Book Review: Open for Business
It can be difficult to document a historic moment while it’s still unfolding, but Richard E. Feinberg has taken to the task with his book, Open for Business: Building the New Cuban Economy. In exploring how President Barack Obama’s opening to Cuba “fits squarely within a broader theme of his foreign policy,” Feinberg has provided an eminently readable take on the changes unfolding in Cuba’s economy, seen through the lens of the U.S. president’s engagement initiative.
Feinberg deals with the paradoxes, challenges and contradictions of Cuba’s unique social model with clarity and sensitivity — and places them in their current economic context. Setting aside the mixed feelings of shock, nostalgia and aversion that Cuba may provoke in a new wave of American tourists, Feinberg makes clear that the island’s social standards are simply not sustainable without increases in labor productivity, competitiveness and exports; he minces no words in describing the dilapidation of the Cuban housing stock and its transportation system. Open for Business provides a thorough look at the problematic rise of the service sector in the Cuban economy, the impact of insufficient investment rates, and the squeeze put on the economy by Cuba’s balance of payment problems.
In the face of such challenges, Feinberg explains how Cuba has launched an effort to address its external debt burden. As of 2008, Cuba’s external debt totaled $31.6 billion to major country creditors, including Venezuela ($11.4 billion), Spain ($3.2 billion), China ($3.2 billion) and Japan ($2.8 billion). Though the numbers are somewhat stale, they still provide an accurate picture of the scope and scale of Cuba’s external debt dilemma, even after the announcement in late 2015 of a deal with 15 wealthy Paris Club creditor nations, which resulted in the forgiveness of $8.5 billion in debt and $2.6 billion in restructuring.
The author’s discussion of the island’s debt problems provides a stepping stone for a larger analysis of Cuba’s structural challenges, including finding a way to diversify its economic links and recalibrate its relationship with Venezuela, China and Brazil. Feinberg notes that opening the country to greater foreign investment will offer major opportunities for the island.
Among the most interesting aspects of the book are the case studies of Cuban joint ventures with foreign investors such as Sherritt, Imperial Tobacco, Meliá, Nestlé, Souza Cruz, Unilever and Rio Zaza. Feinberg provides a wealth of details on the structuring, business case, and internal governance of these efforts, and he notes that they provide some cautionary tales for prospective investors.
An examination of the Cuban private sector closes the book. Feinberg’s portraits of the nascent entrepreneurial class on the island, and the bureaucratic challenges faced by young Cubans trying to plant the seeds of capitalism in the arid landscape of socialist central planning, should be required reading for U.S. consultants, attorneys, economists, academics, and especially business executives considering forays into this fascinating — and frustrating — new marketplace.
Freyre is chair of international practice at Akerman, LLP, and a lecturer at Columbia Law School