At the Caribbean Investment Summit in Miami in May, one of the few countries from the region that did not send an official representative was nonetheless front of mind for many attendees and popped up repeatedly in discussions about FDI: Cuba.

The most populous country in the region, Cuba is coming out of the shadows of sanctions and enjoying a long-awaited rapprochement with the US. Foreign investors are circling the island with interest, chomping at the bit to tap this enticing, newly opening market. Its neighbours have reason to be worried by the competition Cuba will now present as a tourist and investment destination, although many of them are talking about how they can benefit rather than lose out from Cuba’s entrance into the global market. 

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Competing for capital

There should indeed be scope for mutual gain, but now that Cuba seems serious about upping its game in tourism and attracting more foreign investment, it looks to be a formidable competitor. After heightened anticipation as the diplomatic process with the US moved towards conciliation and the subsequent lifting of a decades-long trade embargo, Cuba is crystallising its FDI offer. While working still within the construct of the country’s long-held socialist principles, Cuba is intent on finding a way to engage the international private sector and bring in much-needed foreign capital.

“The goal is to increase GDP by 5% a year, so we need $2bn to $3bn of FDI yearly. The objective of our policy is for FDI to play an important role in meeting our economic goals and helping our country's development,” says Deborah Rivas, director-general of foreign investment at Cuba's Ministry of Foreign Trade and Investment. “Foreign capital helps us implement our policy objectives as a developing country. In the end, there’s not a contradiction [between FDI and socialism]. Cubans benefit from foreign capital.”

She adds: “We have a clear public policy to attract private capital in priority sectors.” These include tourism, energy (especially renewables) and health – although officials stress that other sectors are also open to foreign investment. Unveiling a portfolio of 326 ready-made investment projects at the Havana International Fair in November 2015, government officials said they hoped the projects would draw in more than $8bn in investment.

Building up tourism 

Tourism is a top target. In 2015 Cuba attracted 3.5 million tourists, a 17% increase on the previous year and with travel restrictions for Americans being eased by the US government, this number looks set to keep rising faster than hotels can be built. The Cuban government wants to gear foreign investment in this sector to the construction of new hotels and real estate. Indeed, it is promoting projects such as the building and commercialising of top-quality hotels (five projects involving 11 different hotels), real estate development of golf courses, hotel management and construction involving 21 different resorts, and marina management (seven projects).

“We currently have 66,000 to 70,000 hotel rooms and 10,000 in private hands. But it’s not enough; we need to increase capacity. This is one of the sectors that we’re opening actively,” says Ms Rivas.

Investment law is evolving in order to catch up and there is a new openness to investment structures and tax policies that are closer to the international norm, according to Antonio Carricarte, first deputy minister of foreign trade and investment. “We typically have worked through joint ventures but now we’re recognising other forms of investment and exploring new types of contracts,” he said at the Annual Investment Meeting in Dubai in April. “We are also seeing a shift in tax policy – corporation tax was 30% but has been reduced to 15%. And we are setting the timeframe for permit approvals into the law.”

Cuba’s Caribbean neighbours, take notice.