By Patricia Grogg
HAVANA, Jul 18 2002 (IPS)

The Cuban government plans to cut the red tape faced by foreign capital in this socialist island nation, which stands in the way of investment projects and has drawn complaints from investors.

Deputy Minister for Foreign Investment Ernesto Senti said “a battle is being fought” to cut the time it takes to negotiate and approve business ventures involving foreign capital in Cuba.

“If the government approves a business venture, it must be with the aim for it to begin functioning at the earliest possible moment, in order for all associates to begin reaping the benefits,” Senti said at the congress of iron and steel industry in Havana, which ends Friday.

The official’s statements coincided with international press reports on complaints about the bureaucracy in Cuba from the European Union (EU), the main source of investment in Cuba.

According to the reports, the EU sent the government of Fidel Castro a 15-page document underlining a number of hurdles for developing business ventures in Cuba.

Senti explained that a new “ventanilla unica” system had been put in place to expedite the installation of foreign companies, in which investors only have to go to one office to carry out all of the necessary paperwork, once the investment project has been approved.

The seemingly endless list of bureaucratic steps includes signing up with the business register, environmental impact studies and permits, tariffs, migration and labour permits and a range of other licenses, the opening of bank accounts, and registration in the customs system.

The paperwork takes “nearly a year,” said Senti. But he added that the use of the “ventanilla unica” is voluntary and free of charge, because “we do not want to add further costs,” since investors are already charged high enough fees.

He also mentioned the possibility of temporary tax exemptions for investors, until the investment has provided a return, although that would be decided on a case-by-case basis.

The official reported that to date there are 412 joint ventures in Cuba involving foreign capital from 46 countries. The leading investors are Spain, Canada, Italy, France, Mexico and the United Kingdom. China and Germany have also increased their activity in Cuba, Senti added.

In more recent times, production, services or administration contracts have been added to the mixed companies and partnerships.

The share of investment, which can be up to 100 percent foreign, “is negotiable. What we are after is balance,” explained Senti, who mentioned tourism, energy, biotechnology and sugar by-products as industries where investment has been given the highest priority.

Cuba’s Central Bank stated in its 2001 report on the economy that foreign investment had played a complementary role in the country’s development, by providing “capital, technology and markets.

“This activity has had a multiplying effect on the rest of the sectors of the economy, by spurring competitiveness, efficiency and the use of advanced technologies in national companies,” added the Central Bank.

According to other official reports, by the end of last year, the government was involved in 400 international joint ventures – 72 of which function outside of Cuba – which brought in a combined total of 200 million dollars last year.

In 2001, 24 new foreign investment projects were agreed, 13 of which are operating abroad, mainly in the construction, biotechnology and pharmaceutical industries.

Moreover, the Cuban government has so far signed 62 bilateral accords for the mutual promotion and protection of investment, and seven entailing the reciprocal elimination of tariffs.

However, the EU called for “greater juridical security and a reliable and transparent legal framework” for its investments on the island, according to a newspaper report on the document that was reportedly sent to the Castro administration several weeks ago.

“The practical application of some aspects of economic legislation is not uniform, and gives rise to advantages for some firms to the detriment of others,” complained the EU investors.

The document also criticised the “excess controls and inspections,” which “can result in exasperating interventionism,” and require businesses to make efforts that are more heavily focused on complying with Cuban regulations than on efficient production.

The EU investors argued that Cuba’s tax system must be modernised in order to make it “more transparent, fair and efficient, with a view to promoting foreign investment, particularly in export-related activities.”

Practically all sectors of Cuba’s socialist economy are now open to foreign capital, except defence, health and education services, and retail sales. However, activities linked to those areas are often open to partnerships with foreign capital.

Foreign investment in Cuba, which began to arrive in 1988 in the tourism industry, is protected by the constitution and by law 77, passed in 1995, as well as decree 195 on low-tax zones, issued in 1996.

Excerpt: