Why Cuba?
Current investment law in Cuba has created a favorable business environment for foreign investment, which now allows businesses to be fully-funded with foreign capital, including joint ventures and international economic partnership agreements. Cuba has the 3rd highest percentage of university graduates in the western hemisphere (behind the United States and Canada), a strong tourism industry, first-world health indicators, significant geographical advantages, and a vibrant cultural, sporting, and historical heritage; together, these factors have created tremendous investment opportunities for foreigners. With these positive economic developments, Cuba is well-positioned to become a leading hub to the Americas for shipping and aviation, as well as a business and financial center with stable legal, economic, and political frameworks. Recently, the Cuban government published a report on foreign investment opportunities in 2018-2019 within Cuba, in a wide range of sectors and deal sizes as shown below:
RECENT DEVELOPMENTS IN CUBA
General Economic Policy Changes
In April 2018, Miguel Díaz-Canel succeeded Raul Castro as Cuba’s President, and in parallel with this leadership change, a new Cuban Constitution was ratified in February 2019. Notable changes to the Constitution include the addition of free-market policies, and an explicit statement that foreign investment plays an important role in Cuba’s future economic development. Current investment law in Cuba offers a favorable business environment for foreign investment and allows businesses to be fully funded with foreign capital, including joint ventures and international economic partnership agreements. With these positive economic developments and Cuba’s strategic location, Cuba is poised to become a leading hub to the Americas for shipping and aviation, as well as a business and financial center with a stable legal, economic, and political framework.
KEY INVESTMENT FEATURES OF CUBA UNDER PRESIDENT MIGUEL DÍAZ-CANEL’S POLICY CHANGES INCLUDE:
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- Extended Investable Sectors: Extends investment to almost all sectors of the Cuban economy.
- Secure Legal Framework: Provides foreign investors with a secure, transparent legal framework.
- Extended Investable Sectors: Extends investment to almost all sectors of the Cuban economy.
- Secure Legal Framework: Provides foreign investors with a secure, transparent legal framework.
- Special Tax Advantages: Personal income tax, labor tax, and import tax exemptions; provides a
tax grace period of eight years and one year for sales tax. - Foreign Bank Accounts: Investors are able to open accounts in convertible currency in foreign banks.
- Import/Export Flexibility: Investors face no restrictions on the ability to directly import and export.
- Accelerated Approvals: Decisions on new investments are guaranteed to take no more than 60 days.
- Guarantees to Reduce Risk: Guarantees to foreign investors, including compensation in case of expropriation.
- Special Economic Zone: The development of a Special Development Zone in the Port of Mariel.
In a recent statement, President Miguel Díaz-Canel called for economic decentralization as a vital component to revive the economy, stimulate private sector growth, and provide a secure, transparent legal framework for foreign investors to engage with Cuban entities. Given this initiative to proactively develop foreign direct investment into Cuba, we believe that the U.S. embargo with Cuba will be lifted in the next 24-36 months. In anticipation of the freedom to pursue private enterprise through a partnership with the government or as an independent activity, CCG is primed to be an active entity in the reconstruction of Cuba’s economy.
Tourism and U.S. Policy Changes
In 2018, tourist arrivals in Cuba were approximately 4.8 million people, which represents the highest number of visitors Cuba has seen since the government began recording tourism statistics. As such, the development of a strategy that leverages the unrivaled attractions of Havana is a unique opportunity for CCG’s potential clients’ efforts in the hospitality sector.
Despite positive changes in Cuba’s internal political landscape, the relationship between the U.S. and Cuban governments have recently deteriorated. In April 2019, the U.S. placed additional travel restrictions on U.S. citizens visiting Cuba, which negatively impacted the Cuban tourism industry and affected the 5.1 million tourists forecasted for 2019. Accordingly, U.S. policy continues to require OFAC and other regulatory approvals on a case-by-case basis. As CCG continues to identify new business opportunities and develop commercial plans for its clients’ success, CCG will continue to take an active equity approach to direct investments that deliver a lasting social and environmental impact to Cuba and its people.