HAVANA, may 9th (FT) Cuba is ramping up efforts to attract foreign investment as Miguel Díaz-Canel, who replaced Raúl Castro as president last month, begins the tricky balancing act of trying to solve the country’s economic crisis without undermining Communist party rule.
Although it is still early days for Mr Díaz-Canel, a party apparatchik, diplomats and foreign businessmen report that a number of negotiations are under way — from infrastructure and agriculture to tourism and energy.
Total, the French energy company, and Siemens, the German industrial group, are leading a conglomerate to open a 600 megawatt gas-fired power plant on the socialist island.
Last week Ceiba Investments, a Guernsey-incorporated company with more than 20 years of experience in Cuba, announced a $150m investment to upgrade four hotels and build a fifth with Cuban partner Cubanacan and Spanish hotel chain Club Meliá.
“The negotiations and implementation of these transactions took six months, which I really believe is quite a record,” Sebastiaan Berger, Ceiba’s chief executive, told the Financial Times. “Hopefully [it is] a sign on the wall that the investment processes in Cuba are starting to pick up speed.”
Cuba’s need for investment is urgent. Aid from crisis-stricken Venezuela is drying up, a fleeting US tourist boom popped after US president Donald Trump partially reversed the detente begun by his predecessor and annual revenue from the export of goods and services has fallen more than $4bn, or 23 per cent, since 2014.
But stymied by dense bureaucracy, the inefficiency of Cuba’s Soviet-style economy and its dual currency system, and discouraged by tighter US restrictions, Havana’s record of luring foreign investors has been poor.
“The Communist party has few options but to move boldly forward,” a mid-level party member said. “They either have to allow more domestic capitalism, which they do not want, or quickly reform the state sector in conjunction with an increase in foreign capital. Díaz-Canel is tasked with carrying out the latter.”
Mr Berger said his project, which includes an upgrade to the Meliá Habana, a five-star business-oriented hotel, was ready to go, with funds largely provided by Ceiba, but with Cubanacan and Meliá also making a “real cash contribution”.
Over the past two years Cuba has signed foreign investment deals valued at a record $3.5bn, but little money has arrived.
Plans for an upgrade to Havana’s main airport and a Russian-led upgrade of Cuba’s railways have been delayed for more than a year. No ground has yet been broken on four golf projects worth a total $2bn, agreed over the past three years. The Total-Siemens energy project is also not yet finalised, although tendered last year.
This year authorities have said only $600m in foreign capital will actually enter the country.
“Cuba will not get economic growth until its leaders decide to change the state from an obstacle of development into a facilitator,” said Carlos Saladrigas, a prominent Miami-based businessman who is in favour of closer engagement. “That was the fundamental change in China and Vietnam, and we are still waiting for that in Cuba.”
One of the main exceptions is tourism. Despite a 6 per cent decline in visitors so far this year, there are four new five-star hotels under construction in Havana, all owned by military-run Gaviota and expected to be managed by foreign groups. The Trump administration has banned US visitors from staying in Gaviota-owned hotels.