International investment in Cuba is extending beyond the realm of tourism into areas such as banking, construction, infrastructure, mining and energy. But the challenge for the country, suggests Hermenegildo Altozano, partner at Lovells in Madrid, is to press ahead with the process in the face of the long-standing US restrictive policy and regulations vis-Ã -vis Cuba.
Alongside continued interest in resort hotels and tourism infrastructure developments, and agribusiness (tobacco, sugar), he is now however seeing increasing emphasis on road and airport projects, and further developments in the mining industry (nickel, ferronickel and cobalt) to capitalise on global demand.
“This past year has seen a new trade finance deal for the sugar industry, new joint ventures with local partners to develop mining activities, the development of a luxury resort in Cayo Largo and developments towards the construction and operation of a paper production plant,” he says.
Likewise, the country is placing renewed emphasis on its oldest export crop, sugarcane, and there are now concerted oil exploration efforts off the coast. “Though far from idyllic, the economic outlook for Cuba is not as negative as that portrayed. Some of the predicted growth will inevitably result from the investments being made by energy companies searching for oil and the international companies involved in tourism development.”
The elevation of Raíºl Castro as President, following Fidel Castro, is also significant, says Altozano. “Raul remains loyal to his past but he is promoting certain economic reforms in order to gain efficiency, which implies changes in property ownership, the economy and institutions like the judiciary.”
Equally important would be a change to international investment procedures, which remain subject to case-by-case approval. “It is likely that the Cuban authorities will increase their efforts to attract larger sums of investment and to allow international financial institutions to fund them. But while international banks are increasingly active in development capital and structured finance transactions, access can still be problematic due to the US’ restrictive policy.”
The lifting of restrictions would increase trade and give better access to long-term loans, but in the mean time the challenge for both Cuba and for international companies is to increase the investment protection and to work around those restrictions, says Altozano.