|
In 1993 Cuba opened up a large international
market by legalizing the U.S. dollar. The
dollar now accounts for about two-thirds
of the Cuban economy. This dollar currency
is mainly geared towards tourism and resident
foreigners and Cubans holding dollars. Remittances
by Cubans abroad to relatives in Cuba account
for about $400 million annually.
Originally a statute was passed in 1982
authorizing foreign investments in Cuba
in the form of joint ventures with a state
enterprise. Next, the constitution was amended
in 1992 and laws passed to provide guarantees
for foreign investors including repatriation
of profits to remove the state's monopoly
on foreign trade and to modify labor legislation,
particularly for tourism.
Cubanacán (Corporación de Turismo
y Comercio Internacional) is in charge
of linking foreign companies wishing to
invest in joint ventures in the Cuban tourist
sector. Joint ventures in Cuba work like
this: any Cuban entity retains 51% of the
control when a foreign company invests in
the country. In some instances the percentage
of foreign ownership was approved at a level
above 50%. However, at that time foreigners
could not hold the majority interest in
a joint venture (joint ventures with private
individuals in Cuba are illegal). These
joint ventures were part of the process
of steady economic reform to move Cuba in
the direction of market capitalism. By the
end of 1995 there were over two hundred
joint ventures operating in Cuba. Canada,
Spain, Italy and Mexico are the most active
countries in the joint venture program.
Most of these ventures have been in the
area of tourism. However, there has also
been substantial investment in mining and
agricultural operations.
Cuba has further tried to woo investors
in recent years by offering incentives.
In September of 1995 the Cuban National
Assembly passed a new investment law (Law
Number 77) giving foreign investors the
right to operate wholly owned enterprises
in most sectors of the economy. This law
confirmed the Cuban government's commitment
to encourage and facilitate foreign investments.
According to this law foreigners were permitted
to operate a business without creating a
joint venture. Currently there are 350 joint
ventures worth $2.6 billion operating in
the country. The majority are with companies
from Spain, Canada, Italy, the United Kingdom
and Mexico
Under this law investments may be made
in real estate which may be used for residential
or office purposes for foreigners. Investments
can also be made in real property to be
used in tourism operations. However, under
the new agreement, buildings may be purchased,
but not land.
The only areas where foreign investment
was not permitted were education, health
and the military.
This new law was the first step in moving
the country toward a real market economy.
It is part of an ongoing process of economic
reform in Cuba. It replaced the 1982 statute
which created joint ventures and is much
broader and more flexible in its scope.
The new law virtually increased the role
of foreign investment in the economy creating
free trade zones in Havana in 1996 and allowing
foreign companies to invest in parts of
the economy previously off limits. Now individual
investors or companies may create an affiliate
or subsidiary of a foreign firm. This law
virtually opens all sectors of the Cuban
economy to foreign investment with a few
exceptions. The three exceptions are: health
services, public education and the armed
forces.
Law 77 provides guarantees and security
for the investor by prohibiting expropriation
of foreign investments except when such
action is for a public use or in public
interest, which may be declared by the government
in accordance with provisions of the constitution,
legislation and international agreements.
Furthermore, before expropriations may take
place, the investor must be compensated
for the commercial value of the property
which is to be established by mutual accord.
This measure should ease the fears of those
foreign investors who are afraid to invest
in the country because of the possibility
of government expropriations. They can now
feel more secure about investing in Cuba.
There are specific taxes and fees of around
30% of net earnings, and an employment and
social security tax. These taxes and fees
must be paid by foreign owned and joint
enterprises. There are also incentives for
reinvestment provided by this law.
We have conveniently listed the complete
version of Law 77 at the end of this chapter
to help clarify any questions the reader
may have.
Foreign investors who wish to establish
a wholly owned enterprise must initially
apply through the Ministry of Foreign
Investment and Economic Cooperation
(MINVEC).
This agency is responsible for governing
and controlling the foreign investment process,
the development of free zones and industrial
parks, the promotion of all foreign investment,
and guiding the negotiating process when
setting up foreign investment.
Government authorization is necessary and
there are a series of steps and layers of
government involved. Both wholly owned enterprises
and joint ventures have to be approved by
MINVEC. Then they have to be evaluated by
the Council of Ministers. The whole process
can take up to a year to get approval and
set up a joint venture in Cuba.
Spanish, French, Canadians and others have
invested extensively in tourism despite
the embargo. They have realized that Cuba
is a prime Caribbean market and began to
carve up Cuba for themselves during the
first half of the 90's by investing in tourism
and other areas. American companies anxious
to get a toe hold in Cuba are already lining
up.
Here is a list of organizations which provide
information about doing business in Cuba:
U.S. - Cuba Trade and Economic Council,
Inc., 30 Rockefeller Plaza, New York,
NY 10112-0002, Tel: (212) 246-1444, Fax:
9212) 246-2345, e-mail usctec@aol.com.
It is the only organization in the U.S.
to help individuals seeking advice about
doing business in Cuba. They will furnish
technical support, a wealth of information
and assistance.
They have several publications available
through their web page at: www.cubatrade.org.
We recommend checking out this site and
all that it has to offer. Cuba Foreign Trade
is published quarterly by the Chamber of
Commerce of Cuba. The focus of the magazine
is on foreign trade and general issues of
commercial interest. It lists many business
contacts and potential business opportunities
in different fields. Business Tips on Cuba
is another of their publications which potential
investors should read. Economic Eye on Cuba
is published each Monday for the members
of the U.S.-Cuba Trade and Economic Council.
The Cámara de Comercio de la República
de Cuba or Cuban Chamber of Commerce
publishes a yearly directory of companies
who trade within Cuba, a list of contacts,
addresses and telephone numbers of each
importer. Cuban Chamber of Commerce,
Calle 21 esq. A #661, Vedado, La Habana,
Cuba, Tel: (537) 55-1321, Fax: (537) 33-3042,
www.camaracuba.cubaweb.cu
Another excellent source of information
is Berkshire Financial Services, Inc.,
Apdo. 1500 World Trade Center, Panama City,
Panama, Tel: (507) 317-0037, Fax: (507)
317-0036, E-mail: info@berkshire-financial.com,
http://www.berkshire-financial.com.
They also publish an excellent book called
Cuban capitalism - A Guide to Trade and
Investment in Pre and Post Embargo Cuba.
Consultores Asociados S.A., 5th
Ave. Esquina 164 # 16210 Playa Miramar,
Havana, Cuba tel: 33-6011, Fax: 33-6012
Oficina Nacional TIPS/Cuba, calle
30, # 302, Esquina a 3ra. Miramar, Havana,
Cuba Tel; 33-1797, Fax: 33-1799.
CARIB IMPEX imports and exports
both Cuban products and services. They can
help you find distributors for products
in Cuba and to establish solid commercial
ties with Cuban firms. They are based in
the Bahamas at CARIB IMPEX, Northfolk House,third
floor, Frederick Street, P.O. Box N-9455,
Bahamas, Tel: (2420 356-7270) Fax; (242)
356-2587, E-mail: mailto:carib@batelnet.bs.
There is a very helpful website at: www.cubaweb.com which acts as a clearing house
for those who want to find out about doing
business in Cuba. Check out this great website
for a wealth of information. You may e-mail
them at rosamaria@cubaweb.com.
You should also see www.cubaadvice.com. They offer help for
businessmen in Cuba and have an office center
with fax and e-mail which you may use.
Cuba's monthly business magazine, Business
Tips on Cuba, is full of information
about investment opportunities in Cuba.
It is published in several languages including
English. See www.tips.cu.
|
