Buying Into The Myth Of Cuba’s Economic Liberalization … A Bad Idea
Rumors that Raúl Castro intended to implement significant economic reforms in 2008 sparked a renewed curiosity in U.S. business opportunities in Cuba. Many U.S. firms are even seeking legal advice to help them navigate U.S. sanctions against Cuba’s totalitarian regime in hopes of getting a “head start” on these rumored opportunities.
The most hopeful (or naive) observers predicted that Castro (the second) would adopt the China model with the Communist Party overseeing major economic liberalization. Yet, Cuba remains one of the most hostile and dangerous countries to do business in. Since the implementation of these so-called reforms, more foreign investors have left the island than flocked to Cuba. In 2000, there were 400 foreign companies operating in Cuba through minority joint ventures with the Castro regime. Since then, over half of all foreign companies have pulled out with only 190 remaining.
In the last few years, foreign investors have seen over $1 billion in assets arbitrarily frozen in banks by the Cuban government. During this time, CEOs of various foreign companies have also been arrested with little if any due process. Cy Tokmakjian of Canada’s Tokmakjian Group, for example, was arrested in September 2011 after his firm was raided and his assets confiscated in the typical communist fashion. Two years after the raid, Tokmakjian still sits in a Cuban cell and has yet to be charged with any crime.
Similarly, Amado Fahkre and Stephen Purvis of Britain’s Coral Capital, both of whom had played a leading role in financing Cuba’s tourist industry, were accused of what the Cuban government called spying and revealing state secrets. After enduring a secret trial and serving 16 months in a Cuban jail, Purvis was allowed to return to London, but not before his business offices were shut down by the Cuban government. The multimillion dollar projects he invested in were similarly confiscated and transferred to a Chinese firm. Purvis admits that he was surprised his company was targeted, despite being financed by wealthy European investors and having a reputation as one of the best-established foreign companies on the island.
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