Facing growing shortages of basic goods and fuel, and increased electrical black-outs across the country, Cuba’s National Assembly has approved 75 new economic measures to stimulate the country’s struggling economy. The measures include official authorization of direct foreign investment to Cuba’s small but expanding private sector; reestablishing an official exchange for U.S. dollars that had been closed during the pandemic; and lowering customs duties on goods being brought into the country.
The measures were announced on July 21 by Cuba’s economy minister and vice president Alejandro Gil, who said the new policies were intended to attract foreign currency and investments.
“We are authorizing foreign investment in the non-state sector,” Gil told the National Assembly. The Cuban government, he said, would determine which small and medium-size businesses could receive foreign capital.
“There was never a doubt that the government of Cuba would authorize direct equity investments and direct financing for privately owned companies located in Cuba,” said John Kavulich, who heads the U.S.-Cuba Trade and Economic Council, in a Miami Herald article. “The government is in desperate need of the economic activity, the jobs, the creativity, the efficiencies that are the hallmark of a robust private sector.”
In response to a June 2021 application by an LLC created by Kavulich to provide micro-investment and micro-financing to a small, private Cuban service sector company, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) authorized, in May 2022, the first license for foreign investment in Cuba since the advent of the U.S. embargo 60 years ago.
“Everyone seeking to support the use of the re-emerging post-COVID-19 private sectors in the Republic of Cuba—restaurants (paladars), bed-and-breakfasts (Airbnb-connected), manufacturers (equipment, food products, etc.), service providers (repair, Internet applications, refurbishment, design, cleaning, artists, etc.)—should be applauding the recognition by the OFAC of the essential expansion from gifting [remittances] to equity investment and financing,” Kavulich wrote in the online publication, Economic Eye on Cuba.
Amidst the pandemic, the Cuban government officially authorized the expansion of micro, small and medium-size private enterprises and cooperatives which now total over 4,000 businesses across the island. According Juan Triana, one of Cuba’s leading economists, employment in Cuba’s private sector enterprises is made up of 1.3 million entrepreneurs and employees—approximately 40 percent of the national work force.
“They participate,” he said, “based on their ingenuity, their income and not dangling from the state’s udder and that, in my opinion, is very good, in economic, social and political terms.”
The government’s decision to re-open official dollar currency exchanges on the island should make it easier for U.S. travelers to use and convert dollars on the island. Currently, the currency is trading on the black market for 100 to 120 Cuban pesos to the dollar, with Cuban hotels offering the official exchange rate of 25 pesos to the dollar. The new rate is expected to be closer to the black-market value. Previously, American travelers lost 13 percent on every dollar when exchanging U.S. currency to Cuban Convertible Pesos (CUCs). Cuban authorities have yet to set the new exchange rate, or to establish a date when it will go into effect.