In Bid to Save Sinking Economy, Cuba Invites Foreign Investors
COMMUNIST Cuba is dialing for dollars.Skip to next paragraph
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Early this month, Mexican businessman Gregorio Gomez got an unsolicited call inviting him to explore sales opportunities here in Cuba. His company makes food substitutes. "You know, soy burgers, malts, and powdered ingredients to make baked goods without eggs or flour," says Mr. Gomez during a flight to Havana.
In an effort to save his socialist outpost, President Fidel Castro Ruz is rolling out the red carpet for foreign capitalists, particularly those from Latin America.
"In no book of Marx, Engels, or Lenin is it ever said that countries can be developed without capital, without technology, and without markets," President Castro told representatives of some 200 companies from 24 countries gathered at the Ninth International Trade Fair in Havana last month. "We will be the best partners, the best allies ... of those who want to work together with us and trust in us."
Caught between the three-decade-old United States trade blockade and fast-dissolving trade links with the Soviet Union and East European countries (accounting for up to 85 percent of Cuban trade), Cuba is struggling for its economic life.
Initially, the door opened primarily to joint-venture investments in tourism - apparently to keep the influence of capitalistic ideas contained. But as domestic industries begin to falter for lack of parts or materials, opportunities are developing for collaboration in oil exploration, electronics, nickel mining, biotechnology, sugar-cane byproducts, and even nuclear energy.
Fifty-fifty investment and profit-sharing opportunities are available on a case-by-case basis, with a preference for Latin American partners. Special tax breaks, foreign management, and labor practices are also options, say Cuban officials.
"We are seeing a change in the mentality of Cuban officials in just the last few months. It's less ideological and more pragmatic," says a commercial officer with a European embassy.
Spanish, Canadian, and Italian investors have been particularly active. Cuban officials say some 50 deals have been struck with foreign firms this year, and another 100 are in the works. Italy's exports to Cuba (mostly tourism related) jumped 70 percent in 1990. Mexican businessmen are also now beating a path to the Caribbean isle.
In October, Mexico and Cuba worked out an agreement over Cuba's back debts, thus freeing up a $300 million line of credit from the Mexican national export bank. "We can't remain out of the competition with other countries going into Cuba. Besides, we've a geographic advantage; Cuba is only 100 miles from the Yucatan," says Roberto Sanchez de la Vara, president of the powerful business group La Camara Nacional de la Industria Transformacion.
Mr. Sanchez led a team of about 70 Mexican investors to Cuba in October and met with Castro. He plans another investment mission this month. But he and other businessmen interviewed temper their enthusiasm with a hefty dose of caution.
The Cuban economy is on the ropes. Almost all food and consumer products are rationed. Chinese bicycles are replacing cars. Oxen are being trained to substitute for tractors. And oil supplies are a huge question mark.
Petroleum deliveries from the Soviet Union, which were running about 10 percent behind schedule, were abruptly cut off in December. In a sugar-and-citrus-for-oil barter arrangement, Cubans contracted for 10 million tons of Soviet oil in 1991, down from 13 million in 1990. No deal exists yet for 1992 supplies.
In early December, Cuban Trade Minister Ricardo Cabrisas came back empty-handed from a trade trip to the splintering Soviet Union. Cuba may fare better with the new Commonwealth of Independent States: In late December, Cuba reached an three-year economic collaboration agreement with Ukraine. But while Ukraine has the sugar refineries, Russia produces the petroleum.
"Unless the Cubans can get the Ukrainians to pay the Russians for the oil, the Cubans are in real trouble," says one Western diplomat.
Castro, who's been preparing Cubans for the "zero option" (no Soviet oil), said Dec. 6: m not sure that there is an institution in the Soviet Union capable of guaranteeing the delivery of oil."
Also troubling to investors is the lack of economic reform many had expected to emerge from the Fourth Communist Party Congress in October. Reformists had pushed for privatization of small-scale manufacturing, services, and farmers' markets. But such proposals were passed over for further study.
The "safe" investment, says a Spanish diplomat, is tourism. But beyond that the major corporations "find it very difficult to risk money here under these conditions. Other countries in Latin America offer better risks. Spanish investment," he says, "is no longer growing here."
Yet other diplomats see an increase in the flow of investors coming to see just how eager the Cubans are to deal. "They're getting a foot in the door. Hedging their bets but not wanting to appear too eager to prop up this regime," says a Western official.
A Miami-based business consultant who has escorted US executives here for an unofficial peek at the changes notes that current investments won't come to fruition for two or three years. She wonders: "Are the changes coming fast enough to save Cuba from complete collapse?"