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Cuba opens up to foreign investment amid worsening economic crisis

Facing economic hardship and a shortage of hard currency, the Cuban government opened the country up to foreign investment for the first time in 60 years, AFP’s Leticia Pineda reports. The reform allows international investment in domestic wholesale and retail trade in a surprising effort to confront growing shortages of critical goods. Until now, such investments have been allowed only in services and domestic production.

The lack of foreign currency, raw materials, and capital have aggravated perpetual shortages of food, medicine, and fuel and prompted once-rare protests on the communist-ruled island. Such challenges come at an inopportune time for the regime, as a pullback in tourism, the rise in oil prices and the continuation of Trump-era sanctions has forced inflation to over 30% this year. Shortages also have pushed Cuban consumers increasingly onto the black market, which has exacerbated consumer inflation that reached 70% in 2021.

Such hardships have triggered protests across the country—and prompted a surge in immigration to the US that tops both the 1980 Mariel Boatlift and the 1994 Balsero Crisis, according to The Center for Democracy in the Americas. In response, the government began exploring limited reforms, authorizing solo entrepreneurs, and then allowing small and medium-sized companies to operate in the hope that liberalization will boost domestic industry without sacrificing all state control.

However, ministers have made it clear that friendly investors will be prioritized while many investments will require state approval and partnership with local firms, making it unlikely the reforms will attract enough investors to counter the severe lack of foreign exchange amid elevated energy import costs.

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