Faced with an increasingly urgent economic situation, Cuba’s government estimates it will need to attract $2.5 billion in direct foreign investment per year to solve the crisis. At the same time, authorities have said only $600 million will enter the country this year.
Cuba’s need for foreign money is desperate. The tourist boom from the U.S., and the revenue it brought with it, is over. Aid from close ally Venezuela is drying up as that country plunges further into its own crises. Export revenues have dropped by over $4 billion in the last four years.
There are signs that the government recognizes the need to move quickly. Ceiba Investments recently announced a partnership with Cubanacan and Spanish company Club Meliá to build a new hotel and improve four existing ones. The deal is worth $150 million.
As Ceiba’s chief executive Sebastiaan Berger said, “The negotiations and implementation of these transactions took six months which I really believe is quite a record. … Hopefully [this is] a sign… that the investment processes in Cuba are starting to pick up speed.”
Despite this, Cuba’s byzantine bureaucracy and inefficient economy have made foreign investors wary of doing business in the country. Many within the Communist Party of Cuba (PCC) are suspicious of economic reforms and have resisted change. As a result, reforms designed to improve productivity and encourage investment have been implemented slowly. Of 313 economic changes approved in 2011 by Raúl Castro, not even 25 percent had been achieved five years later.
While the government has signed deals worth $3.5 billion since 2016, because of the political and economic situation, little of this money has materialized. Upgrades to the railroad system and Havana’s airport have been stalled for a year. Construction has not yet begun on the golf courses I reported on recently.
As Carlos Saladrigas, a businessman based in Miami explained, “Cuba will not get economic growth until its leaders decide to change the state from an obstacle of development into a facilitator. … That was the fundamental change in China and Vietnam, and we are still waiting for that in Cuba.”
Polls have consitently shown the population of Cuba is not happy with the state of the economy. One poll conducted in 2016 at the University of Chicago showed 70 percent felt the most serious problem facing the country is its economy. Further, these polls show there is little faith in the government to fix the situation.
“The Communist party has few options but to move boldly forward. … They either have to allow more domestic capitalism—which they do not want—or quickly reform the state sector in conjunction with an increase in foreign capital,” said an anonymous PCC member.
In his first address to the nation, the incoming Cuban president, Miguel Díaz-Canel said he was committed to completing the economic reforms begun by his predecessor. If implemented, this would see the centrally planned state move to an economic model closer to the “market socialism” seen in China and Vietnam. How much he is able to implement in the face of an intransigent Communist party remains to be seen.