FOREIGN INVESTMENT IN CUBA: THE LIMITS OF
María C. Werlau
Since the collapse of the Soviet Bloc, the Cuban government embarked on economic liberalization based on the adoption of capitalist mechanisms which include an opening to foreign investment. This has led to increasing claims abroad that engagement—
particularly commercial engagement within the context of constructive engagement1 —is the policy instrument that will lead to economic and political reform and the eventual collapse of Castro’s regime. Engagement, in fact, is the fundamental element of
the foreign policy of most countries towards Cuba.
The emerging “new consensus” argues that the Communist Cuban regime will not be able to withstand the corrosive practices of liberal capitalism and, for
this reason, considers the development of business
ties with the current government desirable.2
The United States’ policy towards Cuba has generally varied in approach; its importance is widely recognized given the two countries’ geographic proximity
and the historic significance of their relations. With
some exceptions—the most notable during the Carter Administration—since the early years of the Castro government, it has been essentially founded on political isolation and a comprehensive economic
embargo.3 For this reason, since Cuba began a decisive opening to foreign capital, U.S. investors have been precluded from potential business opportunities
there and Cuba has been unable to access the largest
consumer market and source of capital and tourism
in the hemisphere. Presently, the issue of U.S. commercial engagement with Cuba is considered settled until a transition to democracy is initiated there or
further legislation dictates a change in policy. The
Clinton Administration had been committed to encouraging a distinctive policy mechanism, which might be described as “focused engagement,” aimed
at supporting the emergence of a civil society in Cuba.4 But after Cuba’s February 1996 repression of an
1. Although the term commercial engagement generally refers to diverse international commercial and financial transactions, we will use it primarily in reference to foreign investment. The term “constructive engagement” encompasses economic engagement and is normally used within the context of a more comprehensive diplomatic and political relationship. 2. See, for example, Robert Kagan, “Is Castro Convertible? A Skeptic says No,” Standard, Vol. 1, No. 5 (October 16, 1995). 3. The embargo was declared by President Kennedy in February 1962 as a result of Cuba’s subversion of democratic nations in the hemisphere and its confiscation of $1.8 billion in U.S. properties. Formal diplomatic relations do not exist and almost all trade is banned, with exceptions for humanitarian assistance and payment to Cuba for telecommunications. 4. This policy line was codified in the 1992 Cuban Democracy Act, passed by Congress in 1992 during President Bush’s tenure but also supported by then presidential candidate Bill Clinton. This law’s Track II seeks to increase “people to people” contacts with looser restrictions on academic and cultural exchanges and was intended by the Clinton Administration as a tool to encourage private U.S. organizations to play a more active role in promoting a civil society in Cuba, looking to facilitate a more peaceful transition to democracy. See Richard Nuccio, “Promoting civic culture and support for the Cuban people,” remarks at the conference The United State and Civil Society in Cuba: A Discussion with the NGO Community, Washington, D.C., December 1995. At the time, Mr. Nuccio was Special Adviser to the President on Cuba.
Cuba in Transition
emerging organized peaceful opposition and its shoot
down of two civilian aircraft belonging to the U.S.based organization Brothers to the Rescue, President Clinton codified and strengthened the embargo by
signing into law The Cuban Liberty and...
Cited: in Negocios en Cuba, Suplemento del Mundo en Síntesis (19-25 August 1996), p.1.
26. “Cuba Report/Lage…,” The Cuba Report (August 1996), p. 4. Between 1993 and 1995 tourism in the Caribbean is said to have
grown 6.8 percent per annum, while in Cuba growth reached 17 percent.
31. USCTEC, Economic Eye on Cuba (1-7 July 1996), p.2. Reportedly, there are 26,000 hotel rooms in the island, “but many do not
yet meet international standards.”
32. USCTEC, Economic Eye on Cuba (24-30 June 1996), p. 3. On July 1, 1996, for example, Canada’s Wilton Properties Ltd. formed
a joint venture with Cuba’s Gran Caribe Tourism Corporation (VANCUBA Holding, S.A.), to purportedly build 11 hotels with 4,200
rooms during the next ten years. The investment calls for both partners to divide the US$400 million cost of the plan. See USCTEC,
Economic Eye on Cuba, USCTEC, 1 to 7 July, 1996, p.2.)
34. Business Tips on Cuba, Vol. 3, No. 9 (September 1996), p. 4. Business Tips on Cuba, a monthly magazine which promotes business
in Cuba, is a project of the United Nations Program for Development
empresario interesado,” El Nuevo Día (23 November 1995) and Negocios en Cuba, Suplemento del Mundo en Síntesis (19-25 August
Foreign Investment in Cuba, as of
August 1, 1996 (in U.S
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