Country Risk Rating

The highest-risk political and economic situation and the most difficult business environment. Corporate default is likely. - Source: Coface

Business Climate Rating

The highest possible risk in terms of business climate. Due to a lack of available financial information and an unpredictable legal system, doing business in this country is extremely difficult.


  • Tourism and mining (nickel, cobalt) sector and agricultural potential
  • Agriculture, trade, hospitality and construction (over 200 trades) open to the private individual and co-operative sectors
  • Skilled, relatively cheap workforce
  • High quality medical and education sectors
  • Fairly satisfactory social indicators
  • Low crime rates and anti- corruption policy
  • Political Dialogue and Co-operation Agreement with the European Union since 1st November 2017, already beginning regarding FDIs


  • Vulnerability to external factors (climate, commodity prices, Venezuelan aid)
  • Weak productivity in public sector and agriculture
  • Low levels of investment and inadequate infrastructure
  • Burdensome administrative processes and still very new trade regulations
  • State control of wholesale trade, credit, foreign trade and foreign investment
  • Subsidies for basic products (those featuring in the libreta or Supplies booklet) put pressure on public spending
  • Limited access to external finance
  • Exchange rate unrelated to reality upholding dualism of the economy, the black market, scarcity economy and the informal sector
  • Lack of statistical transparency

Current Trends

Activity Subject to External Factors

Growth is expected to pick up only slightly in 2018 as it is still constrained by external factors. Poor economic and political conditions in Venezuela will continue to dampen Cuba’s growth by limiting deliveries of crude oil, refinement of which is a major source of foreign currency. Renewed tensions between Cuba and the United States following allegations of sonic attacks on members of the US diplomatic corps led to the re-imposition of sanctions in November 2017. Individual tourist trips for US citizens are again limited and a blacklist of entities with links to Cuba’s military service has been drawn up. The return of these restrictions has led one rating agency to change Cuba’s sovereign rating outlook from positive to stable. The impact of the destruction linked to Hurricane Irma (late September 2017) is, on the other hand, expected to lessen and the tourism and agriculture sectors should pick up. In 2017 the number of visitors to the Island beat the 2016 record to total over 4 million visitors. The sector is expected to continue to grow, despite the new sanctions, as US tourists represented only 7% of the total in 2016. From the perspective of investments, the Cuban government has released an expanded annual foreign direct investment opportunities portfolio (396 projects in 2017). A special economic zone has even been set up at Mariel port to develop the biotechnology, agro food and renewable energy industries. Household consumption is expected to benefit from the positive impact of tourism in the form of jobs and increased remittances from expatriate workers mostly living in the United States. Inflation should remain within the average of previous years, around 5%, as most prices and wages are controlled by the State. Finally, net exports will make a negative contribution to growth with still very low sugar prices, nickel below its historical levels and lower refined oil output.

External Conditions Influencing Budget and Current Accounts

The explosion in the budget deficit observed in 2017 following hurricane Irma is expected to start to shrink in 2018. The cut in Venezuelan aid, the reduction in exported services (education, healthcare) to Venezuela, Angola and Brazil, as well as low sugar prices are putting considerable pressure on the public finances, at a time when spending is set to rise in the run-up to elections. The government is relying on the controlled development of the non-governmental economic fabric to increase tax receipts. The public debt has increased in recent years but there is a lack of data to analyze its structure. The December 2015 agreement with the Club de Paris opened the way to bilateral reconstruction, following the 1986 default, through an arrangement to clear interest payment arrears and negotiate repayment of the principal on the initial debt by instalments over eighteen years, and a grace period for interest payments up until 2020. From the perspective of the current account, the trade balance shows a deficit, with the country very dependent on imports (of food and energy). The economic downturn in Venezuela is likely to weigh on exports obliging Cuba to buy oil at market prices for its refining industry. Nevertheless, higher nickel prices should partly offset this drop in oil income. Services are likely to show a surplus, enlivened by growth in the tourism sector. The influx of remittances from emigrants living in the United States is a major source of finance and a source of foreign exchange. Finally, the project to merge the two Cuban currencies, the convertible peso aligned with the US dollar (for tourists and worker remittances) and the domestic peso (24 CUP to 1 USD) in which wages and locally produced goods are denominated, remains uncertain.

Towards Political and Diplomatic Handover 

In 2018, the Cuban political class is expected to change following the results of the presidential elections in February, which will see Raoul Castro’s step down as Head of State (new limit of two terms of office). The municipal elections of 27 November 2017 were a precursor to the handover, with particular attention paid by those in power to limiting the participation of dissident candidates so as not to interfere with the appointment of the new Head of State (elected by the parliamentary assembly whose members are appointed by local elected representatives, before being confirmed during parliamentary elections). The current vice-president Miguel Diaz-Canel is standing as successor to Raoul Castro who will continue to lead the Cuban Communist Party. The army remains omnipresent, both in the institutions as well as in the economy, limiting the risk of instability. Meanwhile, Cuba’s diplomatic strategy has recently evolved and the country is looking for new allies in the face of Venezuelan default. The new agreement between Cuba and the European Union, which entered into force on 1 November 2017, will facilitate dialogue and co-operation between Cuba and Europe. Relations with Russia have also become closer, with the shipment of large quantities of crude oil and participation in energy and rail infrastructure projects.


Coface (01/2018)