For decades, the Castro government has been pushing foreign investment for three obvious and “official” reasons: it provides capital, technology and markets. Add to that a fourth benefit: jobs.

Yet in an economy starving for jobs, foreign investment has been something of a disappointment providing employment for less than 3% of Cuba’s workforce.

When the island’s new Investment Law (Law #77) was passed in 1995, the goal was to promote foreign investment including free-trade zones and industrial parks and not just via state-to-state agreements but also foreign direct investment (FDI).

The new law even contemplated offering foreigners 100% ownership in ventures. As such, Cuba signed foreign investment protection treaties with more than 50 countries, and passed legislation extending land-lease arrangements for up to 99 years.

But the fact is that almost 15 years later, not one significant project that’s 100% foreign-owned has been established in Cuba while free zones and industrial parks essentially remain dreams on a piece of paper.

Publicly and privately, Fidel Castro has expressed his opposition to Law 77. Even the official promise to provide answers to foreign proposals and offers within 60 days was never kept, despite many complaints from potential investors that were routinely ignored.

The usual economic and political obstacles major investors find in Third World countries are also found in Cuba, despite the island’s many attractions.

For years, government constraints, bureaucratic regulations, a weak economy and Fidel’s well-known hostility to FDI stood as a gigantic firewall that prevented with very few exceptions any significant development from taking place.

Cuba’s decision to freeze investors’ bank accounts in the aftermath of the 2008 recession went down badly leading investors such as French oil giant Elf Aquitaine, Dutch-British consumer products giant Unilever, Israel’s Grupo BM and others to close their Cuba operations.

In addition, corruption scandals involving foreign investors as well as top Cuban officials who have since been jailed contributed to an atmosphere of distrust and gloom.

Nevertheless, President Raúl Castro’s current process of economic reforms have put the issue back into the limelight. Chapter III of last year’s Lineamientos [guidelines] adopted by the Communist Party of Cuba contained 44 items on foreign investment.

One and a half years later, a new investment law has yet to be adopted but that may finally happen in December, during the winter session of Cuba’s National Assembly.
After so many negative experiences, what accounts for this new delay in adopting legislation aimed at luring foreign investors and improving Cuba’s overall economic situation?

Again, all fingers point to Fidel and his resistance to globalization.

The lack of FDI not only keeps jobs away but also hurts Cuba’s foreign trade picture. The island cannot diversify its exports unless capital and technology is made available; as a result, exports are stagnating.

Last year, Cuban exports rose by 20%, ac-cording to Antonio Carricarte, vice-minister of foreign trade and investments, and former chairman of Cuba’s Chamber of Commerce.

That was largely due to medical services (up 27% from 2010 figures), tourism (up 13%) and medical supplies (up 11%). Together, these three represented 80% of Cuba’s total exports. The remainder consisted of traditio-nal goods like nickel, sugar, tobacco and rum.

Five nations Venezuela, China, Canada, Spain and the Netherlands account for 70% of Cuba’s foreign markets, said Carricarte; Venezuela alone buys 40% of Cuba’s exports.

According to other sources, Venezuela, China, Canada, Spain, Brazil and the United States accounted for $9.68 billion in imports and $4.18 billion in exports in 2010.

Cuban experts and foreign observers have been urging the government for years to diversify trade and reduce the island’s dependence on Venezuela.

One way to do this is increase business ties with the so-called BRIC countries Brazil, Russia, India and China but so far, the latter three have been extremely reluctant to commit to major investments in Cuba, with the exception of the oil industry.

The limited number of markets, exportable goods and trading partners as well as Cuba’s growing trade deficit, directly reflected in the balance of payments and Cuba’s foreign debt should at last convince the leadership to treat the subject with urgency and transparency.

The coming new investment law likely to be adopted in December will show how much that leadership has learned from its many past mistakes.

Meanwhile, a few major foreign firms have made headlines.

These include Brazilian conglomerate Odebrecht SA, which is not only revamping the Port of Mariel west of Havana but has also won a contract to manage the 5 de Septiembre sugar mill near Cienfuegos. The deal involves an initial investment of $60 million.

The Cuban government has also signed a joint venture with Britain’s Havana Energy Ltd. to generate electricity from sugarcane biomass and marabú, a weed that has rendered much of Cuba’s arable land useless (see related story, page 6 of this issue).