Cuba’s Ministry of Foreign Trade and Foreign Investment is opening the door to Cuban Americans who want to participate in foreign investment projects as the island tries to jump-start its beleaguered economy and encourage Washington to loosen sanctions.
Katia Alonso, the ministry’s director of foreign capital investments, told the Miami Herald by email in response to a list of questions that Cuba won’t reject potential business bids from Cuban Americans based on the sole fact that they live in the U.S. — something she said the law has never prohibited, though in the past exile entrepreneurs haven’t always been welcomed either.
“Cuba is open to foreign capital regardless of its place of origin,” Alonso explained, “so if a Cuban American were interested — whether they were born in the U.S. or migrated to that country — in investing on the island, their interest would be evaluated just like any other potential investor from any other place of origin.”
The invitation comes as Cuba looks to boost foreign investment by including opportunities for small and medium business investors within the 503 projects now available, adding up to an estimated $12 billion. Most of the open proposals are in the tourism and energy industries, while the others include investment projects in agriculture, commerce, telecommunications, construction, medical tourism and pharmaceutical industries.
Cuba is in the midst of its most severe economic contraction since the collapse of the Soviet Union, with the government reporting an 11% contraction last year. Pandemic lockdowns, Trump administration sanctions and Venezuela’s worsening crisis shut the island off to traditional lifelines for revenue such as tourism. Cuban officials are hoping the Biden administration will loosen Trump-era restrictions on travel and remittances, though thus far the new administration has signaled that changing Cuba policy is not a priority.
“If the Biden administration is looking for signs of positive movements in Cuba as a rationale for why it should relax some of the restrictions imposed during the Trump era, this gesture by the Cuban government could be seen as a positive step forward,” said Richard Feinberg, a University of California professor and former diplomat.
The foreign investment projects are led by existing Cuban businesses, which would create partnerships with potential investors and negotiate the terms of their business proposal. It would then have to be approved by the Cuban government. Alonso said foreign investors can still propose their own private business ideas, and they will be considered as long as they meet the government’s requirements under their foreign investment policies. She first suggested Cuban Americans might apply at a press conference in March.
“The participation of Cubans who live abroad in a more active way in the economic development of the country corresponds with a desire to continue strengthening ties between Cubans and their country,” she told the Herald.
The foreign investment program does not apply to Cubans living on the island, who are legally barred from establishing medium to large private businesses in the communist country.
This became an issue in one notable case in 2016, when Saul Berenthal, a Cuban American investor wanting to create the first U.S. manufacturing plant on the island since Fidel Castro took power in 1959, saw his plans fall apart after deciding to change his permanent residency to the island, the Herald reported. Berenthal, who was born in Cuba, had proposed a plan to assemble tractors to help small farmers on the island.
Alonso said that for a foreign investor to qualify under Cuba’s laws, they must be a “natural or legal person, with residency and capital abroad.”
“In that regard, a repatriated Cuban citizen, since they do not meet the requirements established for foreign investment, would need to follow the norms for non-state forms of business in the Cuban economy,” she said.
Watchers of Cuba’s economic policies say the island’s overture to Cuban American entrepreneurs could signal a possible shift spurred by the economic crisis and the arrival of a new U.S. administration, though it is still too early to draw any conclusions. Analysts said that as long as the island continues to enforce a double standard for Cuban citizens and does not open up opportunities for private enterprises, interest from Cuban American investors will likely be limited.
“[Cuban government officials] were asked several times whether Cuban Americans could invest and the official response to this is that there was no legal impediment. But that was kind of false. So this open declaration that Cuban Americans can invest in small business is a significant change in comparison past,” said Carmelo Mesa Lago, professor emeritus of economics and Latin American studies at the University of Pittsburgh.
The Cuban government blames its economic woes on the U.S. embargo that has lasted nearly 60 years, in addition to other, more recent sanctions imposed by the Trump administration scaling back engagement with the island.
Ricardo Herrero, executive director of the Cuba Study Group, a pro-engagement policy organization, said one of the greatest impediments for Cuban Americans who may be interested in investing on the island is the deep lack of trust in Cuban authorities. Examples of projects that have been rejected, like Berenthal’s, have only made it harder to change perceptions that the island continues to have a tight grip on private enterprises.
“There is a real trust gap between the Cuban government and Cubans abroad. There’s a high level of risk perceived in an investment with the Cuban government,” Herrero said, adding that many potential investors don’t find the more than 500 projects that attractive. “Cuban Americans will want to invest in private businesses on the island… not just the ones that the Cuban government says.”
Herrero added that it is important to consider that Cuban Americans will also want to partner and hire freely on the island, which would be hindered by the government’s restrictions on local private businesses.
“Nothing will beget success like success. If Cubans in the diaspora see that Cubans investing in Cuba, that their rights are being recognized … that’s going to attract more investors,” Herrero says.
But he added: “Cuba should be recognizing the same rights for all Cubans, whether they’re at home or abroad when it comes to investing on the island.”
Cuba announced recently it would increase the number of business fields where self-employment is allowed from 127 to more than 2,000, part of a planned expansion in the works since last year. But a law to give small and medium-sized private companies legal status has been postponed until 2022.
Throughout the years, the Cuban government’s attitudes toward those who fled and wanted to return as investors has fluctuated. For years, hardliners looked at exile entrepreneurs as a potential threat to the nation’s communist system. But during the Obama administration, several prominent Cuban Americans traveled to the island to weigh potential investments.
“Most of these investors are doing this with relatives or friends, so in some ways, politics is important but it’s not the only impediment to do this,” Mesa Lago said. “Allowing Cuban Americans to invest in private business may be a sign that they are moving away from those restrictions.”