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DOING BUSINESS WITH

CUBA: OPPORTUNITIES FOR


U.S COMPANIES
AMBASSADOR JOSE R. CABANAS
November 2016

CUBA: Updating of the Cuban


Economic Model
Sovereign decision on implementing changes to
achieve a prosperous, efficient and sustainable
Cuban socialism.
GUIDELINES OF THE ECONOMIC AND SOCIAL
POLICY OF THE PARTY AND THE REVOLUCTION
313 GUIDELINES
The guidelines had a previous popular consultation
process which involves millions of Cubans, who
supported them.
F

CUBA: Updating of the Cuban


Economic Model
As part of the implementation of the guidelines we have
defined strategic issues:
The conceptualization of the Cuban
economic
model
of
Socialist
development.
The Program for Economic and Social
Development until 2030. Vision of the
Nation, Strategic Priorities, Objectives
and Strategic Sectors.

Theoretical bases and features of Cuban


economic and social model.
To solve the structural problems of the
economy, from government policies to
inclusive and sustainable policies that
respond to a strategic vision of medium
and long term.

CUBA: Updating of the Cuban


Economic Model
Policy for Development of
Renewable and Efficiency
Use of Energy for the
period 2014-2030.
Low use of renewable sources
(only 4.3 % of Electricity).

Low efficiency in production


and consumption that directly
affects the competitiveness of
the national economy.
High dependence on imported
fossil fuels.

2016 4.3%

2030 24%

The goal is to transform the


structure
of
energy
sources,
increasing the share of renewable
sources.
F

CUBA: Updating of the Cuban


Economic Model
The conceptualization of the Cuban economic model of Socialist
development.
The operation of State enterprises.
Separation of state and corporate functions.
Creation of the Higher Business Management Organizations.
Enhance the work of the Board of Government.
Strengthening the autonomy and powers of state enterprises.

Recognition and Development of non-state forms of ownership and


management.

Delivery of more that 1 million 500 thousand hectares of land in usufruct.


Creating about 500 non-agricultural cooperative ( mainly in trade, gastronomy, technical
services, small industry and construction).
Around 500 000 self-employment persons.

A Review of the Policy towards Foreign Direct Investment.


F

Advantages of Investing in
Cuba.
Legal, social and political stability.
A highly qualified personnel.
A favorable geographic location.
Extensive network of communication by road, railroad, port and airport.
Availability of natural resources.
Existence of a special development zone with a modern port for ships with a maximum draft of 56 feet and
state-of-the-art technology.
Access to maritime transportation by the main international shipping companies.
Agreements for the avoidance of double taxation and the Reciprocal Promotion and Protection of Investments
(APPRI) are in place with 12 and 63 countries , respectively.

Advantages of Investing in
Cuba.
Existence of an investment promotion agency (Center for the Promotion of Foreign Trade and
Foreign Investment ProCuba), subordinated to the Ministry of Foreign Trade and Investment
(MINCEX in its Spanish initials).
Existence of a Chamber of Commerce that has links with similar organizations from other
countries and has carried out investment promotion actions.
Existence of Embassies and Commercial Representative Offices abroad.
Reorganization of the countrys policies, based on the updating of the economic model; these
policies will define a new role for foreign investment and prioritize a more aggressive promotion
there of in the country.
A regulatory framework and updated foreign investment policy with guarantees and incentives for
investors.

Policy towards Foreign Direct


Investment.
1. New Legal Framework
Law No. 18/2014, a new more attractive legal framework.
2. New Policy Principles

Recognize foreign investment as a source of economic development for the country in


the short, medium and long term.
Considering that foreign investment is an active and fundamental element for the
growth of certain sectors and economic activities.
Foreign investment is oriented to export sectors and import substitution, as well as
generating productive chains, promoting modernization, infrastructure development
and technological change pattern.

Annual Target of US 2 billion in FDI.


F

Policy towards Foreign Direct


Investment.
3. Incentives and guarantees for investors.

Foreign investments shall enjoy protection and security and can not be expropriated.

The State shall guarantee the free transfer abroad, in freely convertible currency, free
from taxes or any other fees, of the dividends or profits obtained by the foreign investor.

Foreign investments in the country shall be protected against legal claims by third
parties or the extraterritorial implementation of other states laws.

The foreign investor can sell or transfer his rights to the State, the parties of the
economic association or to a third party, provided this is previously authorized by the
government.

Policy towards Foreign Direct


Investment.
3. Incentives and guarantees for investors.

Foreign investment shall be subject to the special tax regime established in the Act
until the deadline for this special tax regime is due.

The Cuban state shall guarantee that the benefits granted to foreign investors and their
investments are maintained during the whole period for which they were granted.

The term of the authorization granted for the development of operations may be
extended by the very authority that granted it, provided that such extension is
requested by the parties concerned before the set deadline expires.

Policy towards Foreign Direct


Investment.
3. Incentives and guarantees for investors.
Special Tax System in Chapter XII of Law No. 118 Foreign Investment Act, which
stipulates the following advantages, among other aspects:
Foreign investors shall be exempt from paying personal income taxes for the business dividends
or profits.
The profit tax shall be paid by applying a 15 % tax rate on the net taxable profit.
Investors shall be exempt from paying profit taxes for a period of eight years as from the date of
their incorporation.
Investors shall be exempt from paying profit taxes when the reinvestment of net profits and other
benefits is authorized.
There shall be 50% discount on the tax rate applicable to the tax on wholesales and services.
There shall also be an exemption from paying this tax during the first year of operations.
Investors shall be exempt from paying taxes on the use of labor force.
Investors shall be exempt from paying customs duties for the import of equipment, machinery
and other means during the investment process.

Policy towards Foreign Direct


Investment.
4. New Opportunities Portfolio.

It considers projects in all sectors which are defined as priorities for attracting foreign
investment

It contains

24

395 projects, 69 more than in 2015:

in the ZEDM

371 in the rest of the country

The estimated investment amount of the projects contained in the portfolio exceeds

US 8 billions.

Opportunities of Foreign Investment per


sectors.

The projects included in the portfolio have been presented by Cuban companies, according to sectorial
development strategies and policies adopted.
Most of the projects have viability studies or technical and economic pre-feasibility studies, developed by
organizations specialized in these activities.
The portfolio presents widely information about the benefits of investing in Cuba, data from the existing foreign
investment in the country, the 25 general principles of the aforementioned policy and a summary of the taxation
legislation.
Each project has a specification sheet showing it main features: description, modality of foreign investment,
Cuban counterpart, the estimated investment amount , location, potential market, expected results and contact
details.
The Portfolio of Opportunities will be updated on a yearly basis, at the Havana International Trade Fair.

Opportunities of Foreign Investment per


sectors.

Transportation:10, to modernize Cuba's transportation infrastructure. Specifically, Cuba plans to expand its
port, roadway, and rail capacity and improve its system for repairs and technological updates of vessels and
trains. This includes preparing port facilities to receive cruise ships and bringing its commercial aviation services
up to international standards.
Industrial: 16, To promote projects to modernize and create new capacities (e.g. to produce bottles and
packaging, recycle raw materials), manufacturing electronic equipment and electrical appliances, chemical
products and by-products, medical equipment, textiles, clothing and accessories, hygiene products, perfumes
and cosmetics. Cuba seeks to cover their national demand, replace imports and increase exports.
Renewable Energy: 23, The goal is to create, enlarge and modernize production capacities and to promote
projects to generate energy from renewable sources.
Agro Food: 76, Comprehensive agro-industrial projects to increase food production; encourage sustainable
development; and increase efficiency, quality and competitiveness in the different forms of production
management. Cuba is seeking FDI for 76 projects, 36 more projects than last year.

Opportunities of Foreign Investment per


sectors.
Biotechnology: 15, To promote projects in Cuba with strategic partners to improve the manufacturing of
finished products and active drug ingredients for generic medicines. Cuba is looking for partners to complement
domestic projects by increasing joint R&D projects, as well as the creating or extending their own production
capabilities.
Health Care: 3, To develop exports of Cuban medical and health services.
Construction: 10, To access new technologies to improve efficiency in construction, increase production of
materials and spare parts, and to recover and complete general repairs for plants. Additionally, Cuba seeks to
promote the building of infrastructure and industrial maintenance jobs, primarily for the nickel, oil and cement
industries as well as for the designing and building of hotels for tourism and the real estate complexes associated
with golf courses.
Tourism: 114
Oil and Gas: 87
Mining: 13

Mariel Special Development Zone


New or restored
railways
New four-lane highway
providing access to Mariel
464km2 of total area
available for development
in the context of ZEDM

Created in 2013 to drive foreign direct


investment in economic development of
Cuba.
45km from Cubas capital city, Havana.
Modern road & rail connections to Havana
and beyond.
No restrictions on foreign ownership, fast &
agile project approval process, fiscal
advantages versus other territories in Cuba.
Significant international interest from
investors
to
create
manufacturing,
production, farming activities.

www.zedmariel.co

Mariel Special Development Zone

It constitutes a space in the national territory that is not delimited within the customs boundaries, and in which
special policies and regimes are applied, with the goal of promoting sustainable economic development by
attracting foreign investment, technological innovation and industrial concentration, with a view to increasing
exports, effectively replacing imports, and generating new sources of employment, in constant articulation with
the domestic economy.
Activities and sectors prioritized in the MSDZ:
Biotechnology and pharmaceutical industry
Renewable energy
Agro-food industry
Tourism and real estate development
Canning and packaging industry
Agriculture.
Telecommunications and informatics
Investment in infrastructure

www.zedmariel.co

Port of Mariel.

www.zedmariel.co

ZED Mariel (Zone A) - Investors gathering


-

Mariel Container Terminal, first investor and


user of the Mariel Special Development Zone
(ZEDM)

Logistics Activity Zone opened in August 2015


(20,000m2 dry and 5,000m3 refrigerated
warehousing.

8 additional projects under construction:


Meat processing plant
Industrial paints plant
Juices & drinks plant
Heavy equipment leasing & service center
Logistics provider
Hotel supplies logistics provider

Considerable international interest (current


investors: Spanish, Mexican, Belgian, Cuban,
French..)

www.zedmariel.co

ZED Mariel (Zone A) - Investors gathering


USD 722
million
2 318 jobs
Capital
9 100% Foreign capital
2 Joint Ventures
1 AEI

www.zedmariel.co

EVOLUTION OF CONTAINER VESSELS


The maximum size
for the old Habana
terminal & port.

www.zedmariel.co

TC Mariel is designed and built for


the New Panamax class vessels

INFRAESTRUCTURE
Infrastructure

2015

Future

Berth length

702

2400

Max draft (ft)

56.0

59.0

4 (6*)

24

RTG

12

72

Prime movers

22

132

Empty C. Handlers

18

Reachstackers

Area (ha)

27.7

95

Reefer plugs

1140

2500

800,000

3,000,000

Gaintry cranes SPP

Total capacity(TEU)

* With no need for additional work on the dock

Railway facility
RMG

Railway tracks

Capacity (TEU)

120 000

300.000

US PORT DRAFT ISSUES

Houston
(13,6 m)

New Panamax ready


(13,500 TEU)
Post Panamax ready (> 5000
TEU)
Panamax ready (4000~5000 TEU)
Non Panamax ready (< 4000 TEU)

Gulfport
10.9 m)
Mobile
New
(12.15
Orleans
m)
13.6 m)
Tampa
(13,0 m)

Mari
el
Altamira
(12,2 m)

Charleston
Savannah
(13,6 m)
(12,7
m)
Jacksonville
(12,1 m)
Port Everglades
(12,7Bahamas
m)
Miami (15,8 m)

Progreso

500nm

750nm

Kingston

Veracruz
Puerto Castillo

1,000nm

(15.0m)

Caucedo
Puerto Cortes

Puerto Limon
Panama

Cartagena

www.zedmariel.co

Port of Mariel.

LOCATION FOR A HUB PORT


Access Channel Works
In 2016: Panamax
In 2017: New-Panamax

Industrial
Development

Next
phase

Logistics
Zone

Future
phases

www.zedmariel.co

CUBA: International Insertion


Improved the performance of the Trade balance of goods and services
Increase in the weight of the goods and services with higher added value
in total export:
Internationally recognize professional services, such as medical
services.
Within the biotechnology sector, several entities are developing more
than 90 product projects to target infectious oncology, diabetes and
cardiovascular diseases.
Cuba has expanded and diversified its economic relations
Trade relations with over 75 countries
Trade has been tripled in the last 10 years
Active role in the Latin American and Caribbean region
F

CUBA: International Insertion


We have reached important agreements that provide solutions to
most of the countrys foreign debt, including:
China, Russia, Japan, Mexico and the Paris Club
Strict compliance with our commitments. Gradual recovery of the
international credibility of our economy.
In December 2015, the report from the rating agency Moody
s about Cuban economy changes its assessment form
stable to positive.
F

CUBA: International Insertion


US government stated that has approved licenses since December 17, 2014 for
US$ 6 billion in potential exports from US to Cuba. The real amount of export
to Cuba in this period is US$ 314 millions.

WHICH ARE THE HURDLES?


OFAC license is require.
Payment in Cash and in Advance
Serious constraints to have access to credit (not credit in the agricultural
sector).
Any financial transaction between US and Cuba remains triangular, that means
less efficient and more costly. OFAC doesnt permit direct banking corresponding
relations.
Cuba has not been able to make payments or cash deposits in US dollars due
to the fines that have been imposed and the intimidating effects of the blockade.
F

Cuba & US: Breaking barriers.

7 Governors and
1 Liutenant Governor
visited Cuba

13
Bilateral
Agreements

136,913 Americans visited Cuba in the 1st half of 2016. (80%+)

Thank you