Freedom of Establishment
Cuba’s new Foreign Investment Act (Ley de Inversión Extranjera, No. 118/2014) entered into force in June 2014. Key elements introduced by this act include:
- All sectors of the economy are open to Foreign Direct Investment (FDI) excluding health and education services, as well as the Armed Forces, except for their business sectors. Priority sectors include: Agriculture and Forestry, Food Industry, Energy and Mining, Sugar Industry, Light, Chemical and Electrical Industries, Pharmaceutical Industry, Wholesale Trade, Export of health services and health tourism, Construction, Tourism and Transport.
- Foreign firms may seek collaborations with state-owned companies and possibly cooperatives, but not privately owned Cuban businesses.
- FDI may take the form of three separate modalities:
- Minority or majority joint venture companies (JVs, Empresas Mixta) in cooperation with state-owned enterprises.
- International Economic Association Contracts (IEAC, Contratos de Asociación Económica Internacional), for production or management of facilities, usually in tourism.
- Full foreign-owned ventures (Empresa de Capital Totalmente Extranjero). Cuba generally prefers JV with a majority holding by the Cuban partner.
- FDI enjoys full protection against expropriation except for reasons in ‘the public interest’. In these cases, the law foresees compensation. In case of conflict, investors are entitled to appeal to a mutually agreed upon international investment dispute resolution entity.
- The Cuban government will notify foreign investors of the approval or rejection of an application within a period of 60 days.
Acquisition of Holdings
In Cuba, majority shareholding in a local company is allowed, but need to be approved by the governement.
Obligation to Declare
All FDI must be validated by the Governement of Cuba.
Competent Organization For the Declaration
The Ministry of Foreign Affairs is the body of the Central State Administration whose mission consists of proposing, and once approved, executing State and Government foreign policy, and to monitor its fulfillment, while the Ministry of Foreign Trade and Foreign Investment it is the body of the Central State Administration responsible for proposing, and once approved, direct, implement and control the policies of the State and the Government in matters of foreign trade, foreign investment and international economic collaboration.