Cuban investments still remain unsafe

Published on Sunday, 27 April 2014 23:33 - Written by

If you had to point to a single factor that has done the most good for the poor of the world, it might be the recognition of property rights. But the Cuban government’s abysmal record on property rights is why that country remains so poor that food is rationed — in a rich tropical land capable of growing anything.

And that record on property rights is why Cuba’s new “foreign investment law” is doomed to fail.

“Cuba’s parliament approved a new foreign-investment law that for the first time allows Cubans living abroad to invest in some enterprises (provided, according to Rodrigo Malmierca, the foreign-trade minister, they are not part of the ‘Miami terrorist mafia’),” reports The Economist magazine. “The law, which updates a faulty 1995 one, is still patchy, says Pavel Vidal, a Cuban economist living in Colombia. It offers generous tax breaks of eight years for new investments.”

The problem with the plan is that foreign investors want to know their investments are safe — at least, as safe as any other venture capital investment. The Cuban government has a bad habit of nationalizing successful businesses.

We saw this familiar pattern emerge when the Castro regime “allowed” the purchase and sale of private residences, and private land development. But that liberalization came with so many caveats that few investors responded

“Investing in Cuba is only for the most steely-nerved,” the Financial Times newspaper reported in 2013. “Not only is there the vexed question of potential claims on properties from exiled Cubans, the Cuban government has a long, ignominious history of first encouraging and then choking off economic liberalization. It relaxed restrictions on home sales 15 years ago, only to reverse the policy a few years later.”

The Cuban government is its own worst enemy. Few Americans truly support the 55-year-old embargo, and most economists and political observers agree that the embargo has failed.

So while a concentrated effort in Congress could result in the embargo being lifted, the Castro regime’s bad faith would likely keep big American companies out — even if they were allowed in.

In fact, the embargo has worked against its own stated purpose of bringing down the communist government.

How? Political satirist P.J. O’Rourke contends that commerce won the Cold War as assuredly as a military build-up did.

“In the end we beat them with Levi’s 501 jeans,” he wrote in “Give War A Chance.” “Seventy-two years of Communist indoctrination and propaganda was drowned out by a three-ounce Sony Walkman. A huge totalitarian system has been brought to its knees because nobody wants to wear Bulgarian shoes. Now they’re lunch, and we’re No. 1 on the planet.”

He meant, of course, that free trade — and the natural human desire for better living conditions (which at the time included Sony Walkmans) — played a major part in the collapse of communism.

Free trade and foreign investment in Cuba could surely accomplish the same thing there.

But as long as the Cuban government remains likely to steal those investments, that outcome is unlikely.