Continued interest of foreign investors in Cuba

Cuban authorities assured that foreign investors continued to show interest in the Caribbean island last year, forming joint ventures and cooperation projects with state-run companies despite a hard currency crunch, sluggish economy and the U.S. blockade.

The Foreign Investment and Economic Cooperation Ministry said state-run companies formed 24 joint ventures and signed more than 70 cooperative production agreements, according to a report on the ministry´s year-end meeting in the Communist Party´s daily, Granma.

Since the collapse of its former benefactor, the Soviet Union, that threw Cuba´s economy into deep crisis in the early 1990s, Havana has allowed foreign investment under strict government supervision.

Cuba opposes privatization on principle and views foreign investment as merely "complementary" to the state-run economy, with foreign investors adding technology, management skills, financing and markets.

Nevertheless, joint ventures now control key exports such as cigars and rum, tourism and a portion of others such as nickel and sugar, accounting for about a third of the Caribbean island´s hard currency sales and exports, or $2 billion and $675 million respectively last year, the ministry said.

Foreign companies are also heavily involved in the tourism industry, with joint ventures operating around 20% of available rooms and foreign companies holding management contracts for more than 50 hotels.

Foreign Investment Minister Marta Lomas said earlier this month that agreements signed in 2002 were valued at over $1 billion, though local analysts said only a small portion of the money entered the country, as most was promised for future tourism-related development.

Cuba´s economy grew 1.1% in 2002, compared with 3% in 2001 and more than 6 percent in 2000 and in 1999, as the world-wide economic slowdown, a tourism slump, high oil prices, hurricanes, little credit and investment took their toll.

Direct foreign investment in Cuba plummeted to $38.9 million in 2001 according to the Central Bank, the lowest since Havana began reporting direct investment, and from an annual average of $268 million the previous five years. Most local analysts believe 2002 direct

investment was similar.

Foreign businessmen often complain about Cuba´s excessive labor regulations, a lack of information on business laws and their discriminatory application against foreign companies, excessive utility costs due to the state monopoly on services, a repeated need to renew

visas and work permits, among other problems.

The ministry said total direct foreign investment to date was more than $6 billion, though according to the Central Bank less than half that sum has actually been disbursed since the country opened up to foreign investment in 1988.

Granma said Cuba had signed 578 joint venture deals over the last 14 years, of which 168 had been dissolved, as well as 270 cooperative production agreements. More than 100 of the ventures were with Spanish companies, 60 with Canadian and 57 with Italian companies.

The ventures include joint companies in which Cuba almost always holds 50% or more of the shares, looser agreements between a state-run company and foreign company, and risk agreements to explore for oil and minerals.