TRADE-CUBA: Spain, Top Source of Direct Foreign Investment

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jul 18 2000 (IPS) - Spain remains one of Cuba’s top trading partners, along with Canada and Italy, despite concern raised among Spanish entrepreneurs by Havana’s decision to freeze new real estate transactions.

Trade between the two countries stood at over 700 million dollars last year, while Spain’s direct foreign investment in joint ventures has been growing, under a Cuban law regulating foreign investment enacted in 1995.

By late last year, 374 joint ventures were operating in Cuba, 86 of which involved Spanish capital, with a total of 4.3 billion dollars invested or in the pipeline. Spain also has 213 firms — accounting for 27 percent of the total — operating in Cuba, including four banks.

But Spain’s businesses, apparently concerned by the recent freeze on new investment in real estate, asked Cuban authorities this month to provide greater security for investors and a more precise legal framework.

A Spanish business delegation, which agreed on the creation of three new joint ventures in the Cuban capital, expressed their concerns to President Fidel Castro himself at a two-hour meeting with him on Jul 7.

According to sources from Spain, Castro stressed at the meeting that Cuba’s relations with Spain were considered strategic and of “vital importance,” not only due to the strong cultural ties between the two countries, but also because Spain is the top source of direct foreign investment in Cuba.

The president of Spain’s Chambers of Commerce, José Manuel Fernández Norniella, emphasised at the meeting that Spain’s business community wanted to continue investing in Cuba.

But he added that “if we want to set out on this long road together, it is indispensable for investors to feel safe.”

Fernández Norniella headed the large delegation attending the 10th session of the Spanish-Cuban Committee on Business Cooperation, during which business representatives agreed to set up two aeronautics firms and signed an agreement to build a cement factory in the eastern Cuban city of Santiago.

That city, located more than 900 kms from Havana, is strategic in terms of trade flows with the rest of the Caribbean, with which Cuba has close commercial ties.

As well as reassuring Cuba’s business associates from Spain, local authorities broke the government’s silence on the situation in the real estate sector, and clarified that there were no changes in policy on foreign capital.

According to the specialised weekly ‘Opciones’, the real estate business in Cuba has “entered a phase of consolidation,” and the government’s decision not to set up any new joint ventures in the sector does not “by any means” signify a setback in the process of opening up to foreign investment.

Citing sources with Cuba’s foreign investment ministry, ‘Opciones’ said the measure arose from the need “to make a stop along the road and carry out an exhaustive study of real estate projects” and the prospects for future business opportunities.

The freeze on activity did not affect the 17 existing joint ventures — several of which involve Spanish capital — already established in real estate, involving the contruction of 2,300 apartments, either on sale, already sold, under construction or about to enter the construction phase.

“Cuba respects its commitments,” stressed officials at the foreign investment ministry, who further clarified that of the total number of housing units authorised, 500 had already been sold to or reserved for foreign clients.

The rest will be purchased at “market price” by state-owned Cuban companies and leased to foreign nationals, who have a hard time finding suitable housing in the capital.

The sources also explained that while no new real estate ventures would be authorised in Havana, several projects were currently under consideration in three other areas of Cuba.

The government sees foreign investment as “complementary” to its efforts to develop the country — which since the early 1990s has been in the grip of its worst economic crisis in half a century — and has ruled out any steps toward the privatisation of the economy.

The law on foreign investment enabled the entry of foreign capital for investment in the construction of housing or offices, but left all specifications governing property and ownership up to a real estate bill which does not look set for passage any time soon.

Cuban economists assume that the delay in approval of the law is partly due to complex questions like inheritance, the nationality of purchasers — such as emigrants, who remain Cuban citizens — and the need to modify migration-related regulations on the entry and departure of property owners.