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Before talking about investment opportunities,
let's take a brief look at Cuba's economy
to get an overall picture of what is happening
there. This will help you better understand
the investment climate of the country.
Until recently sugar had always been the
mainstay of the Cuban economy. At one time
sugar accounted for 70% of the country's
export revenue. The zafra is the
sugar cane harvest and runs from November
through May. The country produces around
10 million tons of sugar a year. Tobacco
has traditionally been the second most important
agricultural product. Cuba's Vuelta Abajo
region is the best place in the world to
grow tobacco for cigars. Cuba's soil and
climate are also perfect for growing good
coffee. Rice, corn and tropical fruits are
other important crops. In general, agriculture
has been diversified to feed a burgeoning
population.
Cuba has a large reserve of minerals that
are exported-especially nickel. About 40%
of the world's nickel reserves are found
in Cuba and the country is the fourth largest
producer in the world. Nickel has traditionally
been Cuba's second foreign exchange earner.
However, most of the country's minerals
have yet to be exploited. Cobalt, copper
and iron are other minerals found on the
island.
After sugar and nickel, fishing is the
country's third most important industry.
Cuba's pharmaceutical industry is growing
fast and will possibly be an increased source
of exports. However, most industry in Cuba
basically exists for the production of products
for domestic consumption.
At the present time more and more countries,
companies and individuals are making profitable
investments in Cuba. The second Cuban Revolution
in the last fifty years has begun except
this one is capitalistic and not communist.
This revolution is akin to what is happening
in Russia, Vietnam and China. What we are
presently seeing are economic reforms preceding
political reforms. Cuba cannot afford to
not participate in the mainstream of the
global economy. Free market ideas are beginning
to take root in Cuba.
Over fifty foreign countries are currently
doing business in Cuba. Bilateral trade
between Cuba and the U.S. will increase
in the future. Cuba is so ripe for doing
business that many U.S. corporations who
had property confiscated in Cuba are probably
willing to relinquish claims to what they
previously owned just for the chance to
"get their foot in the door".
Rumor has it that many deals have already
been cut behind the scenes. In fact, more
than 2,500 U.S. business executives and
representatives visited Cuba in 1998.
A number of factors make investments in
Cuba attractive. First, its geographic position
and proximity to the United States. Someday
you will be able commute to Cuba if necessary.
Cuba is accessible from all parts of the
world by air or sea. A communications system,
which includes phone, fax and telex services,
links Cuba to the rest of the world. A stable
political situation, low level of corruption,
signs of economic recovery, a banking system,
mass communication (radio T.V. and phones),
a postal system, international courier systems,
international airports, public transportation,
a highly educated work force, unspoiled
beaches and other tourists locations, hotels,
resorts and a rail and road network all
combine to make up a well entrenched infrastructure
necessary for foreign investment.
Another important factor to consider is
that workers' wages are low when compared
to other countries due to Cuba's low wage
scale. Cubans who are employed by the government
or in joint ventures earn only about $10
monthly. However, there are a lot of people
earning more under the table.
Combine these factors with the country's
natural beauty and good weather and you
have a land ripe for investment. Since Cuba
has been isolated from the capitalist mainstream
for such a long time, the country is virgin
for many business opportunities. Enterprising
foreigners will have the chance to start
previously non-existent businesses. Cuba
is ready for innovative people willing to
take chances. The country will attract adventurous
entrepreneurs looking for a window of opportunity
to establish themselves.
All things considered, the country's infrastructure
is good despite current economic problems.
Cuba has more than 10 international ports
with full service and shipping operating.
They are adequate highway and rail systems
in place and a telecommunications network
which is antiquated but being improved.
Cuba has a large highly-educated labor
force. Hired help is affordable. There is
a double tiered economy with Cubans who
work in tourism earning dollars. This has
created much inequity. Current monthly salaries
are low, so there thousands of people yearning
to earn decent wages if given the chance.
You have to pay a social security tax of
about 35% for each worker you hire. Self
employment is now legal in many sectors
of the economy.
The hottest market which has the potential
to produce billions of dollars annually
is tourism. The number of tourists visiting
Cuba is growing at 30% annually. In the
1950s during the Batista era, Cuba was the
most popular tourist destination in the
Caribbean. Now, Castro believes that tourism
is the salvation for Cuba's economic woes.
Cubancan is the organization behind
the country's new emphasis on tourism. They
have already set the building blocks for
a new infrastructure - with improved roads
and transportation, a new cruise ship terminal
in Havana, new marinas, golf courses, airport
expansion and joint foreign investment.
There has also been a joint venture hotel
boom with foreign corporations contributing
to the new infrastructure. About 3 to 5
thousand hotel rooms are being built each
year. There is a new emphasis to develop
multi-destinations within the island. The
government has even offered non-socialistic
incentives allowing foreign investors to
operate in the country for at least 10 years
without paying income tax. Jobs at tourist
resorts are highly sought because of the
availability of dollars and foreign goods.
Despite the U.S. embargo, Cuba annually
has averaged between 1,000,000 and 2,000,000
tourists in recent years. In the last five
years tourism has increased 20% annually
and become the biggest foreign exchange
earner. Currently about two million tourists
generate more than a billion dollars a year.
Tourist visits to Cuba have mushroomed from
less than 350,000 in 1990 to more than 2
million in 2000. Canada provided the most
visitors- 170,000 - followed by Italy, Germany
Spain and France. This is not to mention
all of the Americans who entered through
third countries. Tourism has the potential
to produce even more money annually as Europeans
and Canadians will be joined by more visitors
from the U.S. in the future. Cuba now boasts
over 30,000 hotel rooms, second only to
the Dominican Republic, thanks to a recent
tourism building boom. Recent information
suggests there will be a shortage of high-quality
hotel rooms if tourism continues to grow
at its current pace. When the embargo softens
tourism will really soar upward. About 150,000
Cubans work in tourism-related businesses.
You should seriously think about investing
in this tourism boom. The businesses that
are derived from it - bars, restaurants,
tours, hotels and outdoor activities are
fields worth exploring for investment opportunities.
The needs of a burgeoning expatriate community
will also give rise to new enterprises.
If you have a skill in a particular area
perhaps you will be able to put it to use
in the 'new' Cuba. If you are experienced
in the field of business you choose, you
chances for success will greatly increase.
However, you should remember that running
a business in a foreign country is lot like
managing a one in the U.S. or Canada. Rules,
regulations, work ethic, the customs of
the people and the way of conducting business
will be different than what you expect.
You are best advised to try to play by the
rules and adapt to the way things work in
Cuba. Speaking Spanish will help you immensely
when engaging in business transactions and
communicating with your help.
Check out restrictions and the tax situation.
And most importantly choose a business in
which you have a vast prior experience.
It's much more difficult to familiarize
yourself with a new type of business in
a foreign country.
Remember you will be doomed to failure
if you try to be an absentee owner. A trustworthy
partner or manager can mean the difference
in success and failure. Make sure you choose
a partner with local experience. Don't trust
anyone until you know them and have seen
them perform in the workplace. Before forming
a partnership you should decide what parts
of the business each partner will run in
order to avoid problems down the line. Bureaucracy
can also be stifling in any foreign country.
If you start a business with employees,
be aware of your duties and responsibilities
as an employer. Know what benefits you will
have to pay in addition to salary to avoid
problems. The more employees you have, the
more headaches you will have.
Before you put a penny of your money into
any type of overseas investment there are
a few simple rules you should follow. Adhering
to these principals will help you make more
prudent decisions and protect your investments.
Remember as attractive as a foreign investment
may seem on the surface, there is always
a downside. Bear in mind the rules of doing
business vary from country to country. The
most important thing you can do is your
"homework," that is to say, study
the feasibility of your potential investment
thoroughly before exchanging any money.
Be especially wary of "blue ribbon
deals" that appear to be too good to
be true. Trust your intuition and gut feeling
at times. However, the best strategy and
rule of thumb is, "Test before you
invest."
Many people will have impossible dreams
about what business will be like in Cuba.
It is a giant mistake to assume that success
will come easy in Cuba. Also many unforeseen
problems will surely arise.
There will be a market for almost any consumer
product you can think of. A lot of money
will be made in the local market supplying
products. Cuba's 11 million people provide
a large untapped consumer market. Furthermore,
there will soon be a large number of people
who are used to U.S. goods and services
due to an increasing number of foreign residents
and eventual influx of Cuban exiles. All
you have to do is find a need and fill it.
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