Is Cuba the New El Dorado?

Is Cuba the New El Dorado?
News December 29, 2015
Exploring Cuba's economic opportunities
By Anne-Sophie Gidoin
Op-Ed Contributor

To catch 2 Billion USD in foreign investment per year, the Caribbean's
biggest island has equipped itself with an engaging legal framework.
The remedies available in case of disputes against local entities
reinforces the attractiveness of this 11 million individuals-market.

Cuba seeks foreign investment in the amount of $2 Billion USD per year
to increase its annual growth rate above 4%. Since November 2014, the
Cuban government has hence unveiled 326 strategic investment projects.

Despite extensive media coverage of the restoration of diplomatic
relations with the US during the summer of 2015, the island refuses to
depend again on a single market.

In addition to Venezuela, Cuba currently includes Spain, Brazil, Canada
and China as its preferred partners.

At first glance, resorting to internationalization to ensure growth and
development in a socialist economy might be surprising. Yet, the
leading measures undertaken by the Government confirm that the
"actualization of the Cuban economic model" is on.

The creation of ZED Mariel ("Zona Especial de Desarollo Mariel") in
September 2013 has been the first milestone towards the implementation
of an attractive framework for foreign investors. This 465 sq.m. area,
located 45 km away from Havana, is intended to become a maritime hub in
the region. But it is the entry into force of Law No. 118 – Cuba's
Foreign Investment Act – which seals the modernized legal framework.

The government targets specific sectors for investment such as
agriculture, renewable energy, the chemical and pharmaceutical
industries, infrastructure and tourism, as well as information and
communication technologies. In fact, strategic investment projects
cover a broad scope: health, education and the army being the only
fields reserved to domestic investors .

Foreigners investing in Cuba have two options. On the one hand, they
may create an international economic association with local investors.
This association either takes the form of a joint venture ("Empresa
mixta"), or of an international economic association agreement
("Contrato de asociacion economica internacional"). On the other hand,
an investor may register a totally foreign capital company (« Empresa de
capital totalmente extranjero »). In this case, the investor is able to
settle as a natural person, acting on his own behalf, or as a juridical
person setting up a subsidiary office or a branch of a foreign entity.

In practice, foreign investments shall be approved by the competent
administrative authority, depending on the form of investment. The
CEPEC ("Centro para la Promoción del Comercio Exterior y la Inversión
Extranjera") is the national agency supporting foreigners in their
strategic moves.

The tax regime applicable to joint ventures and international economic
association agreements is particularly attractive, the more so in ZED
Mariel. These companies are exempted from profit tax for 8-10 years.
They also benefit from exemptions related to social charges, territorial
contributions, customs and natural persons' income.

Last but not least, the State guarantees foreign investors free transfer
aboard, in freely convertible currency and freely of tax and fees, of
dividends and profits obtained as a result of the investment, as well as
amounts received in the aftermath of a dispute, liquidation or sale of
the company in which the investment was made. Foreign investors are
entitled to open bank accounts in the Cuban national banking system and,
upon the Central bank's approval, open and operate accounts in freely
convertible currencies in banks established abroad, and engage in
lending operations with foreign financial institutions.

Remedies available to foreign investors in case of a dispute with a
local entity complete the attractive regime set on the island.

Disputes between private parties may be decided by international
arbitration tribunals when contractually agreed. Decree Law No. 250 of
30 July 2007 updates the Cuban arbitration law. The Cuban court of
international commercial arbitration plays a key role in this
mechanism. Accordingly with the New York Convention on the recognition
and enforcement of foreign arbitral awards, which entered into force on
30 March 1975 in Cuba, foreign arbitral awards shall be enforced in Cuba
and Cuban awards shall be enforced in the 155 States members of this
Convention.

Besides, foreign investors may directly assert their rights against the
Cuban State, pursuant to 40 Bilateral investment treaties between the
island and foreign countries. These treaties protect investors from
signatory States especially against expropriation, discriminatory
measures, breach of the fair and equitable treatment standard and other
breaches of international law.

Regardless of continuing uncertainties related to political tensions,
past failures and the State's grip on the economy, the island has
managed to set an engaging legal framework. Cuba is certainly a new
Eldorado, open to daring investors.

Anne-Sophie Gidoin is an Associate in Jones Day's Global Disputes Group,
LL.M.(MIDS, Geneva).

Note: the opinions expressed in Cuba Journal Op-Eds are those of the
author and do not necessarily reflect the views of the Cuba Journal.

Source: Is Cuba the New El Dorado? | Cuba Journal -
http://cubajournal.co/is-cuba-the-new-el-dorado/