Is Cuba the New El Dorado? December 29, 2015 by Cuba Journal - - PDF document

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Is Cuba the New El Dorado?

December 29, 2015 by Cuba Journal

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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 reinforce 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 rst glance, resorting to internationalization to ensure growth and development in a socialist economy might be surprising. Yet, the leading measures undertaken by the Government conrm 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 rst 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 specic 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

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cover a broad scope: health, education and the army being the only elds reserved to domestic investors . Foreign investors 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

• f 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 ofce 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 prot tax for 8-10 years.

They also benet 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 prots 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 nancial institutions. Remedies available to foreign investors in case of a dispute with a local entity complete the attractive regime set on the island.

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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,

• pen to daring investors.

Anne-Sophie Gidoin is an Attorney in Paris, LL.M. (MIDS, Geneva). Follow her on Twitter @ASGidoin. The views set forth in this article are the personal views of the author and are not intended to reect those of its employer or clients.

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