Analysis: The new foreign investment law — what’s the rush?

By José Manuel Pallí, Esq.

All things Cuban seem to live in a very particular time warp. Sometimes, more often than not, time seems static; but every now and then time seems to move feverishly fast.

A presentation before the press corps in Havana of the proposedforeign investment law that is to replace or supersede Law 77/95, Cuba’s present law on these matters, has produced the usual shower of half-baked information.

Cuba’s National Assembly is expected to analyze and debate the proposed law during the first extraordinary session of the VIII Legislature, scheduled to take place this Saturday, March 29.

The assumption is –as it has always been- that Cuba’s National Assembly is little more than a rubber stamp for the wishes and directives of the Castro brothers. But anyone paying close attention to the way those who spoke before the press to explain the general scope of the proposed law and the procedure ahead — José Luis Toledo Santander, one of Cuba’s most prominent lawyers, was one of the speakers —should have noticed those speakers seemed to go out of their way to emphasize the extent to which the proposed law was examined and debated at different levels of Cuban society, while pointing out that every question asked and every issue raised during that consultation process would be reconsidered during the course of the next three days.

Cuba apparently wants to show their version of democracy is wide open to the participation of all its citizens — whether you choose to believe this or see it as just another Castro ploy, that is your prerogative — and a reaffirmation of this might result from discrepancies in the National Assembly and changes made to the proposed version of the law.

Some of the newness that has been advertised by the sponsors of the proposed law seems unwarranted. Law 77/95 is already among those foreign investment laws that leave open to foreign investment a vast majority of areas or segments of the nation’s economy (most foreign investment laws are more restrictive than Cuba’s in this regard, whether by declaring strategic some fields or reserving others for national investors. The three areas where foreign investment is apparently banned under the proposed law are the same found in Law 77/95.

I have not read the full text of the proposed law, so I am not sure if the construction of housing for Cubans is now clearly open for foreign capital to participate in. The speakers did appear to say that real estate and construction are now wide open to foreign investment. How wide is a question that can only be answered by knowing the metes and bounds of the policy applicable to foreign investment in the housing sector. One of the changes highlighted in the press conference was the adoption of sectorial policies to clarify what the goals are in each area or sector of the economy. Another change highlighted before the press was the fact the new law will come with a regulatory act (or Reglamento), which the present one lacks.

I am discouraged by the proposed law’s apparent persistence in the type of requirements that prevent foreigners from directly hiring Cuban employees, at least as far as joint ventures (or empresas mixtas) are concerned. My hope rides with the National Assembly, which could still turn its back on this unsound persistence.

Still, my sense is we should wait until after the National Assembly vote before we begin dissecting the new law basing our comments on this present version.

 

José Manuel Pallí is president of Miami-based World Wide Title. He can be reached at jpalli@wwti.net; you can find his blog at http://cubargiejoe.com.

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