- Investments in Cuba: Faster and More Effective.
SINCE 2014, SOME 50 FOREIGN-CAPITAL BUSINESS DEALS HAVE BEEN SIGNED UNDER THE PORTFOLIO OF OPPORTUNITIES UNVEILED IN NOVEMBER THIS YEAR, AND NEW POSSIBILITIES WILL BE UNVEILED THIS YEAR AT FIHAV 2016
Cuba is determined to step up the approval of investment projects bankrolled by foreign capital, in line with its development interests and giving top priority to direct investment and the generation of values added. However, lack of knowledge and preparation –especially among the impresarios involved- still prevails.
U.S. companies can also invest on the island nation, even though the trade embargo continues to be the biggest hurdle despite the prerogatives made in the telecommunications field or more recently in the hotel sector. Their opportunities now reach out to other areas with great potentials or mutual interests, such as energy, healthcare and biotechnology.
On these and other topics, Excelencias Cuba sat down with Deborah Rivas, director general of Foreign Investment with the Ministry of Foreign Trade & Foreign Investment (MINCEX) during an exclusive interview.
How has the volume of foreign investment fared in Cuba following the announcement of the new Foreign Investment Act and the update of the Portfolio of Foreign Investment Opportunities?
Since the enforcement of the new Foreign Investment Act (FIA) in late June 2014 and the announcement of the first version of the Portfolio of Foreign Investment Opportunities (PFIO) in November of that same year, roughly 50 foreign-capital business deals have been signed in Cuba.
There’s been a tremendous interest on the part of foreign investors from different countries in knowing more details on the new regulations and guidelines, especially on topics linked to fiscal warranties and incentives for foreign companies; the level of business approval and the hiring of workforce. In the same breath, they’ve been highly interested in delving deeper into many of the projects that each and every prioritized sector has included in the Portfolio. Hundreds of meetings have been arranged and held between the Cuban parties and their foreign counterparts.
Delegations of heads of States and Governments, especially in 2015 and in the course of 2016, have visited the country with entourages of businesspeople interested in learning about the new opportunities Cuba has in store for foreign investors.
All these exchanges have helped foreign impresarios to enhance their knowledge on our foreign investment guidelines and policies and on the start of negotiations on projects related to the prioritized sectors that seek foreign capital. Deals on tourism, transportation, renewable energy and oil have been signed. We expect to cut new business deals by the end of 2016, chiefly in such fields as energy, building and food production.
The strengthening of projects in the Mariel Special Development Zone –related to industrial underpinnings that are supposed to set up shop there- has also made headway.
What countries are currently leading the island nation’s investment process and in what basic sectors?
The countries that have set up the largest number of new investments in Cuba on the heels of the new FIA are Spain, China, Russia, Belgium, Netherlands, Australia, Mexico and Canada. Vietnam, Russia, UK, Italy and France are all making progress in the negotiations, so major business agreements might be reached with them in coming weeks.
Of course, the new thing here is that fact that even though the U.S. economic, trade and financial embargo on Cuba remains very much in place, the Office of Foreign Assets Control (OFAC) with the U.S. Treasury Department granted U.S. hotel chain Starwood a license to run the Four Points by Sheraton Hotel in Havana, a condition that makes it the first U.S. investor in Cuba.
The sectors that have closed the biggest number of business deals after the new FIA are tourism, food-processing industries, building, mining, renewable and nonrenewable energies, and the manufacturing industry.
Have you continued getting investment applications or requests from U.S. companies and in what sectors?
Cuba has time and again said that though we positively value the steps taken by the U.S. President to expand bilateral relations, those steps are insufficient. On the one hand, he hasn’t run out of executive prerogatives, and on the other hand, their implementation has been very limited or impossible due to the valid existence of a mesh of laws and political actions that have been imposed on my country for over 50 years of blockade.
Both sides have noticed that the U.S. economic, trade and financial embargo on Cuba is no doubt the main hurdle that hampers further chances to build on things that could be beneficial for the two countries, in particular in those sectors.
Now answering your question, I can say we there are talks going on with executives from American companies during the visits they pay to our country, in our embassy in the United States, and even within the framework of international events that sometimes provide meeting grounds.
In all those cases, we notice there’s a huge potential for developing businesses that are mutually beneficial for both sides, but the embargo law simply gets in the way. We can’t help but wonder why the prerogative wielded in the telecomm sector hasn’t been proposed for other fields with similar potentials and mutual interests for the development of investments.
Has the MINCEX set up special guidelines or taken concrete measures to help American companies work with Cuba despite the fact that the embargo remains in place?
We must reiterate that we neither discriminate against nor favor U.S. companies to engage in business opportunities offered by the Cuban market in terms of foreign investment. Their proposals are assessed under the same set of rules applied to companies from other countries. We believe it’s the fair and ethical thing to do.
We pay heed to American companies interested in doing business or investing in Cuba; we sit down with them and talk about their interests to find out whether they match those of the Cuban counterpart. We spell out our guidelines and procedures, and we indicate them the ways to have access to the necessary information. Whenever an opportunity pops up, we talk to them about the hurdles posed by the enforcement of the U.S. embargo, especially in terms of the financial obstacles.
What are the main complaints investors make as to the obstacles or drawbacks they have to put up with and that are still standing in this process?
Cuba boasts major strengths as a luring nation for investments, such as the island nation’s privileged geographical location, right in the crossroad of all main international trade routes. It’s also a growing market with interregional connections, blessed with highly qualified human resources capable of assimilating new technologies; a scientific potential in research centers and universities; different tourist attractions; developing infrastructure in terms of communications, transportation and others, such as the Mariel Special Development Zone, a place laden with fiscal incentives and warranties which are offered to investors there.
We should also highlight our efforts in having a diverse international engagement as we’re determined to stop depending on just one partner or market, willing to seek ever-growing regional integration and strengthen our strategic ties with several countries.
Foreign investors are worried about the delay in the negotiations, something which is absolutely true for a multitude of reasons.
First of all, Cuba’s foreign investment policy is selective as we steer it to those fields we’re most interested in, in keeping with the strategic sectors we’ve pinpointed within the Long Term Development Plan through the year 2030. We give top priority to direct foreign investment and to the generation of values added for our country. Therefore, there are times when foreign investors come to us and when they get no response to their interests because they’re out of these frameworks, they’re limited to invest and start making claims in that sense.
The most striking thing of all in the sluggishness of the negotiations and the closing of the deals has to do with shortage of training on the part of our businesspeople, the lengthening of the feasibility studies on the projects, the shortfall of specialized consultancies in conducting those studies, the negotiators’ lack of prevision about projects that are already contained in the PFIO and that would eventually speed up a few steps and arrangements, such as the valuation and legal clearance on a vacant lot for a hotel that will be built upon agreement in a certain location, or just for building a power-generation facility relying on renewable sources.
There are other subjective factors that can also have an influence on making these processes sluggish without any apparent reason whatsoever, because, for instance, some other proposals are being revised or people are waiting for the result of a consulting they didn’t have to make because their company was entitled to make a decision on that matter. This is a fledgling process in the country following the separation of state and entrepreneurial functions. And this is something the new guidelines and regulations won’t achieve, but rather a mentality change we need to entrench as swiftly as possible.
We’re confident that sooner rather than later those issues will be ironed out, an increasing number of foreign-capital investment projects will be fast-tracked and the whole process will be more effective.
Has the Ministry considered the chance to add more investment categories to the PFIO?
The 2016-2017 PFIO is expected to add projects in new economic sectors and include projects that were already contained in the 2014 and 2015 portfolios.
One of the new things is the addition of projects aimed at farming and stockbreeding development, one of the prioritized strategic sectors, with either direct or indirect participation of Cuban agricultural and farming cooperatives. New projects for power generation with renewable sources are also included this time around, a sector that also ranks high on the list of priorities. Of course, there’ll also be new opportunities coming up for the travel and tourism industry.
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