Cuba Struggles to Attract Investors Despite Reforms

Posted by Eric Haun
Thursday, August 21, 2014
Photo: Lukas Mathis

Cuba has yet to attract new foreign investors despite launching two major initiatives in the past year, a sign of the lingering caution over doing business with the communist government and its own hesitancy to follow through on free-market-style reforms.

Cuba last November opened a China-style special development zone, including a new container terminal at Mariel Bay. It also passed a new foreign investment law in March, saying it needed more than $2 billion a year in foreign direct investment to spur growth.

But despite cutting taxes and lowering customs barriers in line with other investment regimes in the Caribbean, Cuba has yet to overcome the disadvantages associated with the U.S. economic embargo as well as its Soviet-style economy.

"Cuba has a ways to go in learning how to react with agility to business opportunities," said Pedro Freyre, who heads the international practice at the Miami-based law firm Akerman LLP, which closely follows the reforms under way on the island.

The new foreign investment law, which took effect at the end of June, cut the tax on profits in half, eliminated a labor tax and granted new investors an eight-year exemption on a profits tax.

Though potential investors welcome the tax cuts, some remain wary over Cuba's legal regime, especially after the recent jailing of a handful of foreign executives and the seizing of their businesses over corruption allegations.

Investment proposals under negotiation, which still must be approved at the highest level of the Cuban government, include projects in light manufacturing, packaging, alternative energy, pharmaceuticals and warehouse shipping logistics, according to officials.

Consumer goods giant Unilever , which left Cuba in a dispute over who would have the controlling stake in a joint venture with the government, is said to be negotiating a return to Mariel.

Two other companies considering operations in Mariel, according to diplomats, are in joint ventures with the Cuban government: French beverages company Pernod Ricard and cigarette maker BrasCuba, part of the Brazilian subsidiary of British American Tobacco.

High Hopes
Cuba's economy is stagnating despite a raft of market-oriented reforms initiated by President Raul Castro in 2008. Cuba reported growth of just 0.6 percent in the first half of this year and revised downward its full-year growth forecast to 1.4 percent from 2.2 percent.

Castro has proposed moving 40 percent of the state labor force to a new non-state sector made up of farms, small businesses, cooperatives and joint ventures, and state-run companies have been granted more autonomy.

Bringing in more investment is seen as crucial to the economy. Castro recently told the National Assembly that Cuba needs to attract a minimum $2.5 billion per year to reach annual growth targets above 5 percent.

But eying such a quick pace of growth might be overly ambitious.

Omar Everleny, an economist who specializes in foreign investment, estimated in a recent paper that just $5 billion had been invested in Cuba over the last 20 years.

The government had hoped foreign companies would build factories or new import-export installations at Mariel, some 28 miles (45 km) west of Havana. The special economic zone, covering 180 square miles (466 square km), drew some interest from potential investors, most of whom had existing business ties with Cuba.

But they discovered a paucity of infrastructure in and around the port. Land and utility prices had not even been established. No wage policy was set. Lacking such basic information, companies delayed negotiations and the feasibility studies needed for approval.

Likewise with the new foreign investment law, the promised lists of investment opportunities by government ministries, from agriculture and industry to food processing and pharmaceuticals, have yet to be drawn up.

"Cuba's foreign investment law and its Mariel development zone are emblematic of most of the recent reforms on the island. Many of the changes are in the right direction, but not happening fast enough," said Peter Schechter, director of the Latin American program at the Washington-based Atlantic Council.

Still, one Western diplomat predicts a number of ventures will be signed by the end of the year.

"They have absolutely no choice but to change," the diplomat said. "They need investment in all sectors to survive."

(Reporting by Marc Frank; editing by Daniel Trotta, G Crosse and Kieran Murray)

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Ports

Rotterdam Integrates Safety Research with LNG Training Facility

The Dutch company Falck Risc is becoming the number one expert on LNG safety in Europe. Together with the Unified Fire Department, Falck Risc will draw up guidelines

Antwerp Port Seeks Inputs on Setting-up LNG bunkering

By the beginning of 2016 the port of Antwerp will have an LNG bunkering and filling station for barges. The procedure for construction of the station is currently under way.

FPSO Petrojarl Knarr Delivered to Norway

Three tugs of Fairmount Marine have towed the brand new FPSO Petrojarl Knarr from South Korea to Norway in just 61 days. Petrojarl Knarr, one of world’s largest

Finance

Russia's Yamal LNG Project May Tap Wealth Fund in 2014

Russia's Novatek may get funds from the National Wealth Fund for its Yamal LNG project before the year-end, a minister said, as part of government plans to support sanction-hit companies.

ICC Conference Focuses on Platform to Settle Disputes

The 5th ICC International Commercial Mediation Conference has brought together leading mediators, arbitrators, corporate managers and in-house counsel from around

Deep Sea Supply takes Delivery of 'Sea Triumph'

The Deep Sea Supply  took delivery of the newbuilding Platform Supply Vessel 'Sea Triumph'  on Thursday 18 September.  The vessels 'Sea Triumph' is a STX 05-L

Container Ships

Chevron To Find Buyers for Hawaiian Refinery

Chevron Corp has hired an investment bank to identify potential buyers of its 54,000 barrel-a-day refinery in Kapolei on the Hawaiian island of Oahu, a company official said.

South Carolina Ports Container Volume Up by 13%

SC Ports Authority reported container volumes up 13 percent fiscal year to date, a strong start to the first two months of the fiscal calendar. The SCPA handled 163,

Global Ship Lease to Acquire Containership

Global Ship Lease, Inc. has  announced  that it has agreed to acquire a 8,063 TEU containership from a leading container liner company for a purchase price of $55 million.

News

Russia's Yamal LNG Project May Tap Wealth Fund in 2014

Russia's Novatek may get funds from the National Wealth Fund for its Yamal LNG project before the year-end, a minister said, as part of government plans to support sanction-hit companies.

USCG Search for Pompano Beach Diver Near Ft. Lauderdale

Coast Guard crews and other agencies are searching for a missing diver after he never resurfaced one mile east of Ft. Lauderdale, Florida, Saturday. Missing is Marc Raroha,

Rosneft says Exxon Still Continues to Work With it in Arctic

Russia's biggest oil producer Rosneft said on Saturday that Exxon Mobil was still continuing exploration drilling at their joint project in the Arctic Kara Sea.

Government Update

Ban Welcomes Leonardo DiCaprio as UN Messenger of Peace

As the eyes of the world turn to New York City, where thousands of people are expected to gather today for a massive march in advance of a United Nations climate summit,

Tropical Storm Polo Threatens Battered Mexican Resort of Los Cabos

Tropical storm Polo barreled nearer on Friday to the Mexican Pacific resort of Los Cabos where thousands of troops were restoring order following widespread

Exxon: U.S. to Allow Wind Down Ops in Russian Arctic

U.S. oil major Exxon Mobil said on Friday the U.S. Treasury Department granted it a license to wind down operations on a drilling well in the Kara Sea in the Russian Arctic.

Logistics

Tropical Storm Polo Threatens Battered Mexican Resort of Los Cabos

Tropical storm Polo barreled nearer on Friday to the Mexican Pacific resort of Los Cabos where thousands of troops were restoring order following widespread

Chevron To Find Buyers for Hawaiian Refinery

Chevron Corp has hired an investment bank to identify potential buyers of its 54,000 barrel-a-day refinery in Kapolei on the Hawaiian island of Oahu, a company official said.

Exxon: U.S. to Allow Wind Down Ops in Russian Arctic

U.S. oil major Exxon Mobil said on Friday the U.S. Treasury Department granted it a license to wind down operations on a drilling well in the Kara Sea in the Russian Arctic.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Navigation Pipelines Port Authority Salvage Ship Electronics Ship Simulators
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1543 sec (6 req/sec)