English (Editorials)

THE LAW OF FOREIGN INVESTMENT IN CUBA: ONE SWALLOW DOES NOT MAKE A SUMMER.


Editorial 39. May-June-2014
Convivencia Magazine.
www.convivenciacuba.es
 
THE LAW OF FOREIGN INVESTMENT IN CUBA: ONE SWALLOW DOES NOT MAKE A SUMMER.
 
The former Law of Foreign Investment dates from 1995; it was passed in the middle of the “special period” and it was one of the “measures” to try to get out of the crisis caused by the collapse of the USSR the subsidy of which made the Cuban economy survive for more than 30 years. That law which was “new” in those days failed because it was not new in its essence, because it excluded the Cubans from the Island and from the Diaspora, because it was used as a reversible emergency and because most of foreign investors that could have had a significant impact on the expiring Cuban economy of that time were inhibited: they mistrusted the system in which the law was inserted.
 
Almost twenty years later, facing the same crisis of dependence and subsidy, this time on the decadent economy from Venezuela which has been the “new USSR” for Cuba, a Law of Foreign Investment considered new, is passed in an Extraordinary Session of the National Assembly because it was urgent to do it. Political need always goes beyond resistance to change.
 
The very Minister of Foreign Trade and Foreign Investment, in his presentation at the Assembly at the end of March, 2014 when he spoke he presented the Law emphasising the advantages and “obstacles”. The advantages are presented as if the obstacles didn’t exist and as if Cuba were a normal country with separation of powers of the State, independence of Judicial Power and a general legal framework providing guarantees to the investors whatsoever political choice made by the leaders of the Country.
 
The obstacles pointed out by the Minister of Foreign Trade, Mr. Rodrigo Malmierca, in the middle of the legislative Assembly and published in Gramma on the 31st of March, 2014 were, in this order and we quote:
 
-“The economic, trade and financial embargo imposed by the Government of the United States;
-The situation of external indebtedness;
-The mistakes made in the past regarding this activity; and
-The restrictions caused by the shortage of foreign currency”.  
 
As anyone can see only the first obstacle depends on a foreign law. The other three obstacles depend on the serious economic crisis caused by the interference of political wilfulness which invades the whole Cuban model transversely. These three obstacles acknowledged by the Minister specify and enumerate only three of the consequences coming from the key question: The Cuban economic model doesn’t work.
 
One swallow does not make a summer.
 
The old popular saying expresses very clearly what we wish to say about the “new” Law of Foreign Investment in Cuba.
 
Indeed, if the Cuban economic model doesn’t work due to its centralized and paternalist essence, due to the systematic violation of the market laws, due to political wilfulness and blockages, due to the obstacles to empower the citizens and due to the resistance to be a part of the mechanisms of global economy; then one law, even supposing it is better than the one recently passed, won’t be able to make up the framework of mechanisms, incentives, efficiency and security that make the indication Confidence-Country grow until the owners of the capital (necessary and foreign) decide to take a chance in the “Cuban experiment” which says it is socialist… but it wants to implement capitalist measures; it says it wants to open up itself… but it blocks everything that means to release the productive forces of its citizens; it says it wants to change all that needs to be changed… but not so much.    
 
What is meant to be a cautious and wished gradual change looks like a capitalist performance which hides the rigor mortis of a model that has failed in all places and in all ages. It is the model criticized even by Marx: the one that doesn’t release the productive forces and even more: it reverses the order and makes production relations appear decisive placing them above the truly transforming things. That is to say: it blocks the natural mechanisms of market through political “guidelines” approved by only one party. These guidelines are really rigid political lines which are a limiting factor that suffocate the initiative and creativity of the enterprising Cubans.
 
The limiting factor of the very Guidelines and the present Constitution.
 
About the Constitution of the Republic of Cuba we only could mention the pre historic article 5 which defines only one party as the superior force of society and the State but we are not stopping in this because the very Cuban head of state has expressed that the Constitution will be reformed only at the end of the process of reforms because it cannot be changed every day. That is, it’s taken for granted that the implementation of the present reforms precedes the constitutional reforms that would authorize and would guarantee the process of reforms. This is enough to understand the kind of role of the Constitution and the kind of set of values of the changing legal framework a priori of the reform to the Magna Carta. The world is upside down. The law of the experiment is above the law of laws.      
 
As to the Economic and Social Guidelines approved by the 6th Congress of the only legalized party and were conceived to guide the reforms carry in themselves the limiting factor of the process of Cuban changes. The first five Guidelines have not had enough analysis or international repercussion about their scope and how it blocks the rest of them.
 
We wish to mention only two guidelines which turn the Cuban reforms into the development of a “timbiriche (1) economy” holding centralized control and political power.
 
Guideline Nº 2 says that the economic model belongs and will belong to the State; it will be centralized and socialist like “real socialism”.
 
Guideline Nº 3 says that “in the new ways of non-State management the concentration of property will not be allowed in legal entities or individuals”. That is to say: the State controls any kind of property. In fact, it is already being implemented in the so called “new” Law of Foreign Investment which authorizes the “non-State” cooperatives (this means private property in the list of reforming euphemisms) to partake with foreign investors but to prevent the accumulation of property the intervention of the
Cuban State is set as the third party.
 
And thus other guidelines are written; almost always with two disjunctive syntagms: one leads to change and the other hinders the process. This economic experiment is not only contradictory but ineffective and unsustainable; the last six years in the Cuban economy show it.
 
Some proposals for an open, efficient, prosperous and sustainable economic model.      
 
For an economy to be economy (never better the redundancy) a group of synergic reforms is needed. As sometimes happens in medicine, the very medicines separately do not heal the same way several medicines do jointly.
 
This economic synergic action is not attained by performing experiments with a Frankestein freak trying to combine the worst face of capitalism with the worst face of socialism; the most rigorous adjustment measures for public expenses with the lack of true labor union movement and other spaces and mechanisms to defend the rights of workers.
 
The efficient, prosperous and sustainable synergy should take into account, at least, these three laws and a general legal framework:
 
  1. 1.Law of Property: to acknowledge and defend all kinds of property without the State blockage.
  2. 2.Law of Enterprises: to guarantee the free enterprise and free employers.
  3. 3.Law of Investments: to encourage and defend investment by Cubans and foreigners as well.
 
   Let the Constitution be reformed or let a new one drawn up. Let the Laws of penal, civil and administrative procedures be drawn up or deeply reformed in order to guarantee, defend and arbitrate the lawsuits that should come up after the implementation or the violation of these and other laws without the government intervention or privilege.
 
It is at least, contradictory that of these three laws the first approved is the last one which is precisely the one that benefits foreigners and discriminates Cubans who live in the Island. The reader can see that these proposals change the essence of the present model. Life, experience and the statements of the very government have acknowledged that the model is inefficient and “it doesn’t work even to us”.
 
And together with these proposals let the semantics be changed:
 
-Private property should not be called “non-State”. Things are not defined by what they are not.
-The entrepreneurs should not be called “independent workers”. They are enterprising persons and the sector is productive.
-Investor should not be identified as foreigner. The law should not be called “Law of Foreign Investment”.
-The duty-free zones or areas of commercial development should not be called “Zones of special development”.
-The constraint to free course and sale of some goods in foreign commerce should not be called “an exclusive prerogative of the Cuban State”.
-The State as “the only employer” should not be called “Job bank”.
 
In short, a holistic analysis of the Law of Foreign Investment leads us, just like Ariadne’s thread, to structural economic changes and to changes in the model; these changes, apart from bringing up sustainable prosperity to Cubans can place Cuba among the global systems of the world economy.
 
Pinar delRío, May 20th, 2014
112nd anniversary of the Republic of Cuba.                 
 
 
(1) Timbiriche: A popular and picturesque word used in the Island to make reference to a small and precarious private business