What The United Kingdom Thinks About Commercial Opportunities With Cuba
/United Kingdom Trade & Investment
London, United Kingdom
18 February 2016
Excerpts From Cuba Export Overview
Cuba has one of the world’s few remaining centrally planned economies. The state controls 90% of the economy and employs around 85% of the total workforce.
Contact a UKTI Cuba export adviser for a free consultation if you are interested in exporting to Cuba.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Cuba.
There have been recent discussions between the US and Cuba to restore diplomatic ties and open freer travel and shipping terms. In addition, Cuba was removed as a ‘state sponsor of terrorist activities’ On 29 May 2015. This has led to more interest by international business due to the reduction of risks doing business in Cuba.
Cuba is mostly a service-based economy. Its main export earnings come from healthcare, biotechnology, pharmaceuticals, tourism and nickel.
1. Strengths of the Cuban market include:
English is widely spoken and accepted as a business language, strategic position in the Caribbean and Central America, highly educated and skilled workforce, low labour costs, low crime and pollution rates
2. Challenges doing business in Cuba
Despite the increasing opportunities for UK companies in Cuba, the market still offers challenges which include: very slow decision-making, with most important business decisions being referred to high-level government; all sales in Cuba are public sales, controlled by heavy regulation; payment delays are common; standard practice for the Cuban state to expect to buy on credit terms of 1 to 2 years; potentially increased market competition due to easing of US sanctions
2.1 Extra-territorial fines
The US Government has imposed extra-territorial fines on some companies in third countries that have done business with Cuba in breach of the Helms-Burton Act. However, these sanctions conflict with the UK Protection of Trading Interests Act which makes it illegal for UK based companies to comply with extraterritorial legislation. The Act contains a provision for fines to be levied against companies and individuals that fail to comply with this stipulation. This UK provision is also supported by an EU Blocking Statute which makes it illegal to comply with the US’s extra-territorial sanctions.
3.1 Economic Growth
Cuba reported 4% economic growth in 2015. This is amongst the most dynamic in the region and takes place during a transition process from a state-run economy to one that has more private sector involvement. Growth is mostly linked to an increase in domestic and foreign investment, and a recent boom in the tourist industry with an increase of 17.8%.
3.2 Free trade agreements
Cuba is a co-founder of the Bolivarian Alliance for the Americas (ALBA). It integrates the countries of Latin America and the Caribbean.
Cuba maintains special links with Venezuela. Since late 2000, Venezuela has provided Cuba with oil on preferential terms. Oil is partly paid for with the services of Cuban personnel, including some 20,000 medical professionals.
There are also commercial agreements with China, Russia, Brazil and Vietnam.
4. UK and Cuba trade
In 2015, exports of UK goods to Cuba saw an increase of approximately 32% from 2014. However, total trade figures do not include the significant UK-Cuba trade that is undertaken through countries such as Spain, the Netherlands, France, Venezuela, Mexico and Panama. The UK remains underrepresented in the market compared to other EU countries.
Top UK exports to Cuba:
dairy produce, nuclear reactors, boilers, machinery and mechanical appliances, pharmaceutical products, paper, paperboard and articles of paper pulp, instruments and apparatus, plastics and plastic products, electrical machinery and equipment, beverages, spirits and vinegar, organic chemicals, aluminium and articles
5. Opportunities for UK businesses in Cuba
UK Trade and Investment (UKTI) provides free international export sales leads from its worldwide network. Search for export opportunities.
5.1 Biotechnology and healthcare
The medical industry is currently responsible for one of the largest shares of imports from the UK. Biotechnology has the largest potential in the Cuban market. Health services to ALBA countries account for 60% of all exports from Cuba. The maintenance of this sector is a priority for the government. There are opportunities for UK companies in: high-tech products, lab supplies, partnerships for production and commercialisation
5.2 Renewable energy
In 2013, a £140 million investment project was signed by UK Havana Energy and Cuban Azcuba for the construction of 5 biomass power stations linked to the sugar industry. Other projects are currently under discussion. A number of other opportunities have been approved and are now available to interested companies. These opportunities are available for UK companies with expertise in the following areas: solar energy, wind parks, biomass, hydro-energy
5.3 Tourism
Tourist numbers have steadily increased over the last decade to over 3.5 million in 2015. The rapid increase in tourist arrivals has proved the urgency to develop tourism infrastructure.
Opportunities exist for: development and management of hotels, development of tourism, facilities, such as golf courses and water parks, tourism services, hotel supplies
5.4 Mining
The Cuban nickel industry is one of the primary sources of income for Cuba. It produces about 70 thousand tons of nickel per year and accounts for more than 30% of the world’s known nickel reserves.
The Cuban government is interested in speeding the exploitation of gold, silver, chrome, copper and zinc, resources. This may provide opportunities for UK companies.
5.5 Transport
Cuba is in need of a modernised transport infrastructure. Opportunities exist for UK companies in the following areas: development of ports, enlargement of airports, road construction, ship building and repair, energy efficient cargo and public transport
6.1 Selling from offshore
You can obtain a business visa and travel to Cuba to do business. You can contract with a Cuban importing agent to ship to a duty-free warehouse and distribute from there.
You cannot have an office in Cuba and your executives cannot take up residence there. Cuban authorities take a broad view of what constitutes an illegal office. Exporters have been punished for operating unauthorised offices from residences and hotels.
6.2 Registered agency or office
Representative offices of foreign companies are permitted under Decree Law 206 of 1996. Permits are issued by the Cámara de Comercio de la República de Cuba. The application requires considerable detail about:
the legal status of your company
its technical capabilities
financial stability
Foreign documents must be legalised in Cuba.
Licences are for 5 years and are renewable for 3 year terms.
The licence will not allow your company to carry on wholesale or retail distribution. Your company can be the consignee of an import shipment, but it cannot take possession directly. You must employ a registered agent to physically handle the goods.
To register, you must have:
3 years experience making sales to Cuba of at least USD 500,000 annually
a minimum paid up capital of USD 50,000
at least 5 years business history
You should seek legal advice as the tax and legal obligations of each business structure can differ.
7. Legal considerations
There is Cuban legislation that has a direct impact on business development. Law 77 on Foreign Investment establishes the rules for most trade and Investment activities.
7.1 Standards and technical regulations
Suppliers and manufacturers have an obligation to make sure products are safe. Products must meet relevant safety standards, have clear instructions for proper use and include warnings against possible misuse.
The Oficina Nacional de Normalización (NC) is responsible for standards and technical regulation in Cuba.
7.2 Intellectual property
The National Office of Industrial Property (OCPI) is responsible for intellectual property rights in Cuba.
Cuba is also signatory to the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS). This has specific requirements, enforcement procedures, remedies, and dispute resolution procedures.
8.1 Goods and Services Tax (GST)
The rates for the GST vary depending on the goods, sector, and currency. A rate of 2% applies to wholesalers and 10% to retailers.
Raw materials for industrial production and exported goods and services are exempted from GST.
8.2 Company tax
Companies established in Cuba are subject to 35% of their taxable net profits. This may increase to 50% for the exploitation of natural resources. There are exemptions from company tax.
Foreign companies without legal domicile in Cuba are subject to a 4% rate on their gross income from a Cuban source.
8.3 Individual income tax
Permanent residents in Cuba are subject to 4% income tax on their worldwide income.
Temporary Residents are liable for a personal income tax rate of 15% on their income obtained or generated in Cuba.
8.4 Customs
A tax will be levied on all natural and legal persons importing products into the national territory. The tax rates and payment procedures are established by the Cuban Customs Law that can be accessed at the Cuban Customs Authority website.
You can find more about import tariffs in the Market Access Database (MADB).
9. Entry requirements
All visitors require a tourist card which is usually issued with your air ticket. This can also be bought at airports.
Business visitors need to apply for a business visa at the Cuban Embassy in London.
9.1 Travel advice
If you’re travelling to Cuba for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.