Cuban National Assembly approves new Foreign Investment Law

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by Livia Rodríguez Delis

The Cuban Parliament’s approval of a new Foreign Investment Law has raised great expectations among national and international enterprises and is considered one of the most strategically important steps to be taken in the process of implementing the Economic and Social Policy Guidelines approved in 2011, by the 6th Congress of the Communist Party of Cuba.
In terms of the law’s basic purpose, Marino Murillo, a Council of Ministers vice president, provided legislators context by explaining that, in order to make long term development plans, the economy’s rate of growth through 2030, and the level of investment required to allow for this growth, were identified.

He pointed out that the Cuban economy is currently facing a dilemma, having to direct resources toward investment, as opposed to consumption, given the insufficient Gross National Product, and the need to reach a growth rate of five to seven percent a year, to achieve the level of development projected.

He indicated that essential components of the Cuban economy require significant re-capitalization to support development, and that this level of investment cannot be reached without resources from abroad, mentioning agriculture as a case in point.

Over the last few years, Murillo reported, Cuba’s GNP has shown moderate growth. In 2013, the rate was 2.7%, while a 2.2% growth is projected for 2014. He commented that although there is positive growth, the rate is declining, indicating a deceleration and the need for external financing.

In a presentation on the new legal framework, Rodrigo Malmierca, head of the Foreign Trade and Investment Ministry, reaffirmed that the policy is well aligned with Cuba’s socialist system and is characterized by attention to the protection of national sovereignty, the country’s natural resources, environment and heritage.

The law, initially discussed in extensive regional meetings, was approved unanimously by the National Assembly and contains 34 general principles, including the conception of foreign investment as necessary to economic development in the short, medium and long term, and the proviso that it should contribute to introducing advanced technology; to the development of better management practices; the diversification and extension of export markets; the substitution of imports; and the generation of greater income throughout the economy, as a result of growth in national production linked to new investments.

The law is intended to promote foreign investment by offering an extensive and diverse portfolio of projects and opportunities in special development zones, in particular the recently opened Mariel special zone, the Minister said.

Malmierca further explained that priorities established by the country will be emphasized, including a change in energy generation patterns, to move toward greater use of renewable resources; greater Cuban participation in companies involved in extracting natural resources; public service provision; development of the biotechnology industry; and expansion of the wholesale market serving tourist installations.

The country’s private sector, fundamentally cooperatives, will also have access to foreign capital, although on the basis of exceptional procedures which include government supervision.

Given their importance, Malmierca continued, specific principles are established for several sectors, including agriculture and forestry; energy and mining; sugar production; heavy and light industry (steel, electronics, biotechnology, etc.); wholesale distribution; healthcare; construction; tourism; and transportation.

Among the new features of the foreign investment law is an eight-year tax exemption on earnings, available for longer periods in special cases. Preferential treatment is also afforded investors to encourage the utilization of competitively-priced Cuban products, and provisions are in place to support foreign operations as the unification of Cuba’s two currencies proceeds.

Malmierca emphasized that investors’ assets are fully protected, that they will not be expropriated except in exceptional cases of public need or social interest. The state guarantees investors’ right to transfer abroad any hard currency dividends or earnings.

Among other positive elements, beyond the letter of the law, which should be attractive to foreign capital are the updating of Cuba’s economic model currently underway; the country’s characteristic political and social stability; and the availability of a highly qualified workforce, Malmierca said.

He however warned that obstacles to the participation of international investors in the economy continue to exist, in particular the financial and commercial blockade imposed by the United States; Cuba’s outstanding foreign debt; errors committed in the past in this arena; and limitations caused by the scarcity of hard currency.

In addition to approving the Foreign Investment Law, the National Assembly elected two new members to the Council of State and reiterated its support to the struggle to free the three members of the Cuban Five who remain unjustly imprisoned in the United States, Gerardo Hernández, Ramón Labañino and Antonio Guerrero.

-Granma.cu

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