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Cuba crackdown sees foreign companies exit

May 21, 2012 5:29 pm

Cuba crackdown sees foreign companies exit

By Marc Frank in Havana

Tighter restrictions following Raúl Castro's crackdown on

state corruption and inefficiency is leading foreign businesses to leave

Cuba, jeopardising the that his reform programme needs if it

is to succeed.

The number of foreign joint ventures in Cuba has now fallen to no more

than 240, according to government insiders, versus 258 in 2009, the last

official figures available, and more joint ventures have closed than

opened since the reform package was approved last April.

One of the latest companies to go is Unilever, the Anglo-Dutch consumer

giant, after a 15-year joint venture expired and a dispute over the

controlling interest in a new venture could not be resolved, a local

manager said, asking not to be named.

At the same time, an offshore oil find that Havana had hoped would lead

to increased access to international capital and less dependency on

socialist ally has so far proved fruitless after Repsol, the

Spanish oil company, said late last week that the first of three test

wells drilled in Cuban waters had no oil.

It was hoped that sweeping reforms adopted by the Communist party last

year would open the way for significant foreign investment. But the

government has instead re-examined existing agreements and stalled new

projects, foreign business sources said.

Four joint ventures controlled by two Canadian trading firms are in the

process of being "liquidated". The top two executives in a British fund,

Coral Capital, which says it has invested $75m in Cuba – much of it in

the luxurious Saratoga – are being held, although not charged with

any offence, on suspicion of corrupt practices. Another target – Max

Marambio, a Chilean businessman and friend of – fled the

country after being charged with corruption last year.

Although Mr Castro's reform plan promised a review of cumbersome foreign

investment procedures, promoters of several golf course projects report

they are still waiting for approval, despite government promises to sign

off in 2011, as are various companies that have been negotiating sugar

ventures since 2006.

A multibillion-dollar plan to expand a refinery in central Cienfuegos

and build a petrochemical complex around it, announced years ago, has

also yet to materialise.

"I like to think the government is cleaning up the house before opening

the front door," Cuban economist Juan Triana told a gathering of British

and Canadian businessmen last week.

One western diplomat said: "Cuba is reviewing the investment terms and

some officials have said they want to fix mistakes made when the country

first opened up to foreign investment in the 1990s, closing contracts

that were not beneficial enough."

Most experts and diplomats believe Mr Castro's plans to lay off up to 1m

state workers and lift the country out of its economic malaise will fail

without large flows of direct investment, or a major oil find in the

Gulf of Mexico.

The need for foreign partners is especially acute given the uncertain

future of Cuba's cancer-stricken ally, Venezuelan president Hugo Chávez,

who provides the island with some 115,000 barrels of subsidised oil a

day and faces a presidential vote in October, which he could lose.

"While it is far from clear what the future holds for Chávez and

Venezuela, Cuba must be ready for it," said John Kirk, a Latin America

expert at Dalhousie in Halifax, .

"Given the continued US will to stymie any access to international

lending organisations, the only source of significant capital around is

still going to be foreign and private," he added.

Of the dozen or so multinationals operating in Cuba, Telecom Italia left

in 2011 while those remaining include Nestlé (bottled water), Sol

(hotels), Pernard-Ricard (rum), Anheuser-Busch InBev (beer), Imperial

Tobacco (cigars) and Bouygues Batiment (construction).

If Havana hoped an offshore oil find would strengthen its position, it

may now have to think again after Repsol said on Friday that the test

well it drilled to 4,500m below the seabed was dry. Russia's Gazprom and

Malaysia's Petronas will soon drill a second well, and Venezuela's PDVSA

is tentatively scheduled to drill a third. The US Geological Survey has

estimated that Cuban waters could contain 5bn barrels of oil.

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