of "old" (the persistence in controlling Cuban employees

of foreign investors by meddling into their relationship with those who

want to hire them).

José Manuel Pallí is president of Miami-based World Wide Title. He can

be reached at jpalli@wwti.net; you can find his blog at

http://cubargiejoe.com

Source: Analysis: Cuba's foreign investment law: 'New' indeed, but

barely « Cuba Standard, your best source for Cuban business news –

http://www.cubastandard.com/2014/04/19/analysis-cubas-foreign-investment-law-new-indeed-but-barely/


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