Rob Sequin | Havana Journal
Cuba’s centrally controlled and secret economy is throwing off signs that it cannot sustain its economy for much longer.
As we have seen, many countries around the world have suffered crippling debt crises so Cuba, a country that chooses not to participate in the World Monetary Fund or World Bank, has no access to credit and limited foreign investment and exports. Of course the good Communists here at the Havana Journal will blame capitalism for the debt crisis and probably say that since Cuba is a Communist country that they don’t have a debt crisis. I would tend to agree… oh sure Cuba has billions of dollars of debt but they just don’t bother paying it. Therefore they have no crisis.
As Marc Frank reports, the Communist-run nation failed to make some debt payments on schedule beginning in 2008, then froze up to $1 billion in the accounts of 600 foreign suppliers by the start of 2009. Cuba is talking about paying back the frozen funds at 2% interest over five years but that’s just another debt that Raul and company can avoid at a later date. This is how Cuba gets out of its debt crisis.
The pay-back offer does not apply to Cuba’s joint venture partners and foreign companies administering hotels, each of whom are said to be trying to work out their own arrangements to recover funds.
Cuba has cut imports, froze foreign bank accounts and is making very very small steps at privatizing some services like taxis, beauty salons and barber shops but the government does not reveal much about its creative accounting practices, the amount of its cash reserves, debt or the current account of the inflow and outflow of foreign exchange.
The last report was in 2008 covering finances for 2007.
Reuters says that Cuba blames Washington for its lack of transparency, saying the U.S. scrutiny of Cuba’s economic activity as part of enforcement of its longstanding trade embargo leave it no choice but to cover its tracks.
How to do business in Cuba
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I don’t understand how any company can operate in Cuba since there is so much regulation, restrictions, risks, deterrents to successful business, hidden government accounting and sub-standard accounting practices. VERY few businesses are successful in Cuba. In my opinion most foreign businesses operating in Cuba today are there for the future, not for the present.
We get calls here at the Havana Journal many times a month from businesses looking to be the “first one in” or looking to “explore the Cuban market”. I always tell them how it works… if they are a US based business first they have to go through the lengthy process of getting permission from the US government. Then after maybe three to six months and thousands of dollars in legal fees THEN they can look towards breaking into the Cuban market. This requires many visits to Cuba to meet the right people. THEN, MAYBE they will get a purchase order. If they are a foreign company looking to build anything, they will have to learn about the process of joint ventures. All of this costing many many thousands of dollars, hundreds of man hours with the chance of doing business in Cuba.
Then I tell them the result: you will loose money. The Cuban government will let you operate your business until they figure out how to take it over. Then they will make life difficult for you until you pack up and leave… leave the island, leave your expertise and of course, leave your money.
That’s how you do business in Cuba. Hey, I didn’t say you’d make money doing business in Cuba but if you want to be the “first one in”, good luck. By the way, you are not the first one in and you won’t be the last one out. Just like Meyer Lansky said shortly after Fidel took over… “I crapped out”. Foreigners have been leaving money in Cuba for decades.
Havana Journal Inc., a Massachusetts corporation, offers Cuba business consulting services.