Eugenio Martinez Enriquez (Ambassador of Cuba in Spain) explains the new economic model for Cuba

FDI should account for 30% of total investment

Eva González Madrid (Spain), 16 June, 2015

In developing countries it is usually estimated that a level of FDI (foreign direct investment) at around a 20% of the total is acceptable. In Cuba we want this percentage up to the 30% because we need it, Eugenio Martinez Enriquez (Ambassador of Cuba in Spain) said this morning during the breakfast briefing to present the new Cuban economic model, which was organized by the Club of Dialogues for Democracy .

They attended the event, held at the Hotel Eurostars Madrid Tower, about 300 representatives of Spanish companies and diplomats from more than 20 countries.

Fernando Domínguez Valdés-Hevia, president of Tabacalera and Antonio Gavilanes Dumont (President of the Club of Dialogues for Democracy) also spoke at the breakfast briefing.

Under way to resume diplomatic and economic relations with the United States, the Government of Cuba shows itself as a communist regime, like others, including the one at the PRC, all of them opening the door to foreign investment and several forms of non-state ownership in their way towards a sustainable economic development and to modernize their domestic infrastructures.

The many needs that Cuba has offer a wide range of opportunities to foreign companies

Just to take a couple of examples, both Tabaclera and Baleària are almost touching two more than rosy future doing business with Cuba.

Tabacalera, for example will be very happu as soon as the US market opens to the products manufactured by Cigars from Cuba, a company owned by Tabacalera and headquartered in the Caribbean country.
The Spanish company Baleària, looks at establishing the first daily ferry connecting Cuba and the U.S.A.

Hotel chains like Melia started their positioning in the Cuban tourist market years ago and several French construction companies are doing business for a long time in the country.

Renewable energy, especially wind farms, digital training and the provision of digital services, the construction of a rail network, or turning productive the unfruitful land were quoted by the ambassador within the areas, where foreign companies would be welcomed by the government of Cuba.
The the project to revamp the port of Santiago de Cuba has been awarded to a Chinese company, said the ambassador, and “this is a major project”, he underscored.

Spain is the third largest trading partner of Cuba and currently 40% of the country’s hotel industry is managed in one way or another by two Spanish companies, as acknowledged by Martinez himself.

A brand new Law on FDI

Cuba has approved a new Foreign Investment Law, that has recently entered into force.

Under the new law thare is no discrimination between domestic investors and those coming from foreign states (including Cuban expatriates), the Ambassador of Cuba assured.
Actually the foreign investors get almost a better treatment he underscored.

There is no limit for the establishment in Cuba of companies with 100% not domestic capital. These 100% foreign companies companies enjoy fewer exemptions than those who have the Cuban State as a partner, Martinez Enriquez explained and added that there is no hinder to the repatriation of profits, once the progressive taxes on these benefits are paid.

Martinez said that the foreign investment is “necessary for the development of the economy as a strategic complement to the country’s development.”

“Cuba is a country with a high level of social development” … “the model needs to be updated in order to maintain the generation of wealth at pace to support social development over time,” he said.

A new socialist model combining state-owned companies, cooperatives, self-employment and foreign investment

Ambassador Martinez explained that “the Cuban economy will remain a socialist model where two types of property, State and private, will be combined. ”

“The State will continue to control the major means of production and, secondly, cooperative and self-employed will have a more important role in the services and the production field.” Therefore, “the mechanisms of socialist planning will remain and foreign investment will be an important source of development and modernization of Cuba,”he added.

We know other models, like the Chinese, but we do not look at anyone, the ambassador said and explained, “ours is adapted to the specific needs of Cuba.”

A free trade zone in Mariel

The ambassador referred to the Mariel free trade zone project, one associated with a deepwater port area, one of the most modern in the Caribbean Sea.
Mariel is expected to host business projects in the field of food production, alternative energy, etc.
Spain, he said, is one of the countries that has presented more projects to be developed in Mariel, he said and encouraged other companies to do so, as soon as possible, because this is an area with a limited geographical dimension and once completed there will be no more opportunities like this.

Several challenges and structural problems that need to be solved

The change will not be easy, the ambassador said, because Cuba bears a number of structural problems so that the country is facing several challenges.

First, “almost a 100% of the energy produced comes from hydrocarbons and non-renewable resources, which generate a very high cost for the State, as the State must subsidize electricity consumers.” The government’s goal is, as Martinez explained, reaching around a 30% of the generation mix from renewables, mainly the wind.

The second challenge Cuba is facing is “the low productivity of the agriculture sector, with 67% of poor or fair land and there are about 960,000 hectares of the productive land not cultivated”. Another problem about this is that we have 70% of the population engaged in an activity, farming, which generates only a 20% of our GDP and this also needs to be changed, he said.

The third problem is derived from the demographic factor. “Cuba has an aging population with an average life expectancy of 79 years, so that the Government must arry out policies to increase the birth rate.”

And, finally, “monetary and exchange duality distorts the economy and favors the import market against the export”.

Image over the headline.- Eugenio Martinez Enriquez (Ambassador of Cuba in Spain) during the breakfast briefing to explain the new Cuban economic model organized by the Club of Dialogues for Democracy. On the left, Fernando Domínguez Valdés-Hevia, President of Tabacalera. Image by courtesy of Club of Dialogues for Democracy.

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Eugenio Martinez Enriquez (Ambassador of Cuba in Spain) explains the new economic model for Cuba