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Foreign Investment Law in Cuba: General Definitions

Jul 3 , 2024

 

The Act on Foreign Investment in Cuba, known as Law 118, was passed in 2014 and aims to regulate foreign capital investments on the island.

The purpose of this law is to protect the economic interests of the Cuban State in accordance with the principles required by the country’s economic model and the conditions that exist for its development within the island.

This law establishes the unalterable principles of foreign investment in Cuba, as well as the rights and obligations of an investor and the scope of his expansion in the country, without affecting the interests of the people and the government.

Since its creation in 2014, the Foreign Investment Law has undergone several amendments to update it and adapt it to the changes in Cuba’s economic model and its policy of openness to foreign capital.

These changes are part of the measures taken by the government to increase the opportunities for the production of goods and services in Cuba by foreign companies. Either for domestic consumption or for export.

Main ideas of the Act

  • Equal Treatment: Guarantees equal protection and treatment to all foreign investments, regardless of their origin.
  • Freedom of Investment: Allows investment in various sectors of the economy, including agriculture, industry, tourism, energy, mining and construction.
  • Legal certainty: legal protection for investors and their interests in the country.
  • Tax incentives: Tax incentives are offered to encourage investment, such as tax reductions or exemptions.
  • Investment protection: A legal framework is established to resolve disputes between investors and the Cuban state.

Opportunities to invest in Cuba

  • Joint ventures: combining Cuban and foreign capital to create new legal entities.
  • Concessions: where the Cuban government grants a foreign investor the right to use a good or service for a certain period of time.
  • Production Contracts: where the foreign investor provides the technology and resources needed to produce goods or services in Cuba.
  • Cooperation projects: where the foreign investor develops a project with a Cuban company.

The advantages of investing in Cuba are:

In addition to the security and incentives provided by Cuba’s Foreign Investment Law, there are other compelling reasons to attract foreign investors:

  • Large and potentially growing market due to low supply relative to country’s population
  • It is possible to find qualified workers to develop projects at relatively low cost, as the quality of professionals is internationally recognized.
  • Cuba is privileged for commercial and tourist movements due to its geographical location.

Disadvantages of Investing in Cuba

Although they can be considered challenges, and in many countries the same thing happens, there are conditions that can make Cuba an unsafe ground to invest, in any case it should be considered:

  • U.S. economic sanctions against Cuba could be a barrier to investment and trade
  • Cuba is still developing its regulatory framework for foreign investment.
  • It can be complex and time consuming to navigate the bureaucratic process of establishing an investment in Cuba.

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