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Foreign Investment is an Active Element in Cuba’s Economic Development

Foreign Investment is an Active Element in Cuba’s Economic Development

Photo: TTC

TTC Special. Interview with Déborah Rivas Saavedra, general director of foreign investment of the Cuban Ministry of Foreign Trade and Investment.

TTC – Director, in accordance with Law 118/2014 on Foreign Investment which recognizes that modality as vital to have access to new markets and to introduce Cuban products and services in international value chains, what is the result that validates that premise?

We always say that the changes in regulations, on their own, are not sufficient to meet the goals we have proposed with a view to increasing the attraction of foreign investment. The issuance of a new Law and its complementary legal framework responded to a change of public policy with respect to this subject, in accordance with the Economic and Social Policy Guidelines approved at the 6th Congress of the Communist Party of Cuba.

There’s even a difference between this body’s 6th and 7th congresses: in the 6th it was considered as a complement, and already in the 7th it is incorporated as an active and fundamental element; that is to say, already in the programmatic documents of the Party, in the updating of the model and in the bases of the economic and social development plan up to 2030, there is an express recognition of the need to use that investment.

That is to say, what is a qualitative leap is that at this time it is considered as a fundamental element for the country’s economic development, especially for certain sectors identified as strategic in the short- and mid-term.

Therefore, I would say that in these four years we have achieved a greater understanding by the national economic actors of the political will of the Party and the Cuban government to recognize foreign investment as a source of development, not just to obtain capital, technology and foreign markets but even modern management methods, the substitution of imports and to generate productive linkages.

From 2014 to 2018, the Business Opportunities Portfolio has grown systematically: we have achieved that the enterprises add the chapter of foreign investment in their respective expansion strategies.

Army General Raúl Castro as well as President of the Councils of State and of Ministers Miguel Díaz-Canel Bermúdez have been clear about this and have insisted on how fundamental it is to use foreign investment, that we have to be audacious and creative; and that has already been incorporated in the mentality of our business system, which is reflected in the increasingly more wide-ranging and diverse business portfolio.

We cannot forget that the strengthening of the blockade in these last two years has a negative impact and continues being the principal obstacle to attract foreign capital. However, the growth of the Mariel Special Development Zone (ZEDM) has been stable and users have increased. Moreover, outside of this zone, the projects with foreign investors, in accordance with the strategic sectors defined by our country, have been increasing. We consider that we can continue advancing and that the change of Law, and especially the change in policy, will continue giving results, which will start consolidating gradually.

Last year 2.3 billion dollars in investments were attracted as committed capital, which are going to enter the country to the extent that the projects start being executed. In 2018, although it still hasn’t concluded, there are also new concretized businesses, approved reinvestments and projects in an advanced stage of negotiation that can be closed before the year ends.

We are not satisfied with the results and, consequently, we will continue working with all the agencies. There’s a checking system by sectors; even President Díaz-Canel personally holds monthly discussions on the subject and he has indicated that it be assessed in the Council of Ministers meetings. We are visiting the established enterprises and insisting with all the negotiating groups to concretize the projects.

TTC – In essence, the approved modifications to the complementary regulations of the referred Law stem from what and what benefits do they offer investors?
This year modifications were approved to the Law’s regulations, which are precisely geared at facilitating the processes associated to foreign investment: from the domestic point of view, we assess which are the aspects we can improve to make the paperwork process shorter and that the projects be concretized faster.

And that is the impact that the modifications have: the dossiers will be made with less documents, with a lower level of engineering to present the economic studies, and that should contribute to investors being able to establish themselves in Cuba faster to start the investment process.

TTC – Does the draft of the constitutional reform currently being debated modify the bases of the current Law on Foreign Investment?
The draft constitutional reform confirms the importance we are giving to foreign investment in all the programmatic documents, because it explicitly refers in the economic fundaments that the State guarantees it. This is, in addition, in accordance with investment promotion and reciprocal protection agreements we have signed with other countries.

That it be incorporated into the Constitution implies that it ratifies the guarantees it gives investors, which provides legal transparency and important bases for the establishment of foreign investment in the country. And, at the same time, it stipulates that it be carried out according to the current law, that it is not like in other cases which are laws that we will have to draw up; we are especially fortunate that it is a law that is already in force, it is public and known to all investors.

In general, it ratifies and endorses what we had already been doing and stipulates on a constitutional level the guarantees the State gives to foreign investors. The previous Constitution already stipulated it, it’s not new, but not in such a clear way, and this new one also adds such guarantees.

TTC – Could you mention some of the new projects being executed, associated to the Cuban economy’s strategic sectors?
Well, when referring to the sectors identified as strategic we are speaking of tourism, renewable energy sources, food production, manufacturing industry, hydraulic resources, oil industry; construction, which has an impact not just as a sector but also in a transverse core of the foundations, which is the development of the infrastructure….

Another strategic sector is the pharmaceutical, biotechnological and biomedical products industry. Regarding this, it’s worthwhile mentioning BioCubaFarma (Biotechnological and Pharmaceutical Industries Group), which is currently negotiating several projects and it recently announced the creation of the first joint venture between Cuban-U.S. companies, Innovative Immunotherapy Alliance S.A., between the commercial branches of the Cuban Molecular Immunology Center and the U.S. Roswell Park Comprehensive Cancer Center, for the development of innovative cancer products. Certain clinical trials are currently being made in the United States, and they have established themselves in the ZEDM which, for us, is the spearhead in the attraction of foreign capital.

There’s another strategic core which is Cuba’s insertion into the international economy, in which foreign investment plays a transcendental role, because if we achieve the productive linkages we will in the same way link to exports and we will insert ourselves into the international value chains.

We have recently approved several new projects: photovoltaic parks for power generation; businesses in tourism with international chains, for example, from Mexico, which we didn’t have – in this case with the Posadas Group; Vietnam, with Viglacera, and Singapore, with Banyan Tree; the new Cuban-Italian joint venture Comital S.A., for the production and marketing of fresh pastas.

Added to this are the management contracts of the Havana cruise terminal with a company from Turkey, which is entering Cuba with this business; with Italy, for the production of knitted fabric and clothing, in the light industry; with Australia, for oil prospecting and extraction, and management in mining, both of which are risk management.

That is to say that, despite the blockade, this year there are several closed projects and others that are in the negotiation stage. In all these sectors identified as strategic important businesses have started being concretized and in the new Portfolio there’s much more. The opportunities have been increasingly identified by national businesspeople in order to attract investors for the development of their enterprises, which contribute to the country’s Gross Domestic Product.

TTC – Principal countries that undertake investment projects in Cuba….
There’s a guideline from the 7th Congress, which comes from the 6th, on the diversification of the investors’ origins. We cannot continue depending on a single market; in Cuba’s history, since the period of the colony, it has been demonstrated that that dependence on a single supplier is not viable, and that is why we are diversifying the origins of the capital.

Thus, it can be appreciated that since the approval of Law 118 we have been able to attract investors from new markets that before didn’t have representation in Cuba, for example from Vietnam, India, Singapore, South Korea, and even, as I said before, the United States. I want to say with this that we have been opening little by little the gamut of the investors’ nationalities, which until 2014 were basically European, fundamentally Spanish, and Canadian, but with the new Law and all the proactive promotion being carried out, we have been diversifying the countries.

It is not enough, we must continue diversifying the origins, attract more capital from Latin America, not just from Mexico and Chile, with which we have recently approved new businesses, but rather at the same time from Asian countries and some Africans that also invest abroad.

We must become integrated, because today we have cooperation ties and very good relations with many of the world’s nations; it is necessary to equal the economic and investment relations with the political and cooperation relations we maintain. That is one of the challenges we are committed to and that are based on the guideline focused on never gain depending on a single market or a single supplier for this development.