For the first time since the 1950s Cuban revolution foreign individuals and companies will soon be allowed to own and take full control of the country’s commercial property.
Under a new law passed by the National Assembly, and due to come into effect by the end of June, foreigners will now be allowed to buy commercial and residential real estate as long as it is used as offices, helps develop Cuban tourism, or provides local housing. Aimed at boosting the Caribbean country’s stagnant economy the same bill also gives the green light to overseas investment in a raft of other sectors — with the exception of health, education and the armed forces.
From this summer foreign nationals will be able to establish companies on the island that are 100 per cent controlled from abroad. And there does not seem to be any restrictions on the make-up of the newly allowed ventures: joint ventures that operate with privately-owned local co-operatives, and joint ventures with state companies are all approved by the new law.
“The Cuban economy needs more than $2bn (£1.1bn) in foreign investment every year in order to achieve a necessary seven per cent growth rate,” explained the country’s chief coordinator of reforms Marino Murillo. “Foreign investment is being allowed in order to achieve gross domestic product targets set in 2011.”
Since then the government has missed its investment goals by an average 20 per cent each year. Foreign investment is not only “the most expeditious option” but also “the last opportunity of the reform to move growth closer to the goal” for the five-year period that ends in 2016, added former Central Bank economist, Pavel Vidal, in a recent Cuba Standard Economic Report.
Red-tape, corruption, breach of agreements in joint ventures, non-payment to investors and a weak economy are some of the reasons that have traditionally discouraged foreign investment which, under current regulations, only allows part-ownership in property and business ventures.
Even so, the new law still forces foreign investors to hire all employees, except top executives, through an entity “proposed by the Ministry of Foreign Trade and Investment and authorised by the Ministry of Labor and Social Security”.
The bill — designed to reduce rigid government control, lower taxes and give full legal protection to foreign investors — also aims to sweep away the negative environment that has surrounded Cuba’s existing foreign investment laws for decades.
“Depending on how they are implemented, the new regulations will hopefully reduce the amount of discretion by politicians and bureaucrats,” commented Gerardo Arreola, a veteran correspondent who has covered Cuba and its politics since the 1990s. “Maybe they will end the era in which a business in Cuba was negotiated during months and months of dinners and lunches.”
Unusually for Cuba, there will also be speedy decisions on investments with the government legally bound to approve or reject an application within 60 days. But it’s the execution that will make the biggest difference.
“In the end, the problem continues to be the same with all things Cuban,” Arreola said. “It’s not the fine print that matters most, but what is written with ‘invisible ink’. The question is whether the government has finally decided to apply the same clear and defined rules for everyone.”
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