EMB
45% OF THE POPULATION LIVES
BELOW THE POVERTY LINE AND
MORE THAN HALF OF CUBANS ARE
UNEMPLOYED.
While the prospect of low cost labor might appeal to
some investors, those set on entering Cuba must also be
prepared to contend with a plethora of obstacles: outdated
internet and communications systems, a largely hostile
business environment, widespread corruption, crumbling
infrastructure, unreliable energy and utilities supplies and a
bankrupt economy to name but a few.
This potent combination would be enough to deter many
investors from committing cash and resources to the
Caribbean nation, but for others, the grim picture presents
a wealth of investment opportunities for the taking. “Now
is the time to invest in Cuba,” asserts Richard Feinberg, an
international political economy professor at the University of
California, San Diego. Though admitting that it is not a market
for the timid and risk averse, Feinberg believes that Cuba’s
lack of essentially everything makes the country a haven
for foreign capital. And let’s not forget, with Cuban salaries
averaging US$20 per month, rightly or wrongly, human capital
is one cost that investors are unlikely to lose sleep over.
“Interesting opportunities for joint ventures will emerge in
badly-needed infrastructure, in roads, ports, power generation,
telecommunications and distribution,” says Feinberg, adding
that opportunities will gradually emerge in the agriculture
and pharmaceutical industries too. Then there’s tourism,
an industry that he believes will be responsible for Cuba's
comeback into the free enterprise system. “God put that body
of land in the right place for the cruise industry” he adds. The
San Diego-based professor believes that creating a large port
on the island will greatly facilitate tourism and trade with both
Latin America and the USA—California laying just 220 miles
away and Brazil, 2,000 miles from Cuban shores.
Of course, Cuba’s geographical location might be prohibiting
for investors in other parts of the world such as Europe, China
and India. But then again, these countries already have the
economic hubs of London, Shanghai, Singapore, Hong Kong
and Dubai on their respective doorsteps. And for those intrepid
investors with real determination to reach Caribbean climes,
what’s a few hours flight?—six from London to be specific.
Jose Azel’s response to that question would likely be poles
apart from Richard Feinberg’s answer, and that in itself
epitomizes the Cuban situation. Economics aside, as a nation
that has long divided public opinion, both within and beyond its
borders, whether or not the time is right to invest is largely a
question of point of view—and of morals. If you are a “double
or nothing” kind of investor, prepared to do business with a
military regime and impoverished workforce, then pack your
beach clothes, and light up a cigar because you’re in for an
adventure. For everyone else, the time to invest in—or with—
Cuba, could be a long time coming.
FIVE REASONS
TO INVEST IN CUBA –
AND ONE REASON NOT TO.
VIRGINITY OF THE MARKET. The Cuban
economy has spent almost six decades in
isolation from global markets. So, when
an investor moves in to open a Chinese
restaurant, a travel agency or even a phone
repair shop that can deal with Apple and
Samsung devices, they are likely to be one of
the first in the country.
PROXIMITY TO BIG MARKETS. With its low
labor costs, Cuba could potentially assume
the role that India and China have been playing
for years. US and Canadian companies could
manufacture in Cuba, rather than going all
the way to Asia—a move that would help to
reduce costs and also help the environment
by reducing the CO2 emissions from shippin g.
Who knows? Maybe “Made in Cuba” will be the
next trend.
GOVERNMENT INVESTMENTS. Now that
sanctions are being lifted, Cuba will gain
back billions of dollars that were frozen in
US banks. With this money, the government
has already launched a number of large
investment programs, mainly in infrastructure
and tourism.
OUTDATED TELECOM INFRASTRUCTURE.
The easing of sanctions also has implications
for large telecommunications firms looking
to invest in Cuba, with the sale of some
specific personal communications equipment
and services now permitted. Additionally,
multinational companies are permitted to
work on projects to improve Cuba’s outdated
internet and telecom infrastructure. Almost
any IT business would be a hit in Cuba at
this stage given that the country relies
predominantly on dial-up connections that are
only fit for e-mail and basic web surfing.
ATTRACTIVE LEGAL FRAMEWORK. Cuba has
signed agreements that enable it to avoid
double taxation with 61 countries around the
world. In addition to that, trade and commerce
laws in the Communist country are relatively
weak, which is an advantage for many
companies with good lawyers.
ONE REASON TO NOT INVEST: Any foreign investor will
have to split the profits with a general wearing a green
uniform in the Cuban Revolutionary Armed Forces.
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