Cuba Opening Up to Receiving Foreign Investment

On Saturday, Cuban legislators approved a new measure to help attract foreign investment into the country. The law makes initial investment in Cuba free of taxation and increases lawful protection over these finances. This new piece of legislation comes after a year of disappointing economic growth, which caused Raul Castro and Cuba's government to put forth a series of reforms to fix and modernize Cuba's economy. While many agree that increased foreign capital in Cuba would be highly beneficial to the nation, the fact remains it is still a very uneasy place to do business and the future impact of this law still remains uncertain.

The incentive behind the law is for Cuba to get its economic growth to a higher and more sustainable level. As of 2013, its growth rate was 2.7%, which its far below its annual goal of 7%. This is the level that economists argue will help Cuba's economy expand much further. To reach this goal, Cuba estimates that it will need up to $2.5 billion in foreign direct investment. As the country is still cut off from investment from the United States because of its embargo, capital from other big business countries is what Cuba is now seeking.

With the advent of this law, set to take effect in about three months, Cuba is hoping to become an attractive location for international business. Investment opportunities will be available in almost all Cuban economic sectors, and approval for these investments will take less time than normal. More measures that this law is taking include reducing taxes on profits from 30% to 15%, giving new investors a tax-free period of eight years, and getting rid of a labor tax. Added to the appeal of investment in the country are the several industries and economic sectors that could potentially boom under cooperation with foreign partners, including agriculture, metals, infrastructure, and real estate.

Investors, while intrigued by these prospects, are still uncertain about doing business with Cuba, mostly because the country has an unfavorable history with past investors. Anti-corruption campaigns in the country have been known to try and jail former investors in the country without further notice. The Cuban government is also notorious for hearing outside investment proposals and then doing absolutely nothing about them. As for the proposals that end up being accepted, the Cuban government will tend to take complete charge of those projects once they take off, leaving their investors in the dust with extremely low returns. While many countries have been able to expand their enterprises to Cuba with success, such as Switzerland, Great Britain, and Spain, the harsh fact remains that Cuba has ended more partnerships and investments with foreign countries than it has kept alive.

While this new law could lead to higher investment in Cuba and more economic benefits, the fact is that the country will have to improve its foreign relations in order to achieve its goal. Do you think Cuba will be successful in its venture to achieve more foreign investment?