Cuba allows emigrants to invest in the private sector in the midst of its worst crisis

The Government of Cuba, in the midst of the worst crisis of all time, now admits what it has been difficult to accept for decades: that if anyone has the possibility of saving the country, it is the Cubans themselves.

This week, the Official Gazette published the decree that modifies the regulations that for years prevented emigrants from becoming business partners in their own lands. A reform to article 54 of Decree Law 133 confirms this: “Cuban natural persons residing in the national territory or abroad and foreigners permanently residing in Cuba may be partners of micro, small and medium-sized enterprises and private companies with more than one hundred (100) workers.” The question that everyone asks, after years of ostracism, is about the guarantees that a Cuban has to start investing without the Government reversing this battery of openings.

In the midst of a suffocation that the country had been dragging and that has been reinforced with the economic blockade and the sanctions of the Donald Trump administration towards Havana, the ruler Miguel Díaz-Canel himself had previously suggested that they were willing to open the doors to Cubans abroad. "To whoever wants to build with Cuba without trying to impose anything, we say with our hearts in our hands: here is your house, and here is your open door. Because this country, at this time, does not have any good Cubans left over," the president had previously said, days after announcing his biggest economic reform in years, a package of 176 measures with proposals that attribute greater autonomy to state companies; they authorize foreign investment from the private sector without government mediation; flexibility and decision-making on salaries; the creation of private banks. In other words, the most radical change announced on the island since 1959.

Some of these measures are already beginning to be implemented, among them this one, which allows Cuban emigrants to become owners of private companies, or participate as partners or self-employed workers, with no further requirements than being over 18 years old, being clean of debts with the bank or the State, not being a government official or official, and not being serving a sanction for crimes incompatible with the requested activity. Economists believe that, without a doubt, this is a relevant change. "It creates a legal mechanism so that Cubans residing abroad can participate in the economic life of the country. They are reflecting that possibility in norms, laws, decrees; that is important. It is not only at the level of declaration, it is at the level of resolution of ministries," says economist Ricardo Torres, former researcher at the Center for the Study of the Cuban Economy and professor at the American University in Washington.

However, there are doubts about how reliable it would be to start a business in a country where everything, in the long run, is controlled by a government. "The legal framework is changed, but there is a problem that continues to exist here: ultimately, the system of courts, of administration of justice, we know is not an independent system. It is a system that is controlled by the Communist Party, so there is always the doubt to what extent this system of administration of justice will be impartial when a sentence goes against the interests of the State. There is a basic problem that generates doubts, uncertainty. The problem is not in the norm itself, but in the administration of justice."

What is undeniable, however, is that the regulations that come into force on September 9 constitute one of the biggest changes that the private sector has ever experienced. Among other things, it eliminates the restrictions of no more than 100 employees in a company, without establishing a limit, and allows self-employed workers to be members of SMEs or cooperatives at the same time.

“It is a transformation that is impossible to ignore,” says Torres. "Private companies can now be built as such, without any limit on employees, something that was an important request. They can now participate directly in foreign trade; before there was an obligation that it be through state companies. They can receive foreign investment, participate as partners in an MSME and the number of activities in which the private sector can participate is expanded. Here there is an important boost to the private sector, the problem is that this is happening in a very discretionary manner."

The Government, despite the fact that it has been facing a crisis for decades that has worsened over the last five years, is open to these changes after Washington deactivated Venezuela as its main trading partner, restricted the shipment of fuel from abroad and imposed new sanctions almost every month on officials or entities that trade with Castroism. The measures that Havana has taken, many of a liberal nature, have transformed part of the centralized structure of the Cuban economy, although the country's leadership has always pointed to its conviction of preserving socialism.

“The Government is basically reacting to a situation,” says Torres. “There has not been a serious, genuine, honest reflection on the part of the Cuban government and President Díaz-Canel, accepting that the previous economic model does not work and that this is part of a process to move towards another economic model.”

A few days ago, during an interview with Brazilian journalist Mônica Bergamo, from the newspaper Folha de São Paulo, the president assured that the expansion of the private sector on the island was not a capitalist measure, but "a concession." Torres considers that this “is a very serious problem, because it indicates that, if the situation improved for some reason in the future, then we would return to the previous route,” he maintains.

Other factors against these same measures, or that restrict the horizon to make Cuba visible as a business opportunity, is the crisis itself in which the island is immersed. A country without electricity, with little water supply, where people live at the rate of the black market, with notable inflation, is not a very attractive terrain for investors, even less so in the midst of all the sanctions that the United States has imposed in the last year and which constitute risks that not many would dare to assume.

“It is very difficult to conceive a transformation process of this type without connecting with the global economy,” suggests the economist. "Hence also the insistence that an agreement will have to be sought with the United States, because with the sanctions regime and the level of deterioration of productive capacities on the island, the possibilities for growth of the private sector are limited. Who is going to buy what you are going to sell? How are you going to finance yourself? How are you going to bring the money that is needed to invest? How do you mobilize it? And then, what are the growth prospects of the economy?" he asks.