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    July 21

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AS I SEE THINGS: Tread carefully with investments in the new Cuba

Brian M. Francis, bfancis@uwichill.edu.bb

Added 15 October 2015

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The final contribution in the series on relations between the United States (US) and Cuba addresses the all-important issue of the potential implications of lifting the embargo for Cuba as well as CARICOM. Logically, the issues that can be explored are enormous and well outside the scope of this contribution, mainly because of the word limit of the column. Nonetheless, this writer undertakes an assessment of the opportunities and risks involved for entrepreneurs doing business in Cuba when the embargo is lifted.

Before investing in any business in Cuba, one must understand the Cuban economy and its strengths and weaknesses. In which sectors lay the opportunities? What are the government’s procedures for foreign investment? These questions are among many that entrepreneurs should consider when making investment decisions.

Indeed, agriculture is one of the most important sectors of the Cuban economy and therefore presents, debatably, great potential for investments in the post-embargo era. The most important products are sugar, tobacco, bananas, cirtus, livestock and fish. With respect to oil and gas, the Cuban government has built power plants over the last decade to provide energy to the island so that they could become less dependent on imports. Of course, energy provision is of crucial importance to keep the economy going. Therefore, even with the lifting of the embargo, the Cuban government will be very reluctant to allow too many foreign companies to invest in this crucial sector and “take over” this vital natural resource.

Despite limiting the citations to agriculture and oil and gas, it should already by apparent to readers that the lifting of the embargo will have important implications for CARICOM. Why? In 1972, a few CARICOM countries established diplomatic ties with Cuba. At the end of the Cold War, relations with other members of CARICOM intensified. On Decembere 7 and 8, 2002 there was a summit on Cuba-CARICOM relations. After the summit ended, economic and social ties between Cuba and CARICOM members became even closer. There is even a protocol that allows some economic actions to take place, even if the original agreement between the parties is not signed by all of the members. This agreement covers access to the market as well as cooperation in commerce, tourism, transport, financing, investment and intellectual property rights, according to the late Caribbean economist and academic Norman Girvan.

Clearly, therefore, with the lifting of the embargo, business opportunities in Cuba will increase. Cuba will then become one of the largest markets in the Caribbean Basin. Enterprises from the US would have the options of establishing subsidiaries in Cuba or to set up joint ventures with Cuban-based companies. The US firms can then use Cuba as headquarters for distribution to CARICOM countries.

Of course, it is not likely that this outcome will happen in the near future. If the Cuban market opens up, companies will have to introduce themselves to Cuba very carefully. In the first few yeras after the lifting of the embargo there will be many difficulties. Regulations will not be cleared initially, there will be political changes and instabilities along with it, and the positions adopted by Cuba in different economic and trade agreements with CARICOM may very well also be significantly impacted. And that eventuality is perhaps the one single development that will ultimately determine the full extent of the implications of lifting of the embargo on CARICOM.

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