Cuba's Investment Climate

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 thebest 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, resortsand 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 peopleearning 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 multidestinations within the island. The government has even offered nonsocialistic 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 between1,000,000 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 mentionall of the Americans who entered through third countries. Tourism has the potential to produce even more money annually as Europeansand 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 ofconducting business will be different than what you expect. You are best advised to try to play by the rules and adapt to the way thingswork in Cuba. The best option to invest in Cuba is actually with a panamanian coporation (see www.taxhavens.us )  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. A good guide to Live and invest in Cuba is the e-book published by www.expatsebooks.com .

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.