Cuba's new law encouraging foreign investment is a sign that its communism is played out. In this, Cuba is joining such countries as China and Vietnam that mean to retain monolithic Communist Party power in the political sphere while freeing enterprise and welcoming foreign investment in economic life. Never mind that in both South Korea and Taiwan, capitalist freedom created pressures for political democracy that could not be resisted.
Without Soviet subsidy, Communist Cuba is fraying away. Even its fabled medical and educational delivery systems are deteriorating along with the 30-year-old cars and crumbling buildings. The answer, as Fidel Castro's regime now admits, is to reverse its most fundamental policies.
The new law will allow foreign ownership to become total for firms in most fields outside defense, health and education. Currently, foreign ownership is limited to 50 percent of joint ventures. The law will allow foreigners to remit profits and sell ownership to others. Against the wishes of many Cuban Communists in a year-long debate, the law will allow investments by Cuban expatriates. This is meant to be a wedge between Florida Cubans and the U.S. government, which at their urging prohibits investment in Cuba, and to add many of them to the list of U.S. corporations pressing for an end to that policy.
Cuba enjoys investment now from Mexican, Canadian and Spanish firms. But even Cuban officials don't believe the island can prosper without great infusions of capital from U.S. firms. That is not likely while communism lasts, even if the U.S. embargo should be lifted.
It still is not clear that Cuba understands market economics. The new policy won't work until Cubans in Cuba may invest as freely as foreigners, which is not yet the case, and until uneconomic enterprise is transformed or scrapped. Just allowing foreign firms to put up capital and risk to maintain failed statist enterprise will not persuade many of them to do it. A little bit of capitalism, like a little bit of freedom, won't work unless expanded, and for that reason is a dangerous thing.