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Trading
Although the ZDEM has opened its doors to foreign investment, it is still in a preliminary stage of development, thus in order to support the construction buildings in the zone, the management team is offering to foreign construction companies the opportunity to settle in the area or to open operations in the zone immediately.
Currently there are some urgent needs such as, supply of light panels, ceramic flooring, toilets and sinks, plumbing parts, light and heavy metal structures, and steel pipes.
Renewable energy
5% of the energy in Cuba is obtained from renewable sources, and of these, nearly 90 percent comes from the sugar industry (biomass). Cuba currently generates 17,000 MW/hrs, of which 94 percent is obtained from plant operating with fossil fuels, for which Cuba seeks a replacement by using a system of renewable energy.
About a decade ago, Cuba began with the so-called energetic revolution, for which the government has implemented various forms of renewable energy, such as photo-voltaic system, wind power, biogas plants, pumped-storage hydroelectricity. Although 10 years have passed since its inception, the use of renewable energy on the island is still in its early stage.
Right now one of the priorities of the Cuban government is to boost sustainable development, aiming for environmental protection, plus economic growth.
Wind farms are among one of the opportunities Cuba offers to foreign investment in renewable energy , for which $3 millions budget has been estimated.
Agriculture
The updating of the Cuban economic model seeks a sustainable agricultural development with the integration of science, innovation and market, said the Minister of Agriculture, Gustavo Rodriguez.
When Fidel Castro took the power, he pledged to ensure basic food for the Cubans, where the government spends currently around $ 1. 500 000 per year. However, due to the unstoppable rising prices of the international market and the economic deterioration that Cuba is going through, it becomes almost impossible for the Cuban government to sustain its commitment. To cope with the situation, the state promotes a new agribussiness model which aims to replace imports of agricultural commodities.
Biotechnology, Pharmaceutical
It is no secret that Cuba is a leader when it comes to health. In the last 40 years Cuba has been involved in scientific research and development, with some achievements e. g. hepatitis B vaccine, the meningococcal vaccine BC (only one of its kind in the world) as well as cancer treatments.
Both the biotechnology and the pharmaceutical industry are areas of the Cuban economy where the government strives for its continuous development, which also gives the opportunity to foreign investors to cooperate in its scientific projects.
Business opportunities in the sector includes to create joint ventures abroad, to produce and commercialize from the Cuban technology, and to sign international economic partnerships agreements for the development of new products.
Tourism
The Jardines del Rey extend for 200 km on a north-west to south-east direction, in the provinces of Ciego de Avila & Camagüey, it’s composed of several cays (Coco, Guillermo, Romano, Guajaba & Sanibal).
It is considered one of the most beautiful touristic regions of the country and, based on an environmental protection program established during the development of tourist resorts, it has a well preserved ecosystem, offering its visitors the pleasure to enjoy true nature and endless opportunities related to touristic activities and recreation, such as fishing, jet ski, kayaks, and scuba diving among others.
According to a recent article published by the local press, the lake La Redonda alone receives around 400 foreign visitors on a daily basis.
Nowadays Cuba promotes and advocates for Eco-turism, therefore investment in this region promises to be one of the most attractive due to its unspoiled nature.
Real-estate market has been opened by law in Cuba, allowing foreigners to invest in housing and buildings, either for private or tourist related purposes.
The currently legal framework lays out the legal proceedings how to apply for residence permit, and also establishes who is entitled to be granted with.
The now operational Mariel port has a major container terminal with an annual capacity of 1 million containers, which
is about 3 times more than the capacity of the port in Havana. It is managed by a leading global port operator: PSA Singapore International, has 700 meters of berth length and 18 meters depth, enabling it to receive simultaneously two giant ocean vessels. Mariel has the potential to become one of the major hub ports of the Caribbean, especially in light of emerging economics in the region – Brasil, México & Chile – and the extension of the Panama canal.
Currently the Cuban government is working to develop the 470 km2 Mariel zone (ZEDM by its Spanish acronym), which will have water and electric infrastructure, highway and railway connections, logistics facilities, distribution and warehouse facilities, industrial and service parks, retail centres, workforce housing, conference facilities, recreational facilities, etc.
Cuba’s objectives are:
Something else to consider is the strategic location of Mariel port and the ZEDM. On one side the closeness to the US, because Mariel port will handle the majority of the US cargo once the embargo is lifted. On the other side it will be well connected to other major development areas within the country:
Concessionaires and users enjoying this special regime are exempted from the following tax obligations:
To provide services to concessionaires or users, Cuban and foreign permanent resident employees must first establish their labour relationship with the designated Cuban entity.
Concessionaires and users of the Zone must provide the following:
Concessionaires and users shall open accounts in freely convertible currency in any bank institutions of their choice established in the Zone (thus the banking operations must be done through the bank that has been chosen to perform business activities in the Zone). The transactions made by concessionaires and users with Cuban national companies are subject to Cuban banking regulations.
Foreign investors, whether they are concessionaires or users, once established in the Zone, have the right to freely transfer abroad – in freely convertible currency – net profits or dividends obtained as a result of the investment, as well as repatriating invested capital, without paying any taxes or bank fees related to such transfers.
Foreign citizens providing their services in the Zone – as long as they are not permanent residents in Cuba – shall have the right to transfer their earnings abroad, subject to Cuban banking regulations.
Conflicts between concessionaires and users or between them and a Cuban national company will be resolved in Cuban courts, or any other form of dispute resolution previously agreed, e.g. mediation based on agreement terms and conditions.
Changes have always generated controversy or sceptical views, and Cuba’s attempts to improve its socio-economic situation are no exception.
The Foreign Investment Act (law 118/2014) has been approved 29th March 2014 and is in force as of 28th June 2014. Compared to the old law (77/95), it establishes substantial and remarkable changes we like to discuss in this blog.
Article 4.1 – “Foreign investments within the national territory of Cuba will enjoy all-out protection and legal security and could not be expropriated, unless such action is executed for reasons of public or social interest”. Followed by article 4.2, which stipulates the legal proceedings: “If an agreement on the commercial value of investments fails to be reached, parties involved have the right to go to court”. For Cuban law this is a paradigm shift which is unprecedented.
The old law (77/95 article 3) limited the resolution of conflicts between two parties to the decision of an agency authorized and contracted by the ministry of finance.
Article 13.2 – now allows private farming cooperatives to sign into international economic association agreements.
Article 17.1 – in conformity with the modalities established in this Act, foreign investments in real estate are allowed, as well as the ownership of real estate or other property.
Worth to remember, in 2011 the Raul Castro government recognized the right to transfer the ownership of property to a third party. Therefore – as it seems to me – this is a significant achievement for the Cuban society. 4 years ago this was unthinkable!
We note that the now permitted ownership of property by foreigners had to be preceded by this internal change to the right of ownership.
Article 36.1 – decreased the profit tax from previous 30% to 15% of the net taxable profit. Joint ventures and parties to international economic association agreements shall be exempt from paying taxes for a period of 8 years as from its constitution.
Article 39 – the new law exempts foreign investors from paying tax on labour and social security contributions. Before this new act the applied tax rate has been 11% and 14% respectively.
For Cubans this new regulation for foreign investment signals a genuine attempt to revive Cuba’s economy.