home Cuba, FCPA Cuba Anti-Corruption Efforts: The Wolf at the Door (and Cuba is the Wolf)

Cuba Anti-Corruption Efforts: The Wolf at the Door (and Cuba is the Wolf)

The Cuban government, like most communist and socialist countries, does not like foreign investors. It is viewed as a poison that should only be allowed under extreme vigilance by the state and when absolutely necessary. If your a foreigner planning to invest in Cuba, be prepared to lose all your money as well as your reputation. Just ask UK citizen Stephen Purvis of Coral Capital, one of the largest foreign investment entities doing business in Cuba.

As initially reported in the Economist in May 2012, Purvis was arrested and detained for eight months (8) in a military intelligence interrogation facility. His crime? Purvis allegedly violated anti-corrution laws. Let’s be real clear and upfront about something, there is no rule of law in Cuba. The law is what the Politburo says that it is. If your arrested, there is little recourse to independent courts or other administrative processes to resolve the. As Purvis learned first-hand, your at the mercy of the state and Party officials.

Purvis penned an interesting article about his captivity this summer. It is well worth a read by American businesses. While U.S. companies and individuals are barred from investing in Cuba, Purvis’s account is well worth a read for U.S. persons that export food, medicine, and telecommunications items to Cuba. Why? You need to sign contracts. Contracts need to be enforced. If even 1/10 of what Purvis says is true, then corruption levels in Cuba are extremely high, much higher than the Transparency International rankings (and, with regards to TI, the reports are useful, however, you need a lot more than a TI country profile in your file to have an effective compliance program).

Consider the following observation from Purvis:

“… [u]ntil the law relating to foreign investment and commerce is revised and the security service changes its modus operandi for enforcing these laws, Cuba will remain extremely risky for non-bilateral foreign business and foreign executives should be under no illusion about the great personal risks they run if they chose to do business there.

As businessmen emerge from their awful experience and tell their individual stories perhaps the real reasons for this concerted attack against business’s and individuals that have historically been friends of Cuba will become a bit clearer. In the meantime your intrepid reporters could usefully investigate the individuals and cliques who are benefiting from the market reorganization and newly nationalized assets resulting from this “war on corruption”.

We could’ve have saved Purvis, and many other foreigners that were arrested and who remain in a Cuban military jail, the trouble of learning this lesson the hard way.

I was very suspicious of Cuba’s new anti-corruption fight when it was first announced a few years ago (read my August 2012 post on this issue, another from 2011). Not only is Cuba’s legal system not ready to deal with a private investment economy, but the economy is currently under the control of the military and very loyal members of the Communist Party. These are Marxists who think they know how to be capitalists. A very dangerous combination. The only way to do business with these people is to pay them off.

Cuba is one of those places that American companies should avoid, because not even the most detailed compliance program will ameliorate the risks presented by the current system. However, if you think you can navigate those waters, be sure you have a clear compliance and CSR policy in place that is unique to Cuba. Why?

Because I’m one of those who think that U.S. companies, not the federal government, are the international leaders in global anti-corruption efforts. Your on the front lines. Make it matter. Not all people in Cuba are corrupt or bought out by the state. Maybe they’ll take note of your principled position and, who knows, maybe someday someone in Cuba will take a stand and say enough. It would be good, and very ironic, if a U.S. company had a role in that transition process.

Read Purvis’s commentary here.

P.S., If you think Cuba is done arresting business leaders, think again. Cuba arrested a 71 year old Panamanian businessman this weekend on similar charges. Talking about Panama, I just returned from a trip to that country. Wow! What a place to do business. If your a U.S. company looking to expand to the Latin America and the Caribbean marketplace, consider Panama. Unlike Cuba, they welcome foreign investment, have a legal system that Americans can understand, and there is plenty of investing opportunities for many types of products and services. I’d rather deal with a democratically-elected leader, President Ricardo Martinell, than Communist thugs Fidel and Raul Castro.

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