This is a case-study on the institutional challenges Cuba faces when using Foreign Direct Investment (FDI) as development strategy. The thesis addresses the formal/informal rules and norms within the institutional framework that handles FDI, to observe how they affect Cuba´s degree of Credible Commitment, which again affects inflow of FDI. While the empirical literature on host-country institutional determinants of foreign direct investment has grown voluminous, researchers often fail to agree upon the net effect of institutions on FDI. The theoretical contribution consists of a basic framework developed for generating expectations around the institutional determinants of FDI. Therein, institutional mechanisms are elaborated within the context of our case on Cuba. The most important elements of the formal and informal institutional framework is presented by the laws 77 and 118 on FDI, the country´s economic freedom, the Free Trade Zones project, and an external factor, the U.S. embargo. These factors contain further elements as labor regime, tax regime, corruption, personal safety, import regime, export regime, the state as a partner, types of businesses, and more, which all are addressed to clarify how the formal/informal sides of the institutional framework affect credible commitment and FDI. The empirical contribution is an analysis of institutions, credible commitment and FDI using data from a variety of sources concerning the above mentioned elements. The expectations developed in the theoretical framework contribute to clarify misunderstood assumptions on how FDI work in the Cuban context. I find that the problem exists to a lesser degree within the formal institutional framework. Rather, I find obstacles to occur in how formal framework is executed, which are the informal constraints. This has a negative impact on Cuba´s credible commitment, which leads to less FDI than Cuban authorities have hoped for.