Since US president Barack Obama announced in a speech on December 17, 2014 that the US would restore diplomatic relations with Cuba for the first time since 1961, and loosen some restrictions on travel and trade, a whirlwind of government and corporate activity has opened up FDI opportunities for Cuba.

On January 15, the US Departments of Treasury and Commerce released regulations that, among other things, make it easier for Americans to travel to Cuba, permit US financial institutions to open correspondent accounts with Cuban banks, and enable new telecommunications, financial services, trade and shipping activities. Some restrictions on third-country dealings with Cuban nationals were also lifted, and foreign vessels that have traded in Cuba can now proceed to enter the US.

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A coalition of food and agriculture companies immediately swung into action to put pressure on US Congress to fully lift the trade embargo that remains in place. Currently, these companies can legally export to Cuba but face severe financial restrictions. According to US Secretary of Agriculture, Tom Vilsack, Cuba imports 80% of its food and represents a $1.7bn market.

The often hostile US Chamber of Commerce called the president’s actions “a substantive and positive step forward”, citing “lessened government control or ownership of Cuban businesses” and pledged to work for the lifting of the embargo. Companies such as Caterpillar, Colgate-Palmolive and Chubb have done the same.

While the embargo remains in place, the biggest opportunities for US companies in Cuba are in telecommunications, construction materials and more favorable agricultural trade, said Paolo Spadoni, a political science professor at Georgia Regents University in Augusta, Georgia, and author of two books on the Cuban economy. If the embargo is lifted, he expects tourism, infrastructure, utilities, construction, telecommunications and biotechnology to benefit. And without fear of harming their US operations by breaching the embargo, non-US companies are also likely to enter the fray, Mr Spadoni noted.

Indeed, Thomas J Herzfeld, chairman of the Herzfeld Caribbean Basin Funds, which invests in companies that could benefit from change in Cuba and its neighbours, said he is fielding calls from potential investors worldwide. Mr Herzfeld, who is also bullish on transportation, plans to invest $500m in Cuba-related projects this year and substantially more in future, and estimated it will take billions of dollars to rebuild Cuba. He likens the opening of Cuba to the fall of the Berlin wall or former US president Richard Nixon going to China. 

For its part, the Cuban government, in 2014, passed a new law to attract FDI that, among other things, allows 100% foreign ownership of Cuban businesses. Still, Mr Spadoni said red flags remain. Cuba has a history of unmet payment obligations, a formidable bureaucracy, a state employment agency that controls the hiring of workers, and your business partner or counterparty is likely to be the state.