Investment by Cubans residing abroad
HAVANA, Nov. 27th The new Portfolio of Business Opportunities in Cuba, presented during the recently concluded 38th Havana International Trade Fair (FIHAV), contains 30 more projects than its previous version.The opening of the range of possibilities has not yet translated into the injection of foreign capital that the battered Cuban economy needs, even though the island’s government has decided to clear its path, at least based on the discourse and legal regulations.
By the end of 2021, it was projected that the 678 projects included in the Portfolio of Opportunities could generate a turnover of 12.5 billion dollars, according to calculations by the Ministry of Foreign Trade (MINCEX).
But in mid-2022 the head of that ministry, Rodrigo Malmierca, acknowledged during an appearance before the Economic Affairs Commission of the National Assembly of People’s Power that in the first half of 2020 only nine foreign investment proposals were given the green light, valued in barely 20 million dollars.
According to the calculations of experts in the field, Cuba would need to attract some 2.5 billion dollars a year in foreign direct investment to leave behind a prolonged and deep economic crisis, aggravated by the impact of the COVID-19 pandemic, the sanctions imposed by the United States and the ineffectiveness of some measures designed by the government to alleviate the complex situation.
Eight years have passed since the approval of the new Foreign Investment Law. In addition to the tax facilities established in the Mariel Special Development Zone (ZEDM) and the implementation of a single window for procedures, other flexibility measures have been added. The opening of retail and wholesale trade to foreign capital has been among the most recent.
Who can invest?
In the midst of this panorama, the interest of Cuban businesspeople residing abroad to invest in the country has grown, a legally recognized possibility, but in practice little promoted until very recently.
“That Cubans residing abroad cannot invest in our economy is a kind of myth,” said Alexis Martínez Miller, deputy director of Trade Policy with North America at MINCEX, during his presentation at the session dedicated to the subject as part of the Foreign Investment Forum that met during FIHAV 2022.
According to its organizers, the fact that a meeting of this type has been scheduled within the most important trade fair in the country responds to the express will of the government so that Cubans, wherever they live, have the opportunity to contribute to the economic and social development of the country.
However, the authorities of the sector are the first to accept that this position has not been enough. The bureaucracy not only hinders the investments of Cuban businesspeople because for the rest of the interested parties, overcoming certain obstacles is usually the biggest challenge in the midst of so many emergencies.
“The country’s leadership has recognized it and it is unfortunate because it is not something that we are doing at the last minute to save the country, it is something endorsed in the Constitution, in the Guidelines, in the national economic development plans,” Carlos Luis Jorge Méndez, General Director of Foreign Investment at MINCEX, explained at the meeting.
The official affirmed before the businesspeople present in the debate that this change of mentality is not going to come overnight, but that it is beginning to be noticed.
“Without going into specific dates, it must be taken into account that some time ago foreign investment was considered a necessary evil, later we assumed it as a complement to economic development and now we see it as a fundamental component in that purpose,” Carlos Luis added.
Some of the novelties of the new Portfolio of Opportunities disseminated in FIHAV are that there are more projects scattered throughout the country (104), many of them with amounts that do not exceed 500,000 dollars of investment to make them more feasible.
The proposal includes 197 possibilities in food production and eight linked to the wholesale and retail trade.
The purpose is to make enterprises grow with the participation of Cuban businesspeople abroad that already operate on the island, whose number already exceeds 50.
Problems with understanding
If the authorities and the Cuban businesspeople residing abroad, now summoned, agree on something, it is the need to facilitate their inrush into the Cuban economy.
Both parties also share the opinion that other winds are blowing, even though much remains to be done on each side for the proposals to come to fruition.
From the perspective of Guillermo Ramírez Salazar, general director of the Nevado de México group, it is time to turn the page on previous experiences. A Cuban settled in that nation for two decades, he says that he has experienced both stages when it comes to doing business in Cuba, but he is convinced that currently, the Cuban government is looking with different eyes at businesspeople on the island who have emigrated.
“We have received all the support from MINCEX to open a representation in Havana. They have said that they will attend to our proposals and they have done so. I transmit that confidence to my Mexican colleagues, and to the Cubans as well. We should not be afraid to take that step,” argues Ramírez Salazar.
The economic reforms, with the promotion of private and state SMEs as a star measure, have generated some enthusiasm among Cuban entrepreneurs abroad, who see opportunities to become suppliers of this emerging sector.
The data indicates that up to now most of the businesses led by Cubans living outside the country venture into one-way trade, becoming suppliers, mainly of finished products.
“It’s not that we don’t need this kind of ordinary trade, but we want to change that logic. We are very interested that they also become investors or suppliers of raw materials for those industries that are currently unemployed, due to how difficult it is for us to access them. There are opportunities to also be linked to the state sector,” considers Martínez Miller.
From the institutions that direct the foreign trade sector, it is hoped that businesspeople based beyond the Cuban borders become spokespersons for the transformations that the island’s economy is undergoing, either before other Cubans with the possibility of investing on the island or illustrating colleagues in their countries of residence, explaining the current governmental perspective and the facilities created.
“Sometimes it is hard to convince enterprise executives, to make them see the way things work under capitalism,” says Yuri Pedraza, a resident in Canada for 21 years, who has ventured into exporting products from Ciego Montero and the Caracolillo coffee to the northern nation.
Pedraza points out that many problems of understanding persist. “We do not understand each other, and we do not make ourselves understood. Sometimes we can do business in a different, more beneficial way, with lower costs, but businesspeople in Cuba cling to doing things their way, to buying from them, even if it is more expensive,” he complains.
Cubans without “surname”
“That one is treated in the country as a foreign investor seems a bit creepy to me. I don’t think that in my own country I should be a foreign investor,” Fernando Pérez said during the panel on Cuban businesspeople abroad, and his reflection generated signs of approval among those present in the Expocuba fairgrounds, the usual setting for FIHAV.
The concern of this Cuban residing in Louisiana is shared by Ernesto Soberón Guzmán, general director of Consular Affairs and Cubans Abroad, of the Ministry of Foreign Affairs (MINREX).
For the foreign ministry official, the future of Cuba’s relations with its citizens residing abroad requires broader participation in the socio-economic processes that are taking place in the country.
“The development of an immigration policy that facilitates travel in both directions has led to the fact that we currently have the largest number of Cubans residing in national territory and who also reside abroad.
Therefore, the borders between Cubans residing abroad and Cubans residing in Cuba are blurred. We are heading towards a moment in which the vast majority of Cubans residing abroad will also have their residence in Cuba and there are a series of concepts that we must build on that path,” Soberón Guzmán explained.
According to his criteria, the Cuban living outside the country who is involved in a foreign investment project and who also maintains his residence in Cuba, is not a foreign investor, “he is one more Cuban who is involved in a foreign investment project,” he said.
“The measures that are being adopted are aimed at facilitating the participation in the first place of Cubans who maintain their residence in Cuba and who may also have citizenship and residence in third countries,” said the diplomat.
“If this were not the case, we would be sending the wrong message that to participate in these projects you have to live permanently abroad, which is not the purpose of the approved policy in this regard,” clarified Soberón, another convinced that the apparently easy to explain in 15 minutes still needs a profound change of mentality, although the legal framework has been gradually modified to adapt it to the new reality of a growing number of Cubans residing abroad interested in being linked to the development of the country.
The future is today
According to official estimates revealed during the Foreign Investment Forum held in 2022, the foreign trade authorities on the island have received requests from more than 200 Cuban citizens residing abroad to invest and trade in the country.
These projects have come from 26 countries and are linked to 16 sectors of the economy, including several high-priority ones such as food, transport or renewable energy.
Another large part of the proposals seek to build bridges with the nearly 6,000 new micro, small and medium-sized enterprises (MSMEs), already operating, whose direct relationship with foreign investment has been postponed longer than desired by the parties.
During his speech last July in the parliamentary commission, Minister Malmierca announced that “aspects related to the participation of foreign capital in private businesses, where some experiences could begin soon,” were in the process of being defined. Since then only the implementation of only one pilot project linked to the production of pork has been announced.
Beyond the slowness, obstacles and inconveniences in the midst of this process, there are many Cuban businesspeople who celebrate the good atmosphere that surrounds their investment opportunities.
This vision coincides with that of Hugo Cancio, president of the Fuego Enterprise Inc. group based in South Florida, who values the steps taken as “big” and “that in a certain way they dismantle the incoherent policy of the United States towards Cuba.”
“I have been in the United States for more than 40 years and for more than 30 lobbying in Washington for a process of normalization of relations and a lifting of the embargo.
Many times the same congressmen have questioned the appropriateness of lifting the sanctions if I, as a Cuban residing abroad, cannot invest in my country, that I am discriminated against in this sense,” he explains.
“The fact of being able to invest again, being part of this process of transformation and economic evolution somewhat dismantles that argument that our country will not let us. The hot potato goes to the other side,” says the Cuban-American businessman.
Cancio values the role played by the diaspora in the economic transformation processes successfully implemented in nations such as China and Vietnam. “Cuba cannot be different, and it is something that I have been insisting on for many years, asking the Cuban authorities to take us into account. We must be part of this strategy being promoted by the country,” he refers.
From his experience of several years entering the Cuban market, he is aware that the setbacks have been and will continue to be constant. “It cannot be expected that a country that has had a centralized economy for more than half a century will open up overnight like a sunflower at dawn.
The resistance of some people within the government has slowed down the process, but a change of mentality is taking place and legal, fiscal and banking mechanisms have begun to be created, whatever is necessary to facilitate it,” Cancio considers.
“Without a doubt, it is an enormously complicated country to do business, under sanctions that prevent us from trading freely, with a very limited margin of maneuver due to the U.S. embargo.
But the most important thing is to appreciate the government’s new positions towards foreign investment, towards the private sector, and towards the participation of us as Cuban-American businesspeople or businesspeople residing abroad in the economic destiny of the country.
In addition to being inevitable, it is something very necessary and possible,” the businessman affirms.