Cuba announces new rules for investing in hotels and a hike in state pensions

Facing worsening economic prospects, the Cuban government will allow joint ventures between state enterprises and local private companies, as well as what it calls “selective swap” operations with foreign companies, involving hotels and real estate, the country’s prime minister said in a speech before the National Assembly on Wednesday.

The measures, he said, are part of a government plan to boost hard currency revenue and foreign investments, and increase production in the country, though their real impact cannot be measured until related regulations are published.

Prime Minister Mario Marrero did not elaborate on the swap operations, but in the past, several Latin American countries have implemented so-called debt-for-equity swaps to reduce their foreign debt. In these transactions, a country reduces its foreign debt by giving a company an equity stake in a local company or property.

Marrero said those transactions “will be approved without ceding sovereignty. We already approved the first leased hotel by a foreign company, and there are several under analysis to switch them to this very beneficial model for our country.”

The minister also mentioned forthcoming regulations that would eliminate the requirement for foreign hotel chains to enter into a joint venture or a similar contract with a Cuban government entity in order to lease a hotel.

Several international hotel chains have signed contracts with Cuban tourism companies, including some owned by the island’s military, to lease and manage hotels on the island. Some of those properties — or the land on which they were built —have been the subject of lawsuits under the U.S. law known as the Helms-Burton Act because they were expropriated from U.S. citizens by the Cuban government without compensation shortly after it took power 1959.

Many urban hotels owned by a Cuban military conglomerate known as GAESA are included in a list of sanctioned entities kept by the U.S State Department.

Private sector imports over $1 billion

Marrero’s tone regarding private enterprises was notably softer than a previous address to the National Assembly last year, when he announced several new restrictions on micro, small, and medium enterprises as well as the self-employed.

He provided figures revealing the extent of a crackdown on the private enterprises, including 2 billion pesos in fines for not following price control restrictions on certain food items, as well as the closure of over 8,000 points of sale for the same reason.

Still, he at times explicitly referred to these enterprises as “private companies,” and said the government is seeking partnerships beyond the current leasing of empty facilities, and would allow joint ventures. He said that already there are 2,741 partnerships between government entities and private enterprises to produce food. Notably, the government has so far rejected expanding the privatization to agriculture, and he mentioned only 55 such partnerships in that sector.

Figures shared earlier this week by the country’s economy minister, Joaquín Alonso, show that the private sector, including the self-employed and non-agricultural cooperatives, has imported over a billion dollars in goods and raw materials in the first six months this year.

Without providing details, Marrero also announced several new measures to be implemented before the end of the year, including reducing red tape and simplifying the approval process for foreign investment, changes to the official currency exchange system, steps to promote remittances from abroad, and additional controls on electronic commerce. He also said the government is seeking partnerships with foreign companies to address the ongoing trash collection problem in the country’s largest cities.

But nothing in Marrero’s speech signaled undertaking significant changes at the speed required by the country’s colossal economic problems. His speech was followed by an address from the economy minister, Alonso, who described the collapse of the island’s economy, which has contracted by 11% since 2019.

Alonso said that while there have been some improvements in the repair of electrical plants and the production of certain crops, he acknowledged that the country still lacks the resources to purchase the oil needed to meet the country’s electricity needs and feed the population. He said that continuing to import food to distribute to the public via the decades-old ration-card system is “economically unsustainable.”

Last week, the minister of energy and mines, Vicente de la O Levy, implied that Cuba no longer relies on oil shipments from Venezuela, which had been its principal provider.

“We don’t have a stable fuel supply like we used to,” he said. “We’re turning to the international market to buy fuel, and the country’s oil bill is over $4 billion.”

Money for health and pensions

Many of the measures Marrero announced Wednesday have been under discussion for several years, and some entail small changes that economists have been advocating for a long time.

For example, he said 29 state entities have been approved to use the hard currency they earn to boost their own production, rather than passing the dollars to the central government. He mentioned the Ministry of Health is among those that would be allowed to “retain 100% of what they earn in foreign currency for the services they export.”

That statement implies that the money collected by the government as payment for its medical missions abroad was not spent mostly on maintaining the public health system. Health Minister José Ángel Portal told members of the National Assembly on Monday that the “self-financing scheme” had been in place since last December, and the additional funds had been used to pay debts, purchase antibiotics and medical supplies.

“We had practically hit rock bottom, but these resources have been vital in prioritizing the most urgent needs,” he said.

Still, Portal said, currently, only “30% of the basic medications list” is available in the country.

The prime minister also announced a modest increase in state pensions, which will double the amount earned by those receiving the minimum (1,528 pesos monthly). However, the boost will barely add the equivalent of $4 a month. Those receiving more than 4,000 pesos a month will see no increase. The measure, he said, will benefit 1.3 million Cubans.