Cuba Is Running on Empty

Cuba’s communist dictatorship is broke and seems to have run out of suckers who might lend it more. This month we learned that it’s turned to confiscating dollars and euros from foreign businesses on the island. It may get a few million. But going after corporate profits is like hanging a “closed” sign on the moribund economy.

The regime’s desperation is no mystery. Its 1959 pact with the people says it will provide the essentials for living in exchange for the nation’s freedom. That was never a good deal. Today it’s a joke. The legendary repression continues while medicine, housing and fuel are in short supply. Inflation is galloping. Parents find it hard to feed their children. In September the government cut back bread rations to 60 grams a day from 80 grams. In December, after more than six decades, it finally said it will eliminate the ration book, admitting that it cannot provide even a skimpy list of staples.

Reuters reported last month that “transportation by ground, sea and air in Cuba” fell by 19% in 2024, reaching a level not seen in 20 years, according to American University economist Ricardo Torres. The infrastructure, from roads to electricity, has collapsed.

One demographer estimates 18% of the population emigrated between 2022 and 2023. Those left behind stare into an abyss of hopelessness. Beneath the surface, there’s hunger for change. The island is a powder keg.

Add to this grim economic outlook a U.K. court ruling in December that the National Bank of Cuba and the Cuban state are liable for two 1984 loan agreements, governed by U.K. law, in the amount of about $75 million. Cayman Islands investment fund CRF bought the debt in the secondary market and took the bank and Havana to court for nonpayment. Earlier this month the U.K. Supreme Court refused to hear Cuba’s appeal.

The unfavorable decision for Cuba scratches the surface of its liabilities. Over the lifetime of the Cuban revolution the regime has borrowed an estimated $50 billion to $100 billion. It’s hard to calculate the total because Havana’s reckless sovereign lending has been forgiven so many times. The Soviet Union and later Venezuela propped up the regime, but countries like China, Japan, France, Canada, Italy, Brazil and Mexico also extended credit to Havana. Outstanding debt is now about $40 billion, according to the Miami-based Havana Consulting Group.

Foreign companies, invited into the country beginning in the mid-1990s, also have helped the regime stay alive by making direct investments on the island. But capitalism doesn’t work in an economy run by totalitarian gangsters, which is why 30 years after the “opening,” the country’s foreign direct investment remains paltry. Havana wants to blame its poverty on the U.S. embargo. But Cuba’s dismal track record with sovereign lenders and the private sector goes a lot further in explaining why capital steers clear of the island.

Earlier this month the news broke that Cuban officials have quietly told some foreign companies operating on the island that they could no longer take their profits out of the country. It’s impossible to know how many investors are affected because there has been no official proclamation. Companies seem to be getting the news in private “interviews,” as the regime reportedly calls the struggle sessions.

Foreign investment in Cuba is heavily Spanish and there were rumors circulating last week that Madrid’s Socialist government has tried to keep a lid on the story by pressuring Spanish media not to cover it. Still the news has leaked out. An April 10 headline in the Spanish outlet EFE read, “Cuba blocks the repatriation of foreign currency to foreign companies based in the country.”

Investors don’t seem to want to complain publicly. But they’re talking. “We completely disagree. It’s not the [Cuban] government’s money, but rather the companies’ money,” one unidentified businessman who claimed his assets had been “frozen” told EFE. He said he was informed his money could be used only inside Cuba. EFE also reported that “in some cases” companies “have complained to their respective governments, according to business and diplomatic sources familiar with the situation who requested anonymity.”

These arbitrary expropriations send a message that what entrepreneurs earn in Cuba, they don’t own. Still, money losers might take comfort in knowing things could be worse. In 2011-12 English architect Stephen Purvis spent 18 months in Cuban dungeons after Raul Castro decided he wanted to take over the British expat’s business on the island. Mr. Purvis told his chilling tale in a 2017 memoir titled “Close but No Cigar.”

Cuba still receives hard-currency remittances and payments from governments that engage with the regime’s human trafficking of doctors and nurses. But it isn’t enough. Draining foreign businesses won’t be either. If the dictatorship hopes to survive it needs a new ideological sugar daddy willing to burn money.

Write to O’Grady@wsj.com.

By Mary Anastasia O’Grady