A Law with Dark Corners

A Law with Dark Corners / Fernando Damaso

Posted on April 19, 2014



The Foreign Investment Law, debated and approved by the National

Assembly in extraordinary session, has some worrisome aspects, both for

foreign investors as well as for Cuban citizens.



It seems that Cubans living in other countries are not covered under the

law since the definition of a domestic investor applies only to current

legal residents of Cuba and to cooperatives. The latter are legally

recognized non-state administrative entities which may participate as

domestic investors in projects financed with foreign capital but which

remain completely under state control to prevent the accumulation of

excess wealth.



Elsewhere, investment priority is usually given to a country's own

residents, then to its overseas residents and lastly to foreigners. In

Cuba it is the opposite: foreigners get top priority. Afterwards, we

have to listen to authorities tirelessly proclaiming themselves to be

the defenders of national dignity, independence and sovereignty.



The claim that investments "may not be expropriated except for reasons

of public utility or social interest, as previously defined by the

Council of Ministers" should give one pause. This is a well-established

procedure in most countries. Before such actions can be taken, they must

be discussed and approved by legislative bodies (a house of

representatives, senate, parliament or national assembly).



It is a process in which those concerned — governmental authorities as

well as those in the opposition who may hold with differing views —

participate fully. Final implementation is subject to review by the

judicial branch, which makes sure any such actions do not violate the

constitution.



This is not the case in Cuba where the National Assembly is made up

exclusively of deputies from one party. It is a legislative body without

an opposition in which anything the government proposes is approved

unanimously. The Cuban judiciary, which is nothing more than an appendix

of the government, also has no independence.



In spite of anything that has been stipulated in writing, investors lack

any real protection or legal recourse. They remain subject to decisions

by a centralized authority in the person of the president, who for

political, ideological or circumstantial reasons can act as he pleases

without having to consult anyone, as has happened repeatedly over the

last fifty-six years.



Regarding employment of Cuban citizens, the law stipulates that an

investor must hire workers through an employment agency selected by the

Ministry of Foreign Trade and Foreign Investment and authorized by the

Ministry of Labor and Social Security. Payment to workers would be by

mutual agreement between the investor and the employer. Neither exchange

occurs between the investor and the worker directly but through a state

intermediary.



Though the purported purpose is not to generate revenue, it stipulates

that a portion of the wages paid by the investor will be retained to

cover costs and expenses for services provided.



As one might expect, there is a big difference between what the investor

pays and what the employee receives. The salary paid to the employee

will correspond to a minimum wage set by the employment agency, which it

claims will be higher than that for the country's other workers. Also

factored in will be a coefficient which will allow the agency to adjust

salaries based on a worker's performance.



The unfortunate history of low pay for doctors, teachers, athletes and

other professionals working overseas to fulfill the Cuban government's

contracts with other countries speaks volumes.



It would perhaps have been advantageous to draft an investment law that

also regulated state investments (considering the many examples of bad

investments made over the years). It might also have covered private

investment, differentiating between foreign and domestic investment.



In regards to domestic investment, it might have included both

investment by Cubans living on the island as well as those living

overseas, especially since the latter currently must also possess a

Cuban passport to enter and exit the country, thus confirming their

legal status as Cuban citizens.



This law is not free from the burden of obsolete concepts of failed

socialism, with the objective in ensuring a leading role for the state.

It lacks sufficient transparency to really stimulate foreign investment

and includes some traps into which those who bet on it, without giving

it enough thought, might fall.



7 April 2014



Source: A Law with Dark Corners / Fernando Damaso | Translating Cuba -

http://translatingcuba.com/a-law-with-dark-corners-fernando-damaso/