It seemed plausible enough. In the early 1990s Cuba was still reeling from the collapse of the Soviet Union and the loss of Moscow’s $4 billion annual subsidy. And the head of CFC, Peter Scott, a Scottish specialist in Latin markets, thought foreign capital was Castro’s only way out. In 1996 Scott had launched Beta Gran Caribe, the world’s first investment fund focused on Cuba. Among his initial joint ventures was the $5 million, five-story Paradisio apartment complex in the tony beachside Havana suburb of Miramar. It offered condos to foreigners for prices starting at $130,000. CFC was another Beta Gran Caribe investment project, issuing $60 million in short-term, high-interest loans to a wide array of clients. By 1999 CFC had managed to post a profit of about $250,000. The plan seemed to be working.
But in January 2000 this vision of venture capital in Cuba was cut down by the infighting and paranoia of the Castro regime. The Cuban Central Bank rejected CFC’s application for an operating license with a one-sentence letter. As Scott and Presland tell it, they were victims of a power struggle between the Central Bank and the Cuban partner in CFC–a state-run insurance company. A few months later the Foreign Investment and Economic Cooperation Ministry prohibited the sale to non-Cubans of most of the Paradisio’s 74 residential units. Scott says the order apparently came straight from Castro, who worried that anti-communist exiles might regain a foothold on Cuba by buying Paradisio apartments via third parties.
The island nation of 10 million is still unfriendly territory for financiers. In 1997 CDC Capital Partners of London established a Cuba venture-capital fund, and while CDC did not respond to requests for an interview, industry sources say it has little to show for its efforts. Talk of an economic-reform program fizzled out by 1998. Scott has moved CFC to Madrid, but says he is “extremely confident about Cuba’s future. There is full recognition that the economy will not continue to develop unless it adopts reasonably foreign-investor-friendly policies.” Presland, however, gave up and left Cuba for good in March 2000. “Nothing sensible is going to happen until Castro dies,” he says. “Cuba is like Poland in 1954, [and] there won’t be any serious pro-market reform as long as he is in place.” For now, at least, venture capital remains an extreme adventure in Cuba.
