Cuba Business

Foreign investment in Cuba declining but revenues and profits increase

Posted July 09, 2008 by publisher in Cuba Business.

By Marc Frank | Reuters

Expectations that Cuba’s new President Raul Castro would open up the country to more foreign investors have yet to materialize, according to testimony before a parliament commission published on Wednesday.

The Communist Party newspaper Granma reported there were less investment projects than when Raul Castro provisionally took over the government in July 2006 for ailing brother Fidel Castro.

Granma, quoting testimony by a senior investment official, reported state companies are involved in 234 joint ventures and 12 cooperative production agreements, involving about 2 percent of the work force.

At the close of 2005, the government reported there were 258 joint ventures and 115 cooperative production agreements.

In July 2007 Castro called for more foreign investment, especially in agriculture, but to date the only new agreements signed and announced have been with Venezuela or risk contracts to explore for oil in Cuba’s Gulf of Mexico waters.

Cuba has formed 24 new ventures with Venezuela, which under socialist President Hugo Chavez, has become Cuba’s close ally and major benefactor.

Officials say that despite fewer investors, direct investment has increased, as have venture revenues and profits.

Foreign Investment Minister Martha Lomas told Reuters earlier this year Cuba remained interested in any offer that dovetailed with its development plans, but only major players need apply.

The Cuban state controls more than 90 percent of economic activity and usually retains more than 50 percent control over joint ventures.

Cooperative production agreements generally involve a foreign investor supplying machinery, credits and supplies in exchange for a percentage of profit or product.

(Additional reporting by Nelson Acosta; editing by Jeff Franks and Anthony Boadle)

Member Comments

On July 09, 2008, publisher wrote:

I would love to have clarification on this point:

“Officials say that despite fewer investors, direct investment has increased, as have venture revenues and profits.”

When a company leaves Cuba by choice or by encouragement by the Cuban government, is the investment and money left behind considered to be “revenue and profit”?

When Cuba decides to renegotiate the debt they owe, is that considered “revenue and profit”?

I think any way you slice it, it sucks to do business in Cuba.

Please post any foreign profitable venture news here. PLEASE!

On July 10, 2008, manfredz wrote:

I think that many firms that invest in Cuba, are really inventing in the future betting that the economics of the future will be such that they can recover any losses now incurred.
From what I’ve heard/read, Cuba isn’t the only country you can get burned as an investor - many middle eastern countries are considered a crap shoot too.

On July 10, 2008, cubanpete wrote:

Cuba has a deadbeat credit history, ranging from slow pay to no pay.  An individual with this type of credit record would not quality for a credit card.  Any supplier with any degree of business acumen should deal with Cuba on a strictly cash basis, or be prepared to write off its losses.