Cuba & FIHAV; Trade and Investment in a Tough Neighbourhood

This week sees FIHAV take place. As in previous years, hundreds of companies from all around the world will converge on Havana, brandishing their wares and exhibiting their widgets. This year though FIHAV will be even bigger and even better. The rapprochement between the US and Cuba, the new investment law and the launch of the Mariel Economic Development Zone have all made Cuba a more attractive business destination so more companies than ever are beating a path here to find out what’s going on.

British companies will be amongst their number. Some will be exhibiting, others will be here just for meetings. All will want to know what the opportunities are, who they can work with, how genuine is the interest and what the prospects are for setting up a profitable business quickly. In the back of their minds, and this goes for every businessman or woman, not just the Brits, will be whether the opportunities and business climate in Cuba are as attractive as those in other countries in the region. Often they are – the proof is there are some very successful joint ventures here, including British – but sometimes they’re not. Whether we like it or not, attracting investment, trade and business partners is a competition.

Fortunately it’s a competition the UK is very successful at. Last year almost 2,000 FDI (foreign direct investment) projects were approved in the UK and the country received $72bn in net inflows, more than any other country in Europe. What’s the recipe for success? An excellent business environment, good infrastructure, sensible rules, transparency, property rights and contracts upheld by the country’s courts and the ability to capitalise quickly on a company’s interest before they turn their attention elsewhere.

The World Bank’s Investing across Borders report gives a region-by-region and country-by-country analysis and shows what a tough hood Cuba is in. For example it takes just a month to set up a business in Mexico, even less time in Colombia and Costa Rica ranks above average on the strength of its laws. Some of Cuba’s neighbours have been very successful; Panama attracted $4bn in FDI in 2013 and the Dominican Republic hauled in $3.6bn in 2012.

Naturally, prospective investors will not only look at indexes and ratings but also talk to people in Cuba to get a better feel for how things work on the ground. They’ll be keen for clarity and assurances on the unification of Cuba’s two currencies, how they can incentivise productivity and the quality and certainty of their supply chain. They’ll look at more prosaic things too – the quality of office space, the price of cars, internet access, even the quality of the schooling available for their kids.

Investment has its critics; some people worry about its effect on the Cuban economy and society. I would argue that investment has a real value in creating jobs, providing access to advanced technology, helping a country diversify and expand its export markets and helping with the transfer of management skills.  In a country like Cuba, all of that is crucial.

I look forward to seeing some of you at FIHAV this week. And if you want to read more about doing business in Cuba, check out UKTI’s excellent guide.