Foreign Investment In Cuba - U.S. Chamber Of Commerce

Foreign Investment inCuba,

CubaPlace to invest anddo business.Privileged geographical location.2Favorable conditions to be aproductive and commercial hubfor the region.

CubaPlace to invest anddo business.Access to the Cuban domestic market,including the growing tourism industry,and the countries of the region.GDPGross Direct Products80.656 billion dollarsImports of goods and services13 billion dollarsExport of goods and services17.812 billion dollars3

CubaPlace to invest anddo business.Human Capital Development.Highly educated and qualified labor force.Scientific potential from investing for over50 years in education and science.More than 20 universities, dozens ofresearch centers and prestigious scientificinstitutions.4

CubaPlace to invest anddo business.Natural conditions thatrepresent comparativeadvantages in tourism.Potentialities of the sector. 3 million visitors in 2014. 3.7 million in 2015,It grew by 17.4 %.5

CubaPlace to invest anddo business.Relatively wide transport, communications and industrialinfrastructure.Investment in the Mariel Port and its Container Terminal.Other ongoing investments at ports, airports and railroads.Information society process and efforts to increase Internetaccess.6

CubaPlace to invest anddo business.Cuba has expanded and diversified itseconomic relations.Increased exchanges in trade, finance,investment and cooperation.Trade relations with over75 countries.The trade has been tripled inthe last 10 years.7

CubaPlace to invest anddo business.Commitment to the Latin American and Caribbean integration.Signature and implementation of mid- and long-term bilateraleconomic agendas with several countries.Reorganization of international financial obligations and strictcompliance with the commitments.Access to finance medium- and long-term infrastructureprojects in China, Russia, Brazil, among others.8

CubaPlace to invest anddo business.Foreign investment is one of the aspects for updating modelthat have had greater significance.PolicyTo consider foreign investment as an important sourceof development.Objective: To attract foreign investment flows between2 and 2.5 billion dollars a year.RegulatoryFrameworkA new law and a package of complementarystandards was issued. Updating the legal framework.ZED MarielCreation of a Special Development Zone with specialsystems that encourage the attraction of foreign capitaland new technologies.ForeignInvestmentPortfolioThe Portfolio was unveiled in November 2014 and hasbeen widely spread.12

SPECIALDEVELOPMENTZONE MARIEL

The ZEDM has favorable locationandlogisticalconditions,especially since the investment inits port and container terminal.It provides an attractive specialtreatment for foreign investors,more favorable than the oneapplied in the rest of the country.Its operation is regulated by Decree Law No. 313, Decree No. 316and other regulations issued in September 2013.MARIEL SPECIAL DEVELOPMENT ZONEThe creation of the Special DevelopmentZone Mariel (ZEDM) promotes the attractionof foreign investment.14

HavanaMarielIt is located in the center of trade in the Caribbean and theAmericas.Its port is designed with an integrated approach whichincludes the application of best practices of port marinedevelopment and environmental protection.MARIEL SPECIAL DEVELOPMENT ZONEThe ZEDM is placed 45 km west of Havanaand has an area of 465.4 km².15

ForeignInvestmentPolicy

Foreign investment is an active and fundamentalcomponent for the growth of certain sectors andeconomic activities. Foreign Investment is focused on export and importsubstitution industries, and to eliminate bottlenecks inproduction lines, favoring modernization, infrastructuredevelopment and technological change pattern.FOREIGN INVESTMENT POLICYSOME GENERAL PRINCIPLES17

The main objectives for attracting foreigncapital in selected sectors, are expressedin sectorial policies. Prioritized activitiesare mentioned and, in some cases, thosein which we have not planned foreigninvestments. In addition, these policiescontain other details of interest. Agricultural and Forest Energy and Mines Food Industry Wholesale Sugar Industry Health Pharmaceutical andBiotechnological TourismIndustries: Metallurgical,Light manufacturing,Chemical and Electronics, Construction TransportFOREIGN INVESTMENT POLICYSECTORIAL PRINCIPLES18

LEGALFRAME

Law No. 118/2014 “Law on ForeignInvestment”.Decree No. 325/2014 “Regulations of theLaw on Foreign Investment”.Resolutions No. 46/2014 and No. 47/2014.Central Bank of Cuba.Resolutions No. 128/2014 and No.129/2014. Ministry of Foreign Trade andForeign Investment.Resolution No. 16/2014 and 42/14 Ministryof Labour and Social Security.Resolution No. 920/14 Ministry of EconomyResolution no. 535/14 Ministry of FinanceAgreement No. 7567 of the Council ofMinisters in May 2014.LEGAL FRAMEThe new legal framework for foreign investment consists of:20It is published in the OfficialGazette of the Republic ofCuba (Special Issues No. 20and No. 53) from April andDecember 16th., 2014.

Some peculiarities of LawForeign investors can make their contributions in cash or intangible and intangible assets.FI shall adopt one of the following modalities:LEGAL FRAMEForeign investment may be authorized in all sectors excepthealth care and education services to the population and thearmed forces. The exceptions do not include their enterprisesystems.Joint VenturesTotally foreign capitalcompanies (subsidiary, branch,natural person)International economicassociation agreement21CUBA S.A.

SPECIAL REGIMELAW 118/2014TAX SYSTEM ACTLAW 113/20120% for 8 years, and exceptionally for alonger period. Then 15%.0% for reinvested profits.If natural resources are exploited, it can riseup to 50% (maximum 22.5%)35%Taxes on the use of labor force0%Progressive reduction from20% (2013) to 5% (2017)Customs taxes for the importsof equipment, machinery andother meansExempt for the investment process.It is fixed in the CustomsTariff0% for the first year, then 50% bonus onwholesale (1%) and services (5%).2% wholesale and 10%services. Gradualimplementation until 2016.TAXProfit taxSales and Service taxEnvironmental taxesLand tax to contribute to localdevelopmentReduction of 50% over the period ofpayback.5 taxes0% during the paybackIt is gradually setting in theBudget Act.*Applies only to joint ventures and foreign partners involved in Internationaleconomic association agreement. Excludes Totally foreign capital companies .LEGAL FRAMESpecial tax system *22

Guaranteesto investorsThey enjoy all-out protection and legal security and couldnot be expropriated, unless such action is executed forreasons of public or social interest as previously stated bythe Council of Ministers.The State shall guarantee foreign investors to freely transferabroad the dividends or profits.The term of the authorization granted for the development ofoperations could be extended by the very authority thatgranted it.LEGAL FRAMEThe Cuban State makes sure that the benefits granted toforeign investors and their investments are maintainedthroughout the entire period for which they were granted.23

PORTFOLIO OFOPPORTUNITIESFOR FOREIGNINVESTMENT

New Opportunities Portfolio larger and more diverseIt considers projects in all sectors which are defined as priority forattracting foreign investment.It contains 326 projects. 80 more than in 2014.20opportunities inZEDM306opportunities in therest of the country40 projects listed in the 2014 portfolio have been removed.The estimated investment amount of the projects contained inthe portfolio exceeds 8.173 billion dollars.25

PortfolioorganizationEspecial Development Zone of Mariel: 20 projects.Opportunities grouped by sector: It is divided into 12 sectors. ItIncludes information of interest to each of them, the approvedsectorial policies and the specification sheets of projects.Each project has a specification sheet showing it main features:description, modality of foreign investment, Cuban counterpart,the estimated investment amount, location, potential market,expected results and contact details.The Portfolio of Opportunities will be updated at the nextInternational Fair of Havana.26

New Opportunities Portfolio larger and more diverseThe projects included in the Portfolio have been presented byCuban companies, according to sectorial developmentstrategies and policies adopted.Most projects have viability studies or technical and economicpre-feasibility studies, developed by organizations specializedin this activity.The Portfolio presents information about the benefits ofinvesting in Cuba, data from the existing foreign investment inthe country, the 25 general principles of the aforementionedpolicy and a summary of the taxation legislation.27

New Opportunities Portfolio larger and more diverseThe projects included in theportfolio are distributed in allprovinces, including the specialmunicipality Isla de la Juventud.28

HEALTHMININGTOURISMOILRENEWABLEENERGYAGRO-FOOD(2 at ZED Mariel)(1 at ZED Mariel)FOREIGN INVESTMENT OPPORTUNITIESBY NINDUSTRIAL(9 at ZED Mariel)BIOTECHNOLOGYAND MEDICINE(8 at ZED Mariel)

10 largest US exports to Cuba, 20152015RankingProductsValue (USD)% of total US exports toCuba1frozzen chicken69.809.491,0043,62soybean oil cake41.605.643,0026,03herbicides, anti-sprouting products12.595.190,007,94soybean flour / cium kies, bourbon61.335,000,049soups / broths32.400,000,0210biscuits / bread with chocolate18.000,000,01Total value of largest exports to Cuba159.748.469,00Total US exports to Cuba160.124.269,00Ten largest as % of 2015 US exports to Cuba99,9933Cuba: Nuevas oportunidades de comercio e inversión

US exports to Cuba (2001 - 2015)Reporting yearUS Value of Authorized Expotrs to Cuba 81,002015160.124.269,00Total Sales5.141.005.098,00

50 years in education and science. . health care and education services to the population and the armed forces. The exceptions do not include their enterprise . 10 biscuits / bread with chocolate 18.000,00 0,01 Total value of largest exports to Cuba 159.748.469,00