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Latin America Report

Is U.S. investment in Cuban capitalism bad for Cuban communism? Or a lifeline?

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Desmond Boylan/AP
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AP
CAPITALIST LIBERATION OR COMMUNIST LIFELINE? A cook stands outside a paladar, or privately owned restaurant in Havana. (AP Photo/Desmond Boylan)

As the Cuban regime keeps crushing democratic dissent, investing in private entrepreneurs seems one effective way to loosen its grip. Many exiles disagree.

A new front of debate on U.S. Cuba policy has opened this summer, but it's one that raises an old question: When does economic punishment of the Cuban regime punish the Cuban people — and when does economic aid to the Cuban people aid the Cuban regime?

The bone of contention in the latest dispute: whether or not the U.S. should build up Cuba's fledgling private entrepreneurs.

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In May, the Biden Administration approved the first license allowing Americans to invest directly in a private Cuban business. Then last month, Cuba’s communist regime said it would permit foreign investment in the capitalist enterprises that it's allowed — in limited fashion — for more than a decade now to help Cubans keep their heads above water amid the island's sinking state-run economy.

Those developments might not be as electrifying as last summer's unprecedented anti-government street protests in Cuba. But they matter, a lot, because Cuba’s more than half million private entrepreneurs — known as cuentapropistas — represent what many hope is a way to undermine the regime’s totalitarian grip.

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US-Cuba Trade & Economic Council
John Kavulich

“A greater private sector presence in Cuba — it’s really the only existing path to help people be less dependent on the government,” said John Kavulich, who heads the nonprofit U.S.-Cuba Trade & Economic Council in New York.

Kavulich recently became the first and so far only recipient of a U.S. license to invest in Cuba’s private sector. He formed a limited liability corporation to put $10,000 into a private Cuban service-sector business. He’s not yet naming that company. On a visit to Miami last week, he told me his capital will help it buy equipment and expand inside and, they hope, outside Cuba.

“I explained to the Cuban company, ‘I need you to be a guinea pig, and I’m going to be the other guinea pig,'" Kavulich said.

"We’re using this as an experiment. We want everyone to be able to say, ‘This is how they did it. Really easy.’”

READ MORE: Cuba's fledgling private entrepreneurs are determined to survive the island's currency chaos

Inside Cuba, private entrepreneurs like Havana leather-goods store owner Ernesto Izpuria are eager to take on U.S. and other foreign partners.

Izpuria recently told WLRN that the pandemic and the sharp fall in tourism to Cuba — due partly to former President Trump's reduction of U.S. travel there, which accounts for a large share of cuentapropista revenue — has seriously sapped his business’ cash flow. He needs a just as serious infusion of capital now to stay in business — investment he’s not going to find on the island.

“Usually, when people talk about investment, they’re talking about a factory or something like that,” Izpuria said. “But in Cuba, small private enterprises like ours are the really important investment now.”

A greater private sector presence in Cuba is really the only existing path to help people be less dependent on the Cuban government.
John Kavulich

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Catalina Garcia
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WLRN.org
Ernesto Izpuria

So it might sound strange that the Cuban regime’s fiercest foes — conservative Cuban exiles here in Miami — don’t really agree.

“This is not the time to invest in Cuba," said Cuban exile Irina Vilariño, who owns the South Florida restaurant chain Las Vegas and is a leading member of the Assembly of the Cuban Resistance, which hailed Trump's stricter travel limits to Cuba. (President Biden is now rolling back some of those restrictions.)

"With the exception of genuine humanitarian aid like help for an abuela, this is the time to cut off any money to Cuba.”

Like most exile leaders, Vilariño’s been OK with Cuban families here sending a few thousand dollars to relatives there to help them start small pizzerias or hair salons. But she fears larger-scale investment will simply provide an economic lifeline for the Cuban regime.

Vilariño, a former Republican congressional candidate, argues the more private Cuban businesses grow, the more the regime will squeeze them for taxes and fees. That's money she says helps finance a dictatorship at a time when the economy looks on the brink of collapse — as last weekend's massive oil facility fire in Matanzas, Cuba, seemed to remind the world.

(Florida's Republican governor, Ron DeSantis, and his lieutenant governor, Cuban-American Jeannette Nuñez, have also weighed in against investment. In a statement, they echoed conservative exiles who insist there is no real private sector in Cuba and that the regime's approval of foreign investment is a "kleptocratic scheme.")

“The great majority of any investment will end up in the hands of the regime," Vilariño said. "They are in a desperate state, and this is the one time in our history where the Cuban people finally are speaking out for freedom.”

DEMOCRATIC MOMENTUM

Vilariño is referring to those historic, "Patria y Vida" demonstrations that alarmed Cuban officialdom last year. But the regime has since suppressed that dissent — and harshly. That’s why those who support investing in private entrepreneurs argue they’re the best bet in the long run for creating more democratic momentum in Cuba.

Or, as Havana restaurateur Alexis Ballester told WLRN: “I would love to partner with private investors. It would mean less government and political ideology for us to have to deal with here.”

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Pablo Martinez Monsivais
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AP
Irina Vilarino (right) with then President Donald Trump in 2018

U.S. investors like Kavulich, who is not Cuban, also argue one reason conservative Cuban exile leaders are wary of greater prosperity for Cuban business owners — and of non-Cuba-American investor involvement in that prosperity — is that they fear it will erode exile political influence on the island.

"Which, when you think about it," Kavulich said, "is the same reason the Cuban regime doesn't want to see private business owners getting prosperous. It's about control."

Cuban exile leaders deny that charge. But one big and perhaps more important question is how to get U.S. investment cash to private businesses in Cuba. Because of the U.S. trade embargo, the two countries don’t have banking relationships. Until the U.S. authorizes one, many investors may balk at going into Cuba for fear of violating the embargo.

This is not the time to invest in Cuba — the great majority of any investment in private businesses will end up in the hands of the Cuban regime.
Irina Vilarino

"It's frustrating because there's still a lot of uncertainty out there," said Eduardo Suñol, a Cuban-American in Coral Gables and co-founder with an entrepreneur in Cuba of Mandao, a Cuban food-delivery business that’s seeking U.S. investors.

Suñol said earlier this year, the payment gateway Mandao was using to service customers in the U.S. ordering food deliveries for family and friends in Cuba suddenly backed out of the arrangement. The reason: concerns about doing business related to Cuba.

“Any decisions that could be made here in the U.S." to make it clearer when it's safe to enter into that kind of Cuba-related business, Suñol said, "if they could be made as soon as possible, it’ll benefit many private Cuban businesses — and many Cubans.

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Mandao
Mandao employees making deliveries in Cienfuegos, Cuba

"Because, y’know, this is a human issue, right? It’s an opportunity issue.”

The Biden Administration is expected to clarify its rules for investing in Cuba as early as this month.

Catalina Garcia reported from Havana.

Tim Padgett is the Americas editor for Miami NPR affiliate WLRN, covering Latin America, the Caribbean and their key relationship with South Florida.