As food crisis deepens, Cuba to allow some foreign investment in wholesaling and retail

Six decades after Fidel Castro nationalized Cuba’s private retail industry, the island’s communist government will again allow some foreign companies to invest in the wholesale and retail sectors, Cuban officials said Monday evening, acknowledging the island’s centralized economy cannot solve the widespread shortages of food and essential goods that Cubans struggle with daily.

Cuban Vice Minister of Foreign Trade Ana Teresa González Fraga said the government decided to open up wholesale and retail trade to foreign companies, with some restrictions, in a bet to rescue local industries and rapidly increase the availability of food and other goods at stores.

“We want these measures to have an immediate impact on shortages and contribute to improving offers in stores,” González Fraga said during the evening television show “La Mesa Redonda” (Round Table). She lamented that previous measures taken by the government did not improve “the complex situation in the country.”

Cuba’s private-sector law comes with restrictions — and a ban on Cuban American investment

Castro nationalized retail and wholesaling companies in 1960 and shut down all remaining small private businesses in 1968. He promised that commerce in private hands “would end with the revolution.”

But over the following decades, Cuba’s socialist economy struggled to provide for the island’s citizens, with inefficiency, centralization of decisions and excessive restrictions hindering economic development. The production of food, medicines and goods plummeted to devastating lows after the coronavirus pandemic halted travel and tourism, subsidies from Venezuela diminished, and the Trump administration increased restrictions on other sources of revenue for the government, such as remittances from abroad.

A currency reform last year and a government decision to restrict food sales to stores using the MLC — a virtual currency roughly equivalent to the dollar — have deepened inequalities, fueled protests and helped to set in motion the biggest exodus to the United States since 1980.

The food crisis has scaled to the point that rationing, once confined to the small markets where all households still receive minimal subsidized groceries, has also reached the MLC stores. Customers can only buy essential staples like chicken or cooking oil on certain days, in designated stores depending on where they live, and not without first standing in line for several hours or even days.

Images circulating Monday on social media show a group of elderly Cubans picking discarded food from a street trash container.

Still, the officials announcing the new measures made clear Cuba’s top leadership is still attempting to retain as much control as possible while trying to liberalize the economy. According to their statements, Cuban authorities would still decide who would be allowed to invest and how, similar to other recent economic measures, such as authorizing foreign companies to invest in the private sector.

The Cuban government will allow foreign investment in the retail sector but only in association with the state in mixed ventures, Betsy Díaz Velázquez, the minister of retail trade, said. She added that retail will not be entirely open to foreign investors because “a state market has to prevail.”

The government will also authorize wholesaling companies fully owned by foreign investors but only if they contribute “to the objectives that we have set,” Díaz-Velazquez said. Mixed ventures and other types of associations will also be allowed.

The officials said the government would prioritize businesses selling supplies, equipment and green energy technologies that could boost local production, as well as food, hygiene products and other basic necessities to alleviate shortages.

The government hopes these companies could provide financing to local industries to help deal with domestic demand.

But the officials also suggested there won’t be market competition at first.

“We are going to prioritize and offer these business proposals to companies that have remained in the country,” Díaz-Velázquez said.

She said those are companies that have been in Cuba “for many years, that have accompanied us, that have understood the situation that the country is going through.”

Vice minister González Fraga also announced that some recently created private entities would be allowed to conduct import and export operations but under the control of the Foreign Trade Ministry.

Quoting Raúl Castro, who warned that lifting state controls over foreign trade could eventually destroy socialism, she said the government “has not renounced and will not renounce the monopoly of foreign trade.”

Shortly after the television show ended, commentators on the website Cubadebate, a partner of “La Mesa Redonda” that summarized the officials’ statements, started to question if the measures would be able to improve the economic situation quickly.

Many commenters noted that according to the officials, the foreign companies investing in wholesaling and retail would sell using MLC, the strong currency that is out of reach for many Cubans. The state minimum monthly pension is around 1,500 Cuban pesos, and one MLC sells for 130 pesos.

While the government will welcome foreign investors, Cubans are still not allowed to open and run their own stores, others said.

“We Cubans do not have the right to develop our country; foreigners do,” wrote one commentator. Another replied: “There is an internal blockade which is stronger than anything else.”

Follow Nora Gámez Torres on Twitter: @ngameztorres