Since 2014, Cuba has emphasized that its economic development largely depends on increasing the Gross Domestic Product (GDP) growth rate, which over the last decade has been steady at around 2%, almost half of the Latin American average over the same period.
Analysis of international experiences demonstrates that economic progress requires a sustained growth rate of at least 7%.
As the island does not have the financial resources to achieve such a rate, it has resorted to the attraction of foreign capital.
Conscious of the importance that the current updating of the Cuban economic model has for sustainable development, the Chamber of Commerce of the Republic of Cuba (CCRC) estimates that direct foreign investment flows of around 2–2.5 billion dollars per year are required to ensure the prosperity and sustainability of the island’s socialist socio-economic model.
Despite the positive balance of 2016 for this body, which we could describe as the spearhead of the domestic business sector in terms of international economic relations, it is imperative that foreign trade activities gradually strengthen through 2017, and the foreign investment process becomes more dynamic, in order to meet the country’s economic needs.
As such, the words of Army General Raúl Castro Ruz, President of the Councils of State and Ministers, on closing the eighth period of ordinary sessions of the National Assembly of People’s Power eighth legislature, should be internalized. On that occasion he called to “rid ourselves of unfounded fears of foreign capital; we are not heading toward, nor will we head toward capitalism, this is totally ruled out, as is established in our Constitution, and will be maintained, but we should not be afraid, and erect obstacles to what we can do within the framework of existing law.”
TOWARD EFFICIENT BUSINESS DEVELOPMENT
Interest in doing business with the island has continued to grow, encouraged by the entry into force of Law no.118 on Foreign Investment.
Over the past year, the major attractions of the Cuban market have been concentrated in the development of renewable energy, construction, transport, food production, tourism, industrial recovery and environmental protection.
In the context of a difficult international scenario, marked by the restrictions imposed by the U.S. economic blockade and the contraction of the markets of the island’s most important trading partners, Rodrigo Malmierca Díaz, minister of Foreign Trade and Investment (Mincex), has referred to the complex moment that the Cuban economy is facing, aggravated by the current problems existing on the island regarding foreign currency liquidity.
The Mariel Special Development Zone (ZEDM) is one of the main focuses of foreign investment. Photo: Courtesy of the ZEDM.
Meanwhile, the President of the CCRC, Orlando Hernández Guillén, has noted that the immediate plans of this body, which today represents 709 Cuban enterprises (six more than in 2016), seek to change obsolete mentalities regarding foreign investment, and support the internationalization of national businesses.
According to Malmierca Díaz, it is imperative to improve human capital training and have a more active position in the search for new investors, suppliers and export destinations.
The official has called for maximum efficiency in the use of available resources, and for careful study of every business opportunity that presents itself, as deficient training, delays, negligence or passivity in negotiating processes can not be justified when there exists a well-defined Portfolio of Foreign Investment Opportunities with a total of 339 projects, with a total value of over 9 billion dollars.
Likewise, he has referred to “the considerable efforts the country is making to avoid delays in the fulfilment of financial obligations associated with trade relations impacting on the gradual recovery of external credibility.”
Having highlighted the importance of diversifying economic and commercial relations, in order to vary sources of income and not return to depend on a single product or market, Malmierca Díaz confirmed the high responsibility corresponding to export companies of goods and services in these efforts, with a preference toward those with greatest value added and technological content.
The updating of the 2016-2021 Economic and Social Policy Guidelines, approved by the 7th Party Congress in April 2016, coincided with paying maximum attention to the selection and control of officials and businesspeople that participate in external economic relations, and to their ethical conduct according to the principles of the Revolution, and their technical, economic, financial, and legal training.
The strategic document also dictates that the planning process for the production of goods and services should guarantee a dynamic of GDP growth, and consequently of the country’s wealth, which will lead to an improvement in the population’s wellbeing, with equity and social justice.
THE DIVERSIFICATION OF TRADE RELATIONS
One of the key aspects of Cuba’s trade policy is to promote “whenever economically justified and convenient, the establishment of companies and alliances abroad, that encourage the better positioning of Cuba’s interests in external markets,” as well as maintaining the priority and attention to the main trading partners of the country, and achieving greater stability in securing income.
In this regard, Mincex Director General for Foreign Investment, Deborah Rivas Saavedra, has highlighted the need to create a true export vocation at all levels, to base the most important and strategic decisions on market studies, to homogenize the methods of the advisory enterprises of the country, and continue to make the participation of domestic entities in foreign trade more flexible.
The most recent data published by the CCRC reveals that working agendas were drafted for 1,536 companies in 2016, through 250 business visits from 67 countries. Of these, Japan, China, Spain and Mexico, stand out as the most frequent visitors to the island.
Meanwhile, a total of 50 business forums were organized (almost double that of 2015), linked to governmental and institutional missions received in the country. Among these it is worth noting those held on the occasions of the visits of the prime ministers of the People’s Republic of China and the Canadian province of Quebec; the presidents of Portugal, Honduras and Austria; the Deputy Federal Minister for Foreign Affairs of Germany and the Foreign Minister of Iran; as well as the ministers of Trade and Industry of Antigua and Barbuda, Barbados, Curacao, Ecuador, Italy and Singapore; and the Minister of Planning and Investment of Vietnam.
With the aim of strengthening mutual understanding, 24 agreements were signed (14 more than in 2015), nine of which with China; and the Cuba-South Korea Business Committee was established. With Mexico, Spain, Holland, Italy, Russia, Switzerland, Hungry, Vietnam, Panama, Ukraine, Chile and China, there are now a total of 13 such committees.
According to the report on Resolution 70/5 of the UN General Assembly, entitled “The Necessity of Ending the Economic, Commercial, and Financial Blockade Imposed by the United States on Cuba,” presented last October, the repercussions of this unjust policy on the island’s foreign trade and commerce between April 2015 and April 2016, amounted to $4,106,878,558 dollars, which “represents an increase of $255,962,129 when compared to the repercussions recorded in the previous period.”
The text indicates that the revenues not earned for the export of Cuban goods and services to the United States or third countries, due to the application of the economic blockade, was the indicator with the greatest losses in this sector. In the same period, Cuba lost out on possible revenues of $3,149,284,420 dollars in this regard.
However, in the context of the reestablishment of diplomatic relations with the United States, and the limited measures approved by the Obama administration, Malmierca Díaz has reiterated that Cuba does not discriminate against U.S. companies, but supports mutually beneficial business relations.
A NEW ERA WITH THE EUROPEAN UNION
After 20 years of the application of the so-called EU Common Position on Cuba, on December 12, 2016, Havana and Brussels signed a Political Dialogue and Cooperation Agreement, which was in the making for almost a decade. While this agreement is yet to be ratified by the EU Council of Ministers, and requires the approval of the European Parliament, according to the Cuban President, it demonstrated that Cuba is open to building a new era of relations with the EU, on the basis of respect and reciprocity.
The unilateral Common Position, adopted by the bloc in 1996, and marked by sanctions, was always considered by Cuba to be interventionist and discriminatory. In fact, Cuba was the only Latin American country not to have a bilateral association or cooperation agreement with the EU.
According to Cuban Foreign Minister Bruno Rodríguez Parrilla, this new agreement with the European Commission is the basis for a peaceful, civilized and beneficial coexistence, regardless of its dimensions, socio-political models or levels of development.
One of the three essential aspects of the text surrounds the chapter on trade which, according to Mincex Deputy Minister, Ileana Núñez Mordoche, is an instrument to facilitate exchanges and cooperation regarding trade and investment between Cuba and EU partners.
The official noted that the Agreement, together with the restructuring of Cuba’s debt with the Paris Club, and the opening of financial facilities, create better conditions to increase the European presence in the medium and long term development of the island.
The EU is currently Cuba’s second largest trading partner, after Venezuela, and its largest foreign investor, as well as the origin of a third of the tourists visiting the island. Among the ten main trading partners of the island are three EU nations: Spain, Italy and Germany.
From 2008 to date, with the push for Cuba’s integration into the global economy, cooperation projects (20 of which are already underway) have been approved for a total of 90,000,000 euros, linked to culture, food safety and security, animal welfare, renewable energy, transport and environmental and heritage protection.