HAVANA — In one of its sharpest breaks yet from socialist dogma, the Cuban government Tuesday approved a law greatly increasing the role of foreign investment in the battered economy and allowing creation of free-trade zones.
The law, passed after two days of sometimes heated debates in the National Assembly presided over by President Fidel Castro, opens the way for foreigners to wholly own business and property and allows foreign investment in every sector of the economy except the strategic areas of education, health and national defense. It also guarantees that foreign properties cannot be expropriated without compensation and speeds the process of approving proposed investments.
Passage of the bill marks a large step for Cuba toward the Vietnamese and Chinese models of socialism--a one-party state with strong elements of a free-market economy. The evolution constitutes a clear departure, at least for foreigners, from the Soviet-style socialism in which the state has controlled most of the land and means of production since shortly after the triumph of Castro's revolution in 1959.
In recent speeches, Castro has praised the Vietnamese and Chinese systems and promised "broad and radical measures" to revive the economy, which has been in a tailspin since the collapse of the Soviet bloc in 1989. Over the past three years, the government has gradually opened some sectors of the economy, principally tourism and mining, to foreign investment through joint ventures.
But foreigners could only own up to 49% of any joint enterprise and could not invest in the vital sugar industry or other important economic sectors. Cuban officials said there are currently 212 joint ventures, worth about $2 billion, operating in Cuba.
Tuesday's measures are intended to expand that. Now foreigners can own all of a business, in almost any sector of the economy. They can own houses and land. The change also allows for free-trade zones, where foreigners can set up assembly plants to use Cuban labor and attract capital and technology.
Economists and diplomats said the latest opening will lessen state control over large sectors of the economy, which could lead to further changes in the system. For the moment, however, most Cubans are to remain employed by the state, directly or indirectly. And Cubans are not allowed to purchase or operate businesses, or hire other Cubans.
