By Marc Frank
It has been more than a decade since Cuba, suffering from a post-Soviet economic collapse and jitters about the US, opened its door to foreign businesses.
Now many investors - mainly European - who took the plunge are being asked to leave. Only half the homes rented to expatriates by the state's real estate monopoly are now occupied and at the Havana International School matriculation is down about a third from two years ago and falling.
On average, one joint venture and two smaller co-operative production ventures have closed each week since 2002, when there were 700 in the country.
Joint ventures are with state partners, who usually hold 50 per cent or more shares. Co-operative production agreements involve a foreign investor who supplies machinery, credits and supplies in exchange for a share of profit or product, mainly in labour-intensive sectors such as light industry, the mechanical industry and food processing.
"I would not be surprised if in the end there are only around 50 joint ventures in the country and just a handful of co-operative production agreements," says an employee at the Foreign Investment and Economic Co-operation Ministry.
Relations with the European Union and other western nations remain tense because of President Fidel Castro's repression of dissent, and Cuba is increasingly turning toward countries such as China and Venezuela, which it sees as being less influenced by the US.
Yet the purge appears to be related less to these factors than to recentralising finance and trade and eliminating the partial autonomy that state concerns were granted in the 1990s.
"Changes over the last two years are introducing significant corrections in the Cuban economy, considerably limiting the action of market mechanisms," Jose Luis Rodriguez, economy and planning minister, told local economists last month.
Cuba is now interested in partnering only with well-known companies in strategic sectors of the economy, says Marta Lomas, foreign investment and economic co-operation minister.
Big concerns, at times operating through subsidiaries, are holding their own and include Nestlé (bottled water and other consumer goods) the Spanish-French tobacco company Altaldis (cigars), Pernod Ricard (rum) and Bouygues (construction) of France, Telecom Italia (telecommunications), NV Interbrew of Belgium (beer), Sherritt International of Canada (nickel, oil, gas and power), British-American Tobacco (cigarettes), and Sol Melia (tourism).
European investors whose joint ventures are liquidating complain of endless haggling with state companies and ministry officials over how and when their share of investments will be paid, and the often millions of dollars they are owed for financing operating costs.
If they want me to leave, OK, I'm a guest in their house. But what I can't accept is simply being booted out of here with no solid guarantee I will ever get my money back," says a Spanish businessman operating in Cuba since the early 1990s who is negotiating what he calls "the best possible bad bargain". Another company representative in a similar situation terms his Cuban partner's behaviour "outrageous". I have gone through endless meetings for more than a year with no result in terms of recovering our investment. They are trying to wear me down," he says, like others asking to remain anonymous for fear of making matters worse.
European diplomats say the Cubans are usually within their rights in ending business relationships, but often do so with little explanation and with only the dubious promise that they will some day pay money owed foreign partners.
What you have here is re-nationalisation without compensation," one European commercial representative says.
Some companies are fighting in domestic courts, while others are considering international arbitration, though they are pessimistic about being paid if they win.
Cuban officials did not respond to requests for interviews. Mr Castro has criticised investors several times this year for arranging exclusive supply contracts for their own ventures and charging exorbitant interest to finance the imports. He has also said foreign traders enjoy margins of up to 40 per cent.
One joint venture established a decade ago is being liquidated in spite of a 20-year contract. It has always operated at a loss, though the foreign investor made a profit by selling materials to the company from abroad and Cuba, he claims, saved 45 per cent on imports and made money by charging high prices for labour, utilities and other services.
"I do not understand their problem. The Cubans seem not to fathom win-win situations. For them it is a zero-sum game. They think anything you make should be theirs," the investor said. The companies have little choice but to take a loss in equipment, warehoused products, personnel training and other costs built up over the years.
Cuban law states they must sell what they have back to the government, which pays little, or to other foreigners, of whom there are fewer and fewer, or take what they have with them on their way out of town.