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Cuba is a one-party state, run by the Cuban Communist Party. Míguel Diaz-Canel Bermúdez became President on 19 April 2018, his nomination having been approved by the Cuban National Assembly. This followed an electoral process in 2017 and 2018 in which Cuban citizens had the opportunity to approve municipal, provincial and national assembly members. Former President Raul Castro has stated that he will remain as Communist Party First Secretary until 2021, at which point Diaz-Canel is expected to assume that role too.
Cuba is ranked 68th out of 188 countries in the 2016 UN Human Development Index. Long life expectancy (79.6 years), low birth rates and outward migration is resulting in a rapidly ageing population. This presents challenges for the government in financing universal access to health care, education and state benefits – in a country with negligible, though growing, tax revenue and a struggling economy. Notwithstanding current challenges to the education system, Cuba’s workforce is highly educated, and the adult literacy rate is 99.7% according to UNDP.
Despite the restoration of diplomatic relations between the US and Cuba in 2015, and measures taken by the Obama Administration to reduce some restrictions on travel, remittances and certain exports, the US trade embargo endures. In June 2017, the Trump Administration indicated that it would adopt a stronger enforcement position on some aspects of the embargo. The US Treasury Department subsequently published a factsheet, in November 2017, on the changes to its Cuba sanctions rules, including measures to channel economic activity away from the Cuban military, intelligence and security services.
In September 2017, the US took the decision to withdraw a large proportion of US diplomatic staff from the US Embassy in Havana due to reports of attacks on US diplomatic staff in Cuba. The US Government also issued a travel warning to US citizens intending to travel to Cuba, and in October 2017 ordered the departure of 15 officials from the Cuban Embassy in Washington.
Cuba and the EU have formalised their relationship via a new Political Dialogue and Cooperation Agreement (EU-Cuba PDCA). This was signed in December 2016 and was provisionally applied in November 2017. It covers political relations, a human rights dialogue, trade and investment, and development cooperation.
In 2016, Philip Hammond became the first British Foreign Secretary to visit Cuba since 1959. During this visit, he signed a debt repayment agreement with Cuba, and four memoranda of understanding on energy, higher education, financial and professional services, and culture. The Lord Mayor of the City of London visited Cuba shortly afterwards. Foreign and Commonwealth Office Minister Sir Alan Duncan also visited in 2016, as did the FCO’s Permanent Under-Secretary. In March 2017, Cuban Vice-Minister for Higher Education, Dr. Aurora Fernandez, led a higher education delegation to the UK. The Vice President of the Cuban Central bank and 4 Presidents of Cuban commercial banks visited the City of London in September 2016.
In addition to these senior level bilateral contacts, the British Embassy promotes UK/Cuba cooperation in priority areas, including the modernisation of the banking and financial services sector, renewable energy technology, public procurement, and biotech and life sciences. The UK Government’s scholarship programme ‘Chevening’ has been active in Cuba for 25 years, and recently expanded. 16 Cuban professionals went to the UK in 2017 to study a Masters degree under the scheme.
The Cuban Government continues to implement its package of economic reforms (known as guidelines or ‘lineamientos’ to ‘update the Cuban economic model’) though progress, by its own admission, has been slow. External challenges continue, including decreased economic support from Venezuela (mainly in the form of subsidised oil), the US embargo, falling prices for some of Cuba’s exports (e.g. sugar, nickel, petroleum), and extreme weather events (specifically Hurricane Matthew in 2016 and Hurricane Irma in 2017). Cuba is attracting some foreign direct investment (FDI), but this has not been at the pace desired by the Cuban Government.
While the economy remains dominated by state and military run enterprises, there is a growing private sector including self employed persons in regulated areas (‘cuenta-propistas’) and cooperatives (mainly in agriculture, retail, services, catering). The private sector faces an uncertain regulatory environment – frequent freezing of new operating licences for example – as the state asserts its control over how new businesses develop and interact with the rest of the economy.
A major part of the Cuban Government’s strategy to boost the economy, provide jobs, update infrastructure and transfer knowledge is to attract greater foreign investment. It promotes the Mariel Special Economic Development Zone outside Havana as its main tax-break zone for foreign investment, promising faster decision making on contracts, and easier recruiting practices. The Government also periodically releases a portfolio of investment opportunities open to foreign investors. The latest edition, together with summaries of investment legislation, can be downloaded from the Cuban Chamber of Commerce website.
While investors are still showing high levels of interest in Cuba, many express concerns around the bureaucracy involved in doing business, slow pace of decision making, and inadequate infrastructure (e.g. poor transport links, lack of widespread or reliable internet, poor facilities for expatriate staff). Internet access in Cuba is improving: foreign businesses can connect via the state telecommunications company ETECSA, though this is expensive. ETECSA have announced that mobile internet should begin in Cuba during 2018, and access is being expanded for the Cuban population via a reported 500+ wifi parks and a limited roll-out of home internet.
Cuba has renegotiated its bilateral debt with a number of countries and entities, including the UK, in recent years. Some debt has been written off, some is being repaid under new terms, and some exchanged for access to investment projects in Cuba. In this context, then President Castro said in December 2017 that Cuba will continue to try and regain the international credibility of its economy, including by fulfilling agreements made to creditors.
In August 2017, UK Export Finance announced it could provide support to help boost UK/Cuba trade. Details of the type of cover available can be found on UK Export Finance’s website here
Considerable uncertainty exists around the widely expected unification of the two currencies in Cuba – the ‘Convertible Peso’ (CUC) is likely to be phased out making the Cuban Peso (CUP) the only legal tender. The dual currency system and the uncertainty around its removal have a damaging effect on the economy. While the Cuban Government is clearly making preparations for this changeover, the timetable and transition mechanisms are not clear. Avoiding high levels of inflation is one of the key concerns. President Castro said in December 2017 that the process had taken longer than expected, and that steps were being taken to resolve the issue as soon as possible.
Sanctions are applied by the US Government against companies which it deems to be in breach of the US embargo on Cuba. These have also been applied extra-territorially to foreign-owned companies based in third countries, where the US deems that company to fall under US jurisdiction. The Cuba sanctions programme is contained in the Cuba Assets Control regulations (CACR), issued by the US Office of Foreign Asset Control (OFAC), which also includes the 1992 Cuba Democracy Act and 1996 Cuban Liberty and Democracy (Libertad) Act (popularly known as ‘Helms-Burton’ after its sponsors).
The UK Protection of Trading Interests Act makes it illegal for UK-based companies to comply with extraterritorial legislation (like Helms-Burton) and there is provision for fines to be levied against offending companies and individuals. In parallel an EU Blocking Statute also makes it illegal to comply. The risk of US sanctions can create uncertainty and businesses, especially banks, sometimes find themselves caught between conflicting legal requirements. UK companies, SMEs in particular, have for example encountered problems in payments to/from Cuba being blocked by UK banks. We recommend that companies with extensive US interests which are interested in doing business with Cuba seek legal advice. In addition, a number of advisory notes regarding US regulations have been issued on the OFAC website, and potential investors are advised to read them. Companies should avoid making international transactions involving Cuba in USD, and instead use EUR or GBP. But these challenges have not stopped major UK companies with interests in the US doing business successfully with Cuba. Figures for trade in goods and services between the UK and Cuba from 1999 to 2016 can be seen at the UK’s Office for National Statistics website.
The UK has a bilateral Investment Protection Agreement with Cuba which includes basic provisions for foreign investors, compensation in cases of expropriation and dispute settlement mechanisms. Companies are advised to include arbitration clauses in their contracts.
3. Business and Human Rights
Cuba has signed and ratified the majority of the core International Labour Organisation (ILO) conventions. However, the ILO has repeatedly criticised the Cuban government for failing to meet ILO standards and conventions.
Foreign businesses are required to pay a fee to a centralised agency to employ Cuban staff, who in turn only receive a fraction of this payment. Average state salaries remain low, though the Government announced in 2017 that they had risen from an average of $16 USD equivalent per month in 2007 to an average of $30 USD equivalent per month in 2016. Certain professional categories command higher amounts (e.g. senior doctors can earn $65+), and certain industries attract a higher average (e.g. sugar, mining, financial services). There is no evidence of slavery, servitude or forced labour in Cuba today.
Cuba has a positive track record on child, women’s and LGBT rights, while women and ethnic minorities are well represented in politics and the civil service. More widely on human rights, the UK has previously expressed concerns around restrictions on freedom of expression and assembly in Cuba, and the use of short term detention. Cuba ranks 173 out of 179 countries in the 2017 World Press Freedom Index.
4. Terrorism Threat
5. Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2016 Cuba was ranked 60 out of 176 countries in Transparency International’s corruption perception index. The government has appointed Vice President Gladys Bejerano to the post of Comptroller General to oversee a crackdown on corruption and tighten auditing of state enterprises. In recent years there have been some high profile cases of ministers and senior officials being brought to trial and given lengthy prison sentences for corruption.
Some of these cases have involved foreign businessmen who have also been tried in Cuba and given custodial sentences. There have also been cases where companies have had their licence to trade revoked. Some foreigners caught up in corruption inquiries have been held for extended periods in detention centres pending the outcome of investigations.
Low level corruption in the form of theft from state institutions and companies is pervasive and popularly condoned as a ‘survival strategy’ given chronically low wages in the state sector. This includes theft from hotels, restaurants, retail outlets and factories.
Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Cuba and some basic effective procedures you can establish to protect your company from them.
Read the information provided on our Bribery and corruption page.
6. Protective Security Advice
Cuba is generally a safe country. It is however a poor country (despite its middle income ranking), where wages are low, state employees face redundancies and petty theft from foreign tourists is on the increase. Visitors should take sensible precautions (e.g. avoid unlit streets at night, keep bags about your person, lock car doors, never flag down a cab - only use official taxis - usually outside hotels and the airports). Read the information provided on our Protective security advice page
7. Organised Crime
This is not considered to be a serious threat in Cuba. The UK has longstanding cooperation with Cuban authorities on countering drug trafficking and organised crime is one of the priority areas included in the UK/Cuba Declaration on Bilateral Cooperation (signed July 2011). The UK’s National Crime Agency maintains an active dialogue with its Cuban counterpart.