By Domingo Amuchastegui*
What is the role and potential of foreign investment for the Cuban
economy? Let us look at the views of some of the most influential Cuban
academics.
These economists come from different backgrounds. Several are
associated with the Center for the Study of the Cuban Economy (CEEC) at
the University of Havana, one is from the former Center of Studies of
the Americas (CEA), another from the Center of World Economy Research
(CIEM), and another from the Higher Institute of International Studies
(ISRI). For many years — since the late 1970s — they upheld different
approaches to Cuba’s economic problems, including foreign investment.
Some of them are working abroad today.
The CEEC and CEA – due to their interactions with universities abroad
and international academia — have been perceived as the “liberal wing”
of Cuba’s academia in the field of economics and political analysis
while CIEM — due to its closer dependency on the Central Committee and
the Council of State — were perceived as “the conservative wing.”
Differences and clashes, even with the Cuban leadership, were not
unusual. With the collapse of Soviet-style socialism and its
consequences for the Cuba economy, these differences became more tense
and outspoken.
Paradoxically, the worsening of Cuba’s economy brought together such different views.
Historical context
Ricardo Torres Pérez and Juan Triana, both with CEEC
One of the characteristics of the Cuban economy throughout history is
its high external dependency and the damaging nature of that
relationship. Cuba’s deepest economic crises have been linked to
disturbances in the external sector. Within this picture, the limited
dynamism of Cuban exports stands out, together with low diversity, a
specialization tied to products with limited dynamics in international
markets and low technological content, as well as dependency on one or
the other big power. In its exports to the Latin American region, Cuba
has one of the lowest trade intensities (trade, in relation to
population size). This condition has not changed substantially over the
last 25 years, even when the export of healthcare and education services
is taken into consideration. Cuba’s mediocre performance contrasts with
the high-growth trajectory of open economies.
Early stages of foreign investment in Cuba
Omar Everleny Pérez Villanueva, CEEC
Given Cuba’s incapacity to generate domestic savings sufficient for
growth and development, foreign participation in the Cuban economy has
become a top priority. Cuba has to break the vicious circle where
foreign investment is needed for growth, yet it is impossible to get
investments without achieving growth. It remains necessary to maintain
the recovery initiated in 1994 by allocating foreign resources to those
areas of rapid recovery that are technologically advanced, such as
mining, tourism, communications, and products for tourism.
“Foreign financing in the form of development assistance has been
very limited in the Cuban case, producing few results. Soft credit,
which is necessary for some goals, has not been available to Cuba for
many years, both for political and economic reasons (…) Cuba’s challenge
is to acquire the most modern technologies through FDI…”
Accumulation
José Luis Rodríguez García, a former minister of economy, now with CIEM
The new foreign investment law “must aim at solving aspects that are
crucial to the country’s investment capacity, in the midst of a
situation in which it is not possible to squeeze consumption in order to
increase the rhythm of accumulation.”
Foreign debt (José Luis Rodríguez): “Payment of the foreign debt is
an indispensable requirement for achieving an expansion of the economy
taking into account the need for greater flow of external resources,
including greater foreign direct investment.”
Tourism and development
Pedro M. Monreal González, University of London)
“’Sun and beach’ tourism can not be in itself a sound pillar of
national development because it does not offer possibilities of economic
‘escalamiento’ (upgrading) or, in a best-case scenario, such
opportunities are very limited.”
Oil, energy, and development
Ricardo Torres
In case it strikes offshore oil, “Cuba would become less energy
dependent and might eventually become an energy exporter; new credit and
foreign investment would materialize, along with refining and service
jobs.”
Arturo López-Levi, University of Denver
“With or without oil, the Cuban economy sorely needs an environment in which business and individuals feel confident to invest.”
State hiring and wages
Pavel Vidal Alejandro, Universidad Javeriana, Colombia
Currency unification, in the mid term, will turn state control over hiring and payment of labor obsolete.
Monetary issues
Pavel Vidal
“Foreign investors must monitor the impact of devaluation on the
state corporate system at large, its monetary-financial stability and
fiscal balance. These are factors in which they are indirectly
involved.”
Mariel Special Development Zone
Pedro M. Monreal González
“In the mid- and long term, Mariel could have the best conditions to
establish itself as the best mega-port in the Caribbean. Its great
disadvantage is the absence of commercial relations between Cuba and the
U.S. (… This) is, above all, the biggest impediment for Cuba to make
the best out of an unusual conjuncture that would allow this nation to
modify its international insertion profile for the purpose of
development.”
José Luis Rodríguez
The Mariel Zone is an intent to “ relaunch foreign direct investment
in Cuba with the additional advantages of its special rules.”
Sustainable growth
Pavel Vidal
“It seems far better for sustainable growth, and to obtain
productivity gains, to extend the opening to the non-state sector on a
larger scale, including more opening to foreign direct investment.”
Pavel Vidal
According to a study by the Implementation Commission of the Party
Guidelines, 70% of the overall profits in Cuba are generated by just 4%
of companies, of which almost all are joint ventures in association with
foreigners.
What Cuba needs
Juan Triana
“If we do not receive big investments, we are not going to grow. With
a 10% rate of domestic savings or less, there will be no growth;
countries that have developed their economies in recent decades have had
a rate of 27 to 32% of domestic savings. Cuba needs no less than $3
billion a year of foreign direct investment to be able to develop its
economy.”
------------------- *Former Cuban intelligence officer Domingo Amuchastegui has lived in Miami since 1994. He writes regularly for Cuba Standard and CubaNews on the Communist Party, Cuba’s internal politics, economic reform, and South Florida’s Cuban community.
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