International trade in Cuba: The local perspective

About 30 miles from Havana, the first part of Cuba’s new Mariel port and planned trade and development zone is attracting several foreign partners looking to gain a foothold in the country’s international trade scene. So far, the Cuban government has authorized five international companies to operate here.

While she could not name specific businesses, Ana Teresa Igarza, director of the Special Development Zone at Mariel, told the AP that the foreign firms include two from Mexico, two from Belgium and one from Spain. They cover sectors including food, chemicals and logistics, represent total investment of around $50 million and are expected to launch operations in the first half of 2016.

As Cuba's economy improves, renovation projects have become a familiar sight.

These international partners and their eagerness to be a part of Cuba’s burgeoning economy are a strong indicator of the nation’s appeal for foreign developers. And while global companies wait for the U.S. to lift its embargo against Cuba—or at least the Helms-Burton act that prevents international firms from operating in both countries—Cuban professionals themselves are guardedly optimistic about how international business relations can affect the nation's economic growth and cultural character.

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In Havana, ICAP (Instituto Cubano de Amistad con los Pueblos) is a social organization that helps facilitate a better understanding of Cuba for foreigners by bringing international visitors to Cuba and connecting them with locals. Vladimir Falcon, who works in the U.S. division of ICAP, called Cuba “forbidden fruit” for American travelers, and said that Havana is currently unprepared for the anticipated “tourism tsunami.” The city’s hotel scene is currently “feeling stress,” he said, and local government is working with both local and international developers to open new hotels. Tourism, he said, is a driving force for the nation’s economy—which can float all boats. “We can use it to improve our infrastructure,” he said. “Tourism will be a door.” 

Fidel Ortega Perez, president of the Cuban Chamber of Commerce, emphasized that Cuba has had international business relations with other countries for decades, including in the hospitality field. The Spanish-owned Melia brand, for example, has 28 hotels with more than 13,000 rooms in Cuba, and more in the pipeline. French hotel company Accor has two hotels in Cuba, and Spanish-based NH Hotels has one. With several hundred international partners already operating in Cuba, the country is "very much" open to building its foreign trade. 

Foreign business in Cuba
But as noted previously, international trade with Cuba has specific rules. Private partnerships are not allowed, forcing all foreign businesses to apply to the Cuban government for permission to develop in the country. Both the private international business and the government must provide capital and then divide the profits in a pre-determined pattern. 

Approval of foreign investment applications depends on the sector and the size of the investment. Most importantly, Ortega said that the applicant must propose something that is in the interest of Cuba and its people. “Cuba has to gain and receive income,” he said. “We have opened every industry to foreign investors—if it’s of interest to the country.” 

Similarly, in terms of leadership roles, Ortega said that international developers can send some workers over to make sure the project is run efficiently and to their standards, but most of the hired workers must be Cuban, and there will often be a foreign and Cuban manager working side-by-side in many businesses. 

Falcon said that he has heard of interest in bringing the franchise model to Cuba, but that kind of business model is not a priority at the current time. In the three years since the private sector has taken off, independent businesses have flourished throughout Cuba, giving autonomy and opportunity to the rapidly growing middle class. Franchises, Falcon said, do not seem likely to help Cuban entrepreneurs at this point in the nation’s development. “Why would we accept a project if we don’t need it?” he asked. “Why would we open a door to that kind of business if we don’t need it?”

Ortega agreed that the official government position is to grow Cuba’s private sector, but due to the embargo, there are limited supplies with which to do so. “We have important social interests to protect, and to which we must give priority. [As] the national economy grows, we can offer more supplies to private businesses,” he explained. “If the U.S. removes its restrictions, Cuba’s economic growth will be significant,” he said. “The economy will grow like nobody can imagine.”

Falcon also emphasized that growing foreign trade cannot be used to “undo the revolution.” The new rules on foreign investment are “clear,” he said. “We don’t want to make Cuba dependent on anyone. We don’t want to go back to pre-1959.” As an independent country for 50 years, he added, anyone who wants to work with Cuba will need to work within Cuba’s framework. The country will need to determine for itself what kind of relationship it wants with foreign partners, and how to maintain Cuba’s interests as a priority. “We must identify how the business interest balances with the interests of the Cuban people.” Likewise, any international business would need to respect Cuba’s laws in terms of labor. Unions cannot be prevented from working in any business, and in the case of any disagreement, the court for litigation must be Cuban. “Cuba has been fighting for its right to make its own decisions,” he said. “Let us decide the best path to take for our development.”  

But foreign funds have been helping to improve Cuba’s economy for years now, and with the development of the Mariel zone, international business seems poised to continue growing. “Cuba is open to all foreign investment,” Ortega emphasized. “We do not consider the nationality.” 

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