flag Cuba Cuba: Investing

In this page: FDI in Figures | What to consider if you invest in Cuba | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

Cuba is currently not included in the annual Doing Business report by the World Bank. Contrary to the declarations of the Cuban Government, the island continues to rank among the last countries in the world in terms of the volume of FDI inflows. The US embargo, unlikely to be lifted soon, will continue to put legal obstacles for American and other foreign companies. The Government favours investments that provide advanced technology and contribute to the infrastructure. In 2015, Cuba passed a new law on foreign investment, which introduced tax incentives for foreign investors, and created a special economic zone with tax and customs breaks, with the hope of attracting more foreign capital to boost its state-dominated economy. However, the latter cannot directly recruit employees. The new legislation opens most of the economy to FDI, except in the following strategic areas: health, education, media and the military. It also facilitates the repatriation of funds held by Cuban immigrants. The Government aims to attract USD 2.5 billion annually in FDI (Reuters). The main investors in Cuba, generally via joint venture with Cuban state enterprises, are Spain, Canada, Venezuela, Italy and France. Venezuela has made a number of strategic investments in the field of exploration and exploitation of hydrocarbons in the form of joint ventures and mutual investments. China, with its petrochemical projects and substantial financial support, has become a very important partner for Cuba. In addition, Russia intends to invest in the Cuban energy and health care sectors.
In 2020, FDI flows to Latin America fell by 45% to USD 88 billion, the steepest decline among developing regions, as a result of the global economic crisis triggered by the COVID-19 pandemic. The continent has suffered the highest COVID-19 mortality rate in the world to date, and its economies have faced a collapse in export demand, falling commodity prices and the disappearance of tourism. In 2021, FDI to the region is expected to remain stagnant, challenged by many downside risks, including economic and political uncertainties (UNCTAD, 2021). However, according to the Cuban government, Cuba attracted nearly USD 1.9 billion in foreign investment in 2020, an increase from USD 1.7 billion in 2019.  However, a lack of statistical transparency prevents the collection of reliable data on the amount of FDI inflows. A major investment that took place recently was the purchase of 50% of Habanos S.A. and other premium cigar businesses for USD 1.22 billion by Hong Kong-based Instant Alliance Limited in October 2020.

The Cuban Ministry of Foreign Trade and Investment's latest “Portfolio of Opportunities for Foreign Investment” for 2020-2021 includes 853 business opportunities in the country. The most pressing investment priorities remain unchanged: tourism, energy (both renewable and non-renewable, to replace declining subsidies from Venezuela) and agriculture (to address food insecurity and promote export diversification). Other sectors of interest include biotechnology, logistics, food, construction, pharmaceuticals, transport, and real estate. Thanks to improvements in the legislative framework for foreign investors, FDI has been increasing in recent years, particularly in the tourism sector. In order to facilitate investment, the government implemented additional market-oriented reforms in 2021, such as eliminating of the country’s dual currency system and allowing foreign investors hold majority ownership of businesses. The State has also promoted FDI intended for the Special Economic Development Zone of Mariel through its own regulatory framework and tax incentives that make up a more attractive scenario for investors. Foreign investment in Cuba continues to be essential to the country's economic development and the president has been ramping up efforts to further attract FDI. The country's need for investment is pressing, especially due to the financial impacts of the eight-month long shutdown for tourism the country went through in 2020, on account of the coronavirus pandemic. ProCuba is the national investment promotion agency for Cuba, which offers information about the laws and regulations to invest in the country, provides investors with a step-by-step guide to invest in Cuba, and overall advice for foreign investors. Some of the attractiveness of investing in Cuba include the country's high potential in tourism, qualified and inexpensive labour, and its geographical location. However, the Cuban economy is vulnerable to external factors, such as climate, and commodity prices. Also, poor infrastructure, bureaucracy, Cuba’s Soviet-style economy, the country's dual currency system, and tighter US restrictions, still hamper foreign investors.

 
 
Foreign Direct Investment 201920202021
Number of Greenfield Investments* 1015
Value of Greenfield Investments (million USD) 4,538858

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

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What to consider if you invest in Cuba

Strong Points
Cuba strong points in terms of attracting FDI are :

- High potential in tourism and mining sectors (nickel, cobalt) and in agriculture (sugar, tobacco);
- Opening to the private and cooperative private sector of agriculture, commerce, catering and construction (more than 200 trades);
- Qualified and inexpensive labor;
- Quality medical and educational sectors;
- Relatively good social indicators;
- Low crime and active fight against corruption.

Weak Points
The Cuban economy's weak points in terms of attracting FDI are:

- External vulnerabilities (climate, commodity prices, Venezuelan aid);
- Low productivity of the public sector and agriculture;
- Low investment and poor infrastructure;
- Very heavy administrative procedures and very recent commercial regulations;
- State's control over wholesale trade, credit, foreign trade and foreign investment;
- Reduced access to external funding;
- Distance between the conversion rate and the economic reality, which maintains the dualism of the economy, the black market, the economy of rationing and the informal sector;
- Lack of statistical transparency.

Government Measures to Motivate or Restrict FDI
The thaw in diplomatic relations between the U.S. and Cuba was expected to favour a more liberal economy on the communist island, but President Trump reversed the step forward made by Obama, leaving Cuba in a an unsafe economic position, since it cannot rely on the help of the struggling Venezuela anymore.

Therefore, Cuba is trying hard to attract foreign investment and has put in place since 2011 an ambitious reform programme. Free industrial trade zones have been established in order to attract foreign investors (for example: Havana in Bond, the Wajav zone and the port zone of Mariel). They are exempt of income tax on profits, labour tax, customs duties and any additional duties on merchandise introduced in the free zone. The tax exemption is valid for 12 years. The following five years, the company is taxed only at 50% of the regular rate. For commercial activities and services, the exemption period is extended to five years. The Mariel port area also offers a special salary scheme.

Cuba's Ministry of Foreign Trade and Investment released in 2018 its newly expanded annual FDI opportunities portfolio which details 456 economic development projects worth over $9.5 billion open to foreign investment.

Nevertheless, Cuba has a centralised communist economy, which obliges each company willing to do business on its territory to consider the State as a necessary business partner. Also, Cuba runs a complex currency and domestic exchange rate regime.There are currently two currencies in use: The Cuban Peso (peso cubano or moneda nacional, CUP) used for a majority of domestic transactions and the Cuban Convertible Peso (peso convertible, CUC). The  latter  (CUC)  is  pegged  to  the  US  dollar  and used  by tourists and for domestic transactions. For the domestic consumer market, the exchange rate between both currencies is of 1 CUC for 24 CUP. However, several parallel exchange rates coexist for other segments of the economy. The exchange rates differ, most industries having a different rate. For example, Cuban state-owned firms use 1:1 exchange rate for their bookkeeping and the remuneration of Cuban employees by foreign firms in Mariel is calculated in the basis of a 1:10 exchange rate.

Bilateral Investment Conventions Signed By Cuba
The list of countries with whom Cuba has signed a bilateral convention regarding FDI can be found here.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Cuba’s new Foreign Investment Act (Ley de Inversión Extranjera, No. 118/2014) entered into force in June 2014. Key elements introduced by this act include:

- All sectors of the economy are open to FDI excluding health and education services, as well as the Armed Forces, except for their business sectors. Priority sectors include: Agriculture  and  Forestry;  Food  Industry;  Energy  and  Mining;  Sugar Industry;  Light, Chemical and Electrical Industries; Pharmaceutical Industry; Wholesale Trade; Export of health services and health tourism; Construction; Tourism; Transport.

- Foreign  firms  may  seek  collaborations  with  state-owned companies  and  possibly cooperatives, but not privately owned Cuban businesses.

- FDI may take the form of three separate modalities:
1) Minority  or  majority joint  venture companies  (JVs, Empresas Mixta)  in cooperation with state-owned enterprises.
2) International   Economic   Association   Contracts (IEAC, Contractos   de Asociación   Económica Internacional),   for   production   or   management   of facilities, usually in tourism.
3) Full foreign-owned  ventures ( Empresa  de  Capital  Totalmente  Extranjero).
Cuba generally prefers JV with a majority holding by the Cuban partner.

-FDI  enjoys full  protection against  expropriation except  for  reasons  in ‘the  public interest’. In these cases, the law foresees compensation. In case of conflict, investors are  entitled to appeal to a mutually agreed upon international investment dispute resolution entity.

- The Cuban government will notify foreign investors of the approval or rejection of an application within a period of 60 days.

Acquisition of Holdings
In Cuba, majority shareholding in a local company is allowed, but need to be approved by the governement.
Obligation to Declare
All FDI must be validated by the Governement of Cuba. For more information, please visit Procuba website.
Competent Organisation For the Declaration
Ministry of Foreign Affair of Cuba
Requests For Specific Authorisations
All businesses must be approved by the government.

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Investment Opportunities

Investment Aid Agency
Pro Cuba - Center for the promotion of foreign trade and foreign investment
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Cuba
Globaltenders, Tenders & Projects from Cuba
DgMarket, Tenders Worldwide
Other Useful Resources
Chamber of Commerce of Cuba
 
 

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Latest Update: July 2022