Is Cuba ready to open up to foreign investment?

Motorcyclist drives by a sign reading "Socialism or Death" A forbidding slogan for foreign business investors

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"Socialism or death" is the stark choice that shouts down from the sign above a Havana steel firm. The words surround a painted image of Fidel Castro's face, a reminder that Cuba remains a very peculiar place to do business.

But it seems a new, pragmatic mood has taken hold.

This weekend, Raul Castro - now in charge and overseeing a broad, albeit snail-paced reform programme - convened an extraordinary session of parliament.

Start Quote

We're all struggling but maybe with a bit of outside help, life for us Cubans could be a little better”

End Quote Cuban pensioner

The goal was to bring more foreign investment to the island.

Sense of urgency

Deputies duly approved a new law that Cuba hopes can attract more than $2bn a year in investments and help treble economic growth to 5-7%.

Trade Minister Rodrigo Malmierca told deputies that the foreign investment law was intended to help Cuba access advanced technology, new management methods and export markets, and create jobs.

[It] "will not only help attract foreign capital with clear rules and incentives, it will also allow us to use that potential to develop the country, whilst preserving our independence and sovereignty," the minister said.

Political unrest and economic problems in Venezuela have added urgency to the move, as Havana has been forced to contemplate losing a vital ally and financial prop.

It was the loss of a previous benefactor - the USSR - that first forced Fidel to open Cuba's economy to outside investment.

Members of the National Assembly raise their hands to vote during an extraordinary session overhauling their foreign investment law at the National Assembly in Havana, Cuba, on 29 March 2014. The media have been given few details of the new law approved by parliament on Saturday

Money poured into tourism in the 1990s as well as the island's nickel mines and elsewhere.

But getting a venture approved has always been laboriously slow, with some projects stalled for no apparent reason beyond lingering, ideological concerns.

"The new law looks very promising as a strong incentive for foreign investment," says British businessman Andrew McDonald, suggesting such doubts have finally been overcome.

His own firm, Havana Energy, is part of a joint-venture building a biomass power plant at a Cuban sugar mill.

"I think this will give a significant signal to the international community that Cuba is ready for business," he adds, arguing that there is strong interest in the market here - on the right terms.

In one indication that old attitudes die hard, the foreign press was not given a copy of the new law or allowed into parliament for Saturday's debate.

But details released to state media showed an eight-year exemption from profit tax, moving to 15% - or half the current rate. They mention other tax advantages and stress legal guarantees to prevent businesses being expropriated by the state.

Start Quote

What the Cubans have to overcome is a record of nearly 20 years of vacillating treatment of investors”

End Quote Paul Hare Former UK ambassador to Cuba

That addresses a serious concern given the mass nationalisations in the wake of the 1959 revolution.

The dearth of investment over many years suggests Cuba is an attractive market: over 11 million people, with many and varied needs.

US trade embargo

But there are obstacles for investors.

Cuba is still designated a "State Sponsor of Terrorism" by the US, which complicates financial transactions with the island, and raising capital.

On top of that, restrictions imposed by the US trade embargo bar Americans and any firms with US interests from doing business here, and eliminate a major export market.

Then there's Cuba's own past.

"What the Cubans have to overcome is a record of nearly 20 years of vacillating treatment of investors," believes former British ambassador to Havana, Paul Hare.

Since 2002 he says the number of joint ventures on the island has dropped by nearly a half.

He also highlights the arrest and opaque trial proceedings of several well-established foreign businessmen, ostensibly linked to an anti-corruption campaign, which spooked fellow investors.

Man and pedestrians walk past a billboard showing Che Guevara The new law is aimed at opening up Cuba to advanced technology and export markets, and create jobs

"The regime may want a makeover, but the scars will be hard to erase," Mr Hare argues.

Phase one in that attempt was inaugurating the Mariel Special Development Zone outside Havana, which offers even greater tax breaks for foreign firms.

Start Quote

Maybe some political prejudice against foreign investment was really strong in the past but I think [policy] today is more rational ”

End Quote Juan Triana State economist

The investment law is phase two.

"Maybe some political prejudice against foreign investment was really strong in the past but I think [policy] today is more rational," state economist Juan Triana recently told the BBC.

He also believes business confidence can be restored.

Opportunities

"The way the government handled the legal framework before was really discriminatory. I think we are building a new environment. But it takes time," Mr Triana argues.

Cuba invited a delegation of Brazilian entrepreneurs to visit this week as part of its new charm offensive.

"Of course there are a lot of obstacles. But this is a new opportunity, too," Julian Pedro Carpenedo said after the three-day mission by 31 firms.

Workers landscape the area near a new port under construction in Mariel, Cuba on 6 November 2013 A new port is under construction in the special economic zone of Mariel

His company - Globoaves - already exports chicken meat to Cuba; the government wants it to invest in reviving the domestic poultry production industry too.

"We have to come and see what's going on in order to decide if it's actually the right place to invest but we're still excited to check the opportunities," Mr Carpenedo says.

As for Cubans themselves, Raul Castro's reforms allowing limited private enterprise have made life a little easier for some but they can't give the economy the boost it needs.

So most say they welcome foreign investment.

"We're all struggling," a pensioner tells me as he whips up a milkshake in a porch for a thirsty customer.

"We manage. But maybe with a bit of outside help, life for us Cubans could be a little better."

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