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Cuba, an investment destination?

| News | Cuban Desk

Ignacio Aparicio analyzes this year's forecasts and the situation in Cuba at the investment level

Ignacio Aparicio, managing partner of Andersen's Commercial Department in Spain and director of the firm's Cuban desk, analyzes the situation in Cuba at the investment level. He affirms that, 2020 was a very tough year for the world economy and also for Cuba. In addition to the effects of the pandemic and tourism at a low level, there is the lack of liquidity in foreign currency, a general shortage of supplies, the problem of late payments and the strangulation it has suffered from the continuous measures of the US government - among others, the cuts in remittances from the US, limitations on US travel, the disappearance of US flights and cruises to the island, as well as the effect that the activation of Title III of Helms Burton (the possibility of suing entities in the US that "traffic" in assets confiscated by the Revolution) has had on the investment climate.

Aparicio notes that, in relations with the US, it will be necessary to await developments and new measures by Biden, who has anticipated that he will resume Obama's policies and will surely lift many of the sanctions imposed by Donald Trump who, before leaving the White House, has once again included Cuba this January among the countries sponsoring terrorism, a list from which Obama removed it in 2015, which will make the country's access to international financing even more difficult.

He adds that, the official figures for 2020 are not bad compared to other years. According to Cuba's Ministry of Foreign Trade and Investment, in 2020 the country obtained foreign investments of more than two billion dollars through 30 authorised businesses on the island (an amount that corresponds to the average of the last three years according to official figures).

But Cuba faces 2021 full of uncertainties. In addition to the 2020 effect and Covid, it remains to be seen how the monetary reunification underway will develop, which will undoubtedly have a major social impact, generating price rises and inflation.

In addition, necessary reforms must be undertaken to boost the private and cooperative sector, as well as to encourage foreign investment. The replacement of Raúl Castro as head, as first secretary, of the communist party due to the expiry of his mandate in 2021 is yet another element of a new scenario in which the island will find itself.

Although Cuba is not a recurrent market for Private Equity, due to the particularities of its economy and legal regime for foreign investment, it nevertheless offers many opportunities for medium- or long-term development in investments linked to production. The government's priority is that investment projects should contribute to increasing exports. Sectors such as infrastructure, renewable energy and environmental transition (water management, waste management, biotechnology and clean energy) are some of those that the Cuban government considers strategic and promotes in its portfolio of opportunities that it periodically publishes and in which it may be interesting to position itself.

The government is seeking to concentrate investment in these strategic sectors, in addition to food production, since every year considerable amounts of foreign currency are spent on acquiring supplies that are insufficient and do not correspond to the population's demand. In short, another objective is import substitution; domestic shortages also encourage investment in these basic and/or traditional sectors, such as agri-foodstuffs, but also logistics, technology and industrial equipment, among others. This is without forgetting the tourist-recreational and hotel industry, which is currently ailing, but still has great potential for development and growth".

See the article in Iberian Lawyer. 

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