Only a fool would invest money in communist Cuba

As the saying goes, a fool and his money are soon parted. And that’s what happens when you invest in a country run by a corrupt and lawless dictatorship notorious for nickel-and-diming and outright robbing foreign investors.

FIU international business professor Jerry Haar explains in The Hill:

The folly of investing in Cuba

The Cuban government’s recent announcement that it intends to permit foreign private investment is fueling the hopes and dreams of those in the business community whose naivete, avarice or moral agnosticism allows them to believe that their financial investment in the island economy will turn out to be manageable, profitable and sustainable.

While the embargo on Cuba has prevented Americans from doing business with Cuban nationals and entities for more than 60 years, the Biden administration has recently rolled back Trump-era restrictions and authorized a U.S. license to finance and invest directly in private small businesses on the island.

Admittedly, there are sectors of the Cuban economy that present attractive possibilities, such as tourism, energy, agribusiness and biotechnology. But American firms must bear in mind that foreign companies from Canada, Europe and Asia enjoy “first mover advantage” — they know the turf, the power brokers, the fixers, the suppliers and networks, the culture and the invisible rules of the game. They can also count on their governments to step in to protect their interests due to the loans provided to Cuba — especially loans from Spain, Britain, Canada, France and Japan.

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Prospective investors in Cuba should be aware of the extremely poor state of Cuba’s infrastructure. This includes transport links, housing, internet and facilities for expatriate staff. Only 17 percent of Cuban households have a computer, and Cuba has the lowest mobile phone penetration of any country in Latin America. Water resources and sanitation are also illustrative, with 80 percent of the infrastructure more than 40 years old. Additionally, power outages are not confidence-builders for manufacturing companies eyeing investment in Cuba.

In terms of business operations, there are problems galore. Foreign firms present in Cuba can attest that their operations are challenged by many factors. These include government bureaucracy, the slow pace of decision-making and the inability to hire workers and pay them directly. Cuban law generally requires that foreign investors hire workers via public agencies known as “hiring entities” (entidades empleadoras). Low levels of worker productivity and high levels of absenteeism also characterize the Cuban workforce.

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