There Is No Doing Business in Cuba, Only with Cuba
The Communist Island’s “Private Sector” Is a Farce
JOSÉ AZEL JANUARY 11, 2016 AT 8:25 AM
First, let’s get the preposition right. All commentary regarding
entering the Cuban market makes reference to investing “in” Cuba. But,
when used as a preposition, “in” innocently indicates inclusion within a
space or place.
However, “in” is an insufficient and misleading preposition with
reference to Cuban investments. Investing “in” Cuba is a naive
expression that closes the eyes to the “with” character of those
The island is not like other foreign markets where the investor’s due
diligence requires mostly investigating demographics, local market
information, and maybe some political risks.
Cuba is a totalitarian state. Investing in Cuba necessarily requires
investing in partnership with the Cuban government, and more
specifically with the Cuban military.
It is thus much more precise to use the preposition “with”’ to denote
“accompanied by.” Investing with Cuba, in association with the Cuban
military, requires a much more rigorous due diligence.
Investing “in” Cuba requires the investor to contend only with factors
such as median income of US$20 per month, outdated internet,
communication and information systems, an unfriendly business
environment, violation of workers’ rights, widespread corruption,
unreliable energy, outdated water and sewer systems, a crumbling
infrastructure, a bankrupt economy, an awkward dual currency system, and
In addition, investing “with” Cuba requires foreign firms to accept
being minority partners, with the Cuban government representing the
Under this arrangement, the Cuban government expects foreign investments
to generate revenues for the state on its terms. If the venture fails to
meet the expectations of the state, it may arbitrarily terminate the
agreement, and there is no independent judicial system to adjudicate any
It is also a mischaracterization to speak of a “private sector” in Cuba
with the suggestion that such a sector exists as possible partners for
US investors. There is no private sector in Cuba in the sense that we
use that term in free-market economies.
The so-called self-employed (cuentapropistas) in Cuba are not equivalent
to a private sector. These are individuals whom the state has granted
permission to operate in one of 201 highly specified domestic trade
activities and under very restricted conditions.
They do not have legal standing as would a sole proprietorship,
partnership, or corporation in the United States. It is therefore very
misleading to speak of a private sector in Cuba.
Let’s take just one aspect of doing business “with” Cuba to illustrate
how it offends our values and morality, our labor and business laws, and
our expectations of corporate behavior.
Foreign investors operating on the island cannot hire their own
employees. The foreign firm must negotiate with the Labor Ministry a
“contract for the supply of its labor force,” indicating the quantity
and qualifications of needed employees.
The state staffing agency for foreign enterprises then sends its
pre-screened personnel to the foreign firm. The foreign employer pays
directly to the staffing agency in foreign currency, or equivalent Cuban
convertible pesos (CUC). The staffing agency then pays Cuban workers in
non-convertible national Cuban pesos (CUP).
Under this arrangement, the state pockets over 90 percent of the
worker’s purported salaries.
This practice is a form of slavery that violates International Labor
Organization conventions. Cuban writer Carlos Alberto Montaner has aptly
named it: Cuba, the pimp state. It is a repugnant practice that would
expose participating US companies to public scorn and endless litigation.
Corruption is a serious problem in official Cuba, with an ethos of
unlawfulness, and a state-controlled economy where there is little
respect for the rule of law. US companies, particularly publicly traded
firms subject to myriad anti-corruption and disclosure regulations,
would find it nearly impossible to operate lawfully in such an
environment of systemic and endemic corruption.
Those looking to invest “with” Cuba should therefore include in their
due diligence the vetting of their to-be controlling shareholder: a
state-owned enterprise such as GAESA, the vast conglomerate run by
Brigadier General Luis Alberto Rodríguez López-Calleja, Raúl Castro’s
And we should all begin using the preposition “with” to specify that
it’s not investing “in” Cuba, but in partnership with the corrupt Cuban
Source: There Is No Doing Business in Cuba, Only with Cuba –