CubaPLUS Magazine

For several years, Cuba has been developing foreign investment and has already achieved some results. Nevertheless the government led by Mr Miguel Díaz-Canel is currently prioritizing foreign investment in the interests of strengthening the country’s economic development. Experts own the Cuban economy all agree on the need for increasing foreign investment, although of course they are aware that the Cuban economy also faces other problems, that are being addressed.

The recent Havana International Trade Fair (FIHAV) that took place between 29 October and 2 November brought together more than 2 500 businesspeople, some thirty organisations promoting foreign commerce and high-level official delegations from twenty different countries.

Three hundred and fifty Cuban companies were also present, including many from the ZED Mariel special development zone located forty five kilometres from Havana.

Foreign firms with existing trade relations with Cuba attended the event, as did others looking to build new relationships.

Over the next two issues we will examine the main aspects of foreign investment in Cuba set out by the Ministry of Foreign Trade and Investment.

Foreign Investment: general policy principles

1. Foreign investment will be a short-term, medium-term and long-term source of economic development for the country. The objectives for attracting foreign investment should be: access to advanced technology, gaining management and administration methods, diversification and expansion of export markets, import substitution, access to external finance, employment creation and increasing revenue from production linkages to and from the national economy.
2. To gain new managerial methods to improve market position, increase productivity and profitability, increase efficiency in complex investment processes and their integration into the rest of the economy.
3. To immediately prioritize foreign investment that targets food import substitution.
4. To incentivize the development of integrated projects that generate production linkages in pursuit of collective efficiency. These could involve a sole investor or various investors with a common interest.
5. In line with the country’s demographic dynamic, foreign investment should permit access to advanced technologies that increase productivity and make for more efficient use of the workforce.
6. To contribute to changing the country’s energy infrastructure via the use of sustainable energy sources exploiting solar power and wind power, generating hydro-electric power, biogas production and making use of biomass from agroindustrial byproducts such as sugar-cane, forestry waste and the invasive marabou weed.
7. To consider a role for foreign capital in complementing national projects in scientific and technological development, keeping intellectual property rights over the results obtained, particularly the trademarks and patents created on the Cuban side.
8. To consider foreign investment in certain sectors as a fundamental and active element necessary for the growth of the economy.
9. To consider as the following as priority sectors: agricultural production and the food industry; tourism, including health tourism; energy, particularly developing renewable sources; mining and fossil fuels; and industrial infrastructure creation and improvement.
10. To direct the majority of foreign investment towards export sectors. Additionally to direct it towards eliminating bottlenecks in the production chain and encouraging modernisation, improving infrastructure and changing the role of technology in the economy, as well as guaranteeing that the needs of the country are met efficiently, with the aim of promoting foreign investment via an ample and varied portfolio of investment projects.
11. To focus promotion in stages across potential activities and to increase investor diversity. To heavily promote investment in Special Development Zones, particularly driving work on the ZED Mariel Special Development Zone.
12. To consider as priorities any activities that entail technology transfer or involve production chains or seek to improve production chain efficiency, as well as activities in less economically developed zones.
13. In the following sectors, Cuban entities should retain the principal share: natural resource extraction, public service provision, biotechnology development, wholesale trade and tourism.
14. To include criteria that project the effect on the balance of payments over time in the prerequisites for the approval of foreign investment projects, and making this one of the decisive elements for approval
15. Businesses funded by foreign investment shall not be able to freely employ members of the workforce. The concept of the employment agency as a business organization will remain, and its objective will continue to be the supply and control of the workforce. Salaries will reflect work contributed, efficiency and added value generated by the company. The charge for workforce services will be negotiated between the employment agency and the foreign investment-funded company, based on norms established by the Work and Social Security Ministry. The concept of scaled salaries will be eliminated and a minimum wage will be established. Contracted workers will receive a salary above the established minimum.
16. Foreign investment may be selectively directed towards the development of non-state-owned forms of property with legal status, with priority being given to the cooperative sector.
17. State-owned property shall not be transferred to private owners, except in exceptional cases where it is used for purposes of national development and does not affect the political, social and economic foundations of the State.
18. Exclusive rights over the Cuban market will not be granted; the foreign partner may be a supplier and client of the business under equal conditions with third parties.
19. In projects involving the export of goods or services, the foreign party shall guarantee the market.
20. The country's construction capacity deficit cannot slow down the development of the investment process with foreign capital. The alternatives required to avoid it, including the hiring of foreign labor, may be evaluated.
21. Design and construction services between foreign and Cuban companies will be put to tender when investments, due to their complexity, require it in accordance with the country's current investment process legislation.
22. To authorize the establishment of Wholly Foreign Capital Companies for the execution of investments whose complexity and importance require it, especially for the development of industrial infrastructure through special turnkey contracts, such as: Contracts of Engineering, Procurement and Construction (IPC), Construction Contracts, Property, Operation and Transfer of these Contracts.
23. In principle, opening of bank accounts abroad will not be authorized, nor will external guarantees be accepted that compromise the retention of Cuban cash flows in banks abroad.
24. To make the economic information requested by foreign investors compatible with the international indicators used to measure results. Publish statistics as identified.
25. Any increase in the investment budget will be borne by the foreign entity.
26. Investments in infrastructure, both direct and indirect, may be carried out under foreign investment models with long-term financing. Priority will be given to those associated with the development of tourism.