Monday, April 28, 2014

Cuban investments still remain unsafe

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

"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.

Source: Tyler Morning Telegraph - Cuban investments still remain unsafe

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