Foreign Direct Investment in a Post-Communist Cuba: Overcoming Future Challenges

International Business and Economics Research Journal, Vol. 3, No. 7, pp. 87-100, July 2004

14 Pages Posted: 8 Dec 2004

Abstract

The history of economic transition since the collapse of communism in the late 1980s and early 1990s offers many lessons for what Cuba may expect when it eventually embarks on its transition path. The path of transition has been more difficult than was conceived immediately following the collapse of communism. The nearly exclusive policy focus on economic liberalization and privatization of public enterprises did not lead to sustained inflows of foreign capital and the rapid economic growth and development once promised for these economies. Current transition strategies have increasingly recognized the importance of well-functioning social institutions ("good governance") as the necessary foundation of a well-functioning market economy. Building the institutional infrastructure required by a market economy and necessary for long-term success in attracting FDI has proven, however, to be a difficult and slow process.

Foreign direct investment is accepted as one of the key supportive components of an economic transition strategy, but some of the key determinants of FDI are also ones that characterize an effective institutional infrastructure of a market economy. Additional factors related to systematic or market risks are also important determinants of FDI. A basic understanding of these determinants can aid future policy makers.

This paper examines Cuba's recent experience in attracting FDI, summarizes some of the empirical work that has been done regarding the link between well-functioning social institutions and FDI and draws lessons for a future Cuban government pursuing transition to a market economy. General policy recommendations are also developed.

Keywords: Foreign direct investment, Cuba, economies in transition, Cuban economy

JEL Classification: F21, F23, O54

Suggested Citation

Cruz, Robert D., Foreign Direct Investment in a Post-Communist Cuba: Overcoming Future Challenges. International Business and Economics Research Journal, Vol. 3, No. 7, pp. 87-100, July 2004, Available at SSRN: https://ssrn.com/abstract=628243

Robert D. Cruz (Contact Author)

Miami-Dade County ( email )

111 NW First Street
22nd Floor
Miami, FL 33128
United States
305-375-1879 (Phone)

HOME PAGE: http://www.miamidade.gov/oedit

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