Cuba hopes new incentives will lure lure foreign investors, revive economy
HAVANA — Cuban lawmakers on Saturday approved a law aimed at making Cuba more attractive to foreign investors, a measure seen as vital for the island's struggling economy.
Meeting in an extraordinary session, parliament replaced a 1995 foreign investment law that has lured less overseas capital than the island's Communist leaders had hoped.
Cuba's GDP expanded 2.7 percent last year, below targets and weak for a developing nation. Government officials say the economy needs 5 percent to 7 percent annual growth to develop properly.
“Cuba needs from $2 billion to $2.5 billion a year in direct foreign investment to advance its socialist socio-economic model, prosperous and sustainable,” said Marino Murillo, a vice president and the czar of President Raul Castro's economic reforms.
The legislation would cut taxes on profits by about half, to 15 percent, and make companies exempt from paying taxes for the first eight years of operation.
An exception would affect companies that exploit natural resources, such as nickel or fossil fuels. They could pay taxes as high as 50 percent.
Meanwhile, many foreigners doing business with the island would be exempt from paying personal income tax.
Cuban-born economist and University of Pittsburgh professor emeritus Carmelo Mesa-Lago said elements such as lower taxes, a shorter timeline for approvals and the ability to invest in property send encouraging signals, but it's too early to tell.
“The test of the law is how it will be implemented in practice,” Mesa-Lago said.
Many Cuban observers are skeptical of the law.
“Would you put your money in Cuba?” asked Jaime Suchlicki, director of the Institute for Cuban and Cuban-American Studies at the University of Miami. “They can change the law,” he told USA Today, “but they have to change the system for people to jump in and invest.”
Washington's 52-year-old economic embargo on Cuba prevents most U.S. trade with the island and includes sanctions to discourage foreign outfits from doing business with Havana.