The Foreign Investment Law: A Litany of Squandered Opportunities
DIMAS CASTELLANOS | La Habana | 11 Mar 2016 – 8:56 pm.
Entitled “Inversión extranjera, puntal para el desarrollo (Foreign
investment, Key to Development” on Friday, March 4, 2016, the daily
paper Granma published a conversation between journalists Sheyla
Delgado and Óscar Sanchez with Déborah Rivas, representing the Foreign
Trade and Investment Ministry.
In the introductory paragraph the journalists cited how the Professor of
Negotiation Emilio Rodríguez Mañalich used to say in class: “Opportunity
is like a white blackbird that flies by just once … and if you fail to
take advantage of it, you might never see it again.” They go on to say
that: “It is precisely opportunities that have been the most immediate
result of Law No. 118 on Foreign Investment in the country…”
Professor Rodríguez Mañalich was right. Time is an exacting judge, and
opportunities rarely resurface. What neither the journalists nor the
minister recognised is that the Cuban authorities are those who have
squandered the most opportunities, and continue to.
No country, and much less underdeveloped ones, can ignore the important
role played by foreign investment. Cuba continued to reject it, before
and after the collapse of Socialism in Eastern Europe. Despite the poor
results obtained from Decree-Law 50 of 1982, and Law 77 of 1995, the
restrictions were kept in place, as was the absence of guarantees and
the negative treatment, leading to a drop from some 400 joint ventures
operating in 2002 to just 200. We had to wait 20 years, however, and
witness the paltry results of the reform initiated in 2008, before we
It should be underscored that our current economic stagnation traces its
roots to the process of nationalisation carried out between the agrarian
reform laws of May 1959 and October of 1963, through which the economy,
subordinated to ideology and politics and, was forever impaired.
The new legislation, Law 118, though more flexible than the preceding
one, is not enough to overcome the crisis. According to the Cuban
authorities themselves, the country needs sustained growth in its Gross
Domestic Product (GDP) of between 5 and 7%. To achieve this it needs
accumulation and investment rates of no less than 25%, which would
require an annual investment flow of between 2 – 2.5 billion dollars.
The emerging scenario of resumed diplomatic relations with the US
represents a great opportunity to make a leap forward, but it will be
impossible without the corresponding political will. The nature of the
current model, and its repeated failure, mean that it cannot be updated.
Rather, it must be replaced.
When presenting the bill the Minister of Foreign Trade and Investment,
Rodrigo Malmierca Díaz stated that it “has major political implications,
as it constitutes a profound updating of the transformative process
undertaken at the beginning of the Revolution, placing the main means of
production in the hands of the Revolutionary State.” That is, the
declared intent behind it is to maintain the model of state ownership
that generated economic inefficiency in the first place, such that its
on-going failure is guaranteed.
Some of the current Law 118’s shortcomings are:
1- The Government is seeking sources of external funding even while it
denies Cubans’ right to participate as investors.
2- It does not recognise the social function of property, and does not
allow for private property. Instead, it declares that it will not allow
for its concentration in the hands of natural or legal persons.
3- It limits self-employed Cubans to a list of activities almost
entirely restricted to services, and denies them any legal personality
as providers of the same.
4- While it provides investors certain “guarantees”, the subordination
of the judiciary to the Party and the State make the Government a
supreme judge and jury, placing investors at an acute disadvantage.
5- It does not allow for the free hiring of personnel, assigning this
function to a State enterprise.
6- It does not recognise Union Rights (the freedom of workers to form
unions without prior authorisation), a principle enshrined in the
Constitution of the International Labour Organization, set down in said
organization’s Convention 87, and incorporated into the Universal
Declaration of Human Rights, the International Covenant on Civil and
Political Rights, the International Covenant on Economic, Social and
Cultural Rights, the American Convention on Human Rights and the
European Convention on Human Rights.
These, among other limitations, prevent it from seizing the opportunity
offered by the current scenario, in which the US has begun to ease the
embargo, while the Paris Club and other creditors are renegotiating
Cuba’s debt and forgiving all or a part of it.
In the conversation with Granma, in reference to the impact of the
Foreign Investment Law, the official explained that: “The US blockade
against Cuba remains the greatest obstacle to attracting foreign
capital.” That statement evades the truth. While it is true that the
embargo has not been overturned, it has undergone significant changes.
Before the commencement of the negotiations the US made modifications to
the Treasury and Commerce Department rules, and implemented a package of
measures that weakened the embargo and encouraged other nations to
negotiate with Cuba.
If it wishes to take advantage of its opportunities, the Cuban
Government should take measures to foster a situation conducive to the
lifting of the embargo. Such measures would neutralise the forces that
oppose it, strengthen the private sector, and facilitate the emergence
of the middle class that our economy so direly needs.
It would behove the Cuban government, thus, to seize the opportunity,
not only for the normalisation of relations with the US, but also for
the most important thing: to return to Cubans the rights and freedoms
that were wrested from them, and without which there will be no positive
The present situation represents an unacceptable violation of the
current Constitution, whose Article 14 states that: “the economy is
based on all the people’s socialist ownership of all the basic means of
production.” And a denial of the concept, upheld by José Martí, of the
Republic as a state ensuring equal rights for all those born in Cuba,
for the free expression of thought, and for many small property owners.
Source: The Foreign Investment Law: A Litany of Squandered Opportunities
| Diario de Cuba – www.diariodecuba.com/cuba/1457726181_20866.html