Friday, January 30, 2015

Investing in Cuba can be a risky business

Investing in Cuba can be a risky business
01/29/2015 10:45 AM 01/29/2015 10:45 AM

The Greater Miami Chamber of Commerce holds its annual South Florida
Economic Summit today. This is what businessmen should know about doing
business with Cuba:

From a business perspective, commercially engaging with Havana is
different than doing business in most countries. Until now the American
companies that have exported hundreds of millions of dollars in products
to the island have benefited from American restrictions that required a
cash and carry basis for American exports to Cuba.

Those restrictions have saved U.S. taxpayers millions because Havana is
well-known for not paying its bills.

In 1986, Cuba stopped paying principal and interest to the Paris Club,
to whom it owed billions of dollars to governments, banks, and foreign
companies. Since then, Havana has restructured some debt. Some creditors
forgave part of it due to the regime's near bankruptcy.

The Heritage Foundation 2015 Index of Economic Freedom ranks 178
countries according to freedom from corruption, the rule of law, labor
and business freedoms. Only North Korea ranks worse in terms of business
and investment environment than Cuba.

Corruption is endemic in Cuba, posing a great risk to anyone who
disputes the authorities on a business matter.

In September of 2014, BBC News reported the sentencing of Cy Tokmakjian,
74, "the president of a Canadian transport company to 15 years in jail
for bribery." He had been detained since 2011 and denies the charges.
Two other Canadians working for the Ontario-based company were sentenced
to 8 and 12 years.

The Tokmakjian Group said the regime seized assets worth about $100
million, and a Canadian Member of Parliament, Peter Kent, told the
Financial Post that, "the trial was, from almost any measure,
extraordinarily unfair and rigged." The company said that "lack of due
process doesn't begin to describe the travesty of justice that is being
suffered by foreign businessmen in Cuba."

There are other cases. According to The Economist, "On October 11, 2011,
Amado Fakhre, a British citizen and the head of Coral Capital, an
investment fund, was awakened at dawn and taken for questioning...His
company owns Havana's poshest hotel in partnership with the
government...His Havana office has been closed and declared a crime scene."

El Pais, Madrid's daily, reported in October 2009 that the Spanish
foreign minister had visited Havana to intercede on behalf of Pedro
Hermosilla, a Spanish businessman specializing in sales of medical
equipment. He had been detained for over a month at Cuba's political
police headquarters. About 280 Spanish companies had about $300 million
frozen by the government and were not permitted to send any profits
home. "Diplomatic sources admitted that the measure was due to Cuba's
lack of hard currency and the serious economic situation."

And there is more:

▪ Investing in Cuba requires a joint venture with the Castro government
(the Castro family and the regime's elite).

▪ Minimal requirements before risking shareholders' capital should
include the sanctity of contracts, the rule of law, and the ability to
bring disputes before independent courts.

▪ Raúl Castro came to power in 2006. Despite what cheerleaders for his
economic "reforms" say, they amount to a lot less than they claim. Many
Cubans say they're a sham. Oswaldo Payá, the leader of Cuba's Christian
Liberation Movement, denounced them as fraud. He was murdered when his
car was run off the road by Cuban police. The government refuses to turn
over the autopsy report to his family.

▪ The regime does not allow foreign companies to hire their workers;
instead, they're provided by the government. Investors pay thousands of
dollars per worker to the government, which then pays the workers $30 or
$40 a month, in violation of international labor agreements.

Obama's Cuban policy is based on the misconception that full diplomatic
relations and American trade will bring about respect for human rights
and an economic breakthrough. But in fact he will be implementing a
policy that has failed as long as the embargo: the Europeans' policy of
engagement. That policy has had absolutely no beneficial impact on the
rights of Cubans.

Their engagement with Cuba will benefit ordinary Cubans only when
Europeans and Americans condition all of their actions benefiting the
regime to specific Cuban government reforms.


Source: Investing in Cuba can be a risky business | The Miami Herald The
Miami Herald -

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