Official name: Republic of Cuba
Area: 109 884,01 km
Capital: Havana
Official Language: Spanish
Time zone: GMT -5
Main cities: Havana, Santiago de Cuba, Holguin, Camagüey, Cienfuegos, Matanzas, Pinar del Río and Ciego de Ávila.
Geographic location: Cuba is an archipelago comprising the island of Cuba with an area of 107 464,74 km2, the Isle of Youth with 2 419,27 km2 and about 4 200 adjacent cays and islets.
It is the biggest Caribbean island and has a strategic position at the entrance of the Gulf of Mexico in the Caribbean Sea. It is bounded to the north by the United States of America (Key West) and the Commonwealth of Bahamas, which are respectively located 150 km, and 21 km away; Jamaica is 140 km to the south, the Republic of Haiti lies 77 km to the east, and the United Mexican States are 210 km to the west.
Climate: Generally speaking, it is quite acceptable to say that Cuban climate is tropical, seasonally humid, with maritime influence and semi-continentally features. There are also reports of the existence of another type of climate in the highest areas of the main mountain ranges of the country, which is classified as relatively dry and tropical with very little rain. Temperatures are generally high. Average annual temperatures range from 22ºC to 28ºC and may be higher in the eastern coast; values lower than 20ºC are reported in the highest areas of mountain ranges. The maximum average temperature registered ranges from 27ºC to 32ºC and the minimum average temperature, from 17ºC to 23ºC.
Political and administrative division: Cuba is divided into 15 provinces and 168 municipalities, including the special municipality of the Isle of Youth.
Population: 11 239,004 inhabitants (2015).
Population density: 102,3 inhabitants/km2 (2015).
Population growth rate: 0,1 per 1 000 in-habitants (2015).
Official currency: The official currency is the Cuban peso (CUP), which circulates in bills to the value of 1, 3, 5, 10, 20, 50, 100, 200, 500 and 1,000 pesos and coins to the value of 1 and 3 pesos. The convertible peso (CUC) is also used to pay for products and services offered in that currency within the national territory.
Exchange rate determination: The CUP is worth the same as the American dollar (USD), that is to say, 1 CUP is equal to 1 USD according to the official exchange rate (which applies to all banking and commercial operations). In the case of buying and selling operations executed by the population, 25 CUPs are equal to
1 CUCs whereas 1 CUC is equal to 24 CUPs. Exchange services are provided by banks, airports, hotels and exchange houses (CADECAS). The country is currently working on the exchange and monetary unification. Such unification will be gradual and will comprise several stages which will involve legal entities and nationals.
Political and governmental system: In the Republic of Cuba, sovereignty is vested in the people, from whom arises the power of the State. This power is exercised either directly or by means of the National People’s Power Assembly which is the supreme body of the power of the State, represents and expresses the sovereign will of the whole population, and constitutes the only instrument invested with constituent and legislative authority in the country-together with other bodies of the State derived from the Assembly, in the manner and under the regulations established by the Constitution and other laws.
Cuban economy is governed by a centrally planned system, based on the socialist ownership of the basic means of production.
Telecommunications: The Empresa de Telecomunicaciones de Cuba, S.A. (ETECSA), has a network of Internet and telephone services which guarantees direct communication within the national territory and with any corner of the world (http://www.etecsa.cu). This telephone services network has developed gradually. Currently, according to the official figures, there are 4 643 789 telephone lines in use in the country. In addition, by means of Cubacel services, ETECSA commercializes mobile telephony, operating under the GSM (900 MHz) and 3G around all the national territory.
Transportation system: There is a seaport, road and air infrastructure that allows the connectivity of socioeconomic objectives both in and out of the country. The most important connecting roads throughout the Island are the Carretera Central (Central Highway), the Autopista Nacional (National Freeway) and the (Línea Central) Central Railway; the latter has a long railroad network with 8 367 km of tracks..
Air Transportation: The country has a solid airport infrastructure whose expansion has been planned for the main tourist areas, in view of the expectations concerning tourism growth in the Island. In Cuba at present, there are various operational foreign airlines. Among airlines which provide more frequent services are Aerocaribbean, Aeroflot, Aerovaradero, Air Canada, Air Caraibes, Air Europa, Air France, Aeromexico, Bahamasair, Blue Panorama, Cayman Airways, Comercial take off S.A, Conviasa, Copa Airlines,
Cubana de Aviación, Elca S.A., Iberia, Interjet, Lan Chile, Martinair, Taag, Taca, Tame, KLM y Virgin Atlantic. Nevertheless, the country receives throughout the year a great number of charter flights, which have connection with almost all.
Maritime transportation: Cuba has 32 commercial ports. The most important ones are Mariel, Havana, Santiago de Cuba, Cienfuegos, Matanzas, Moa, Gerona, Cayo Largo, Batabanó and Nuevitas.
The most modern port in the country is the Mariel port, located in Artemisa province, within the Mariel Special Development Zone, which is about 45 km to the west of Havana.
Since the port is situated in the middle of the Caribbean region and the Americas, in the intersection of the North-South/East-West axes of the maritime commercial traffic of goods, it constitutes the center of a 1000- mile radius circumference in which the main ports of the region are located. It has a modern container terminal with 702 meters of quay, which has the necessary capacity and services for the operation of Super Post-Panamax ships, by means of modern and highly automated equipment to handle, store, connect and control containers.
The national financial and banking system, whose governing body is the Banco Central de Cuba (Central Bank of Cuba), comprises nine commercial banks, 15 non-banking financial institutions, 10 representative offices of foreign banks in Cuba, and three representative offices of non-banking financial institutions. The representative offices of foreign banks based in Cuba do not work as banks or branches thereof; they are simply responsible for the management and promotion of bank activities carried out by the bank they represent and by the institutions of the Cuban banking system and other national entities.
Financial Insurance: The insurance activity in the country can be carried out by public corporations, mutual and state companies, recognizing that the work of insurance entities shall be kept within the bounds of insurance and reinsurance operations. The Ministry of Finance and Prices (MFP by its Spanish initials) is the governing body of the insurance activity in the national territory. There is also an Insurance Superintendence, attached to the MFP, which performs control and supervision duties.
The most used insurance coverage that are commercialized nowadays are: cargo insurance, fire and allied lines insurance, non-maritime civil liability insurance, financial insurance, industrial facility insurance, oil and gas insurance, maritime insurance, aviation insurance, agricultural insurance, land transport vehicles insurance, various types of civil liability insurance and personal insurance.
Structure of the Cuban business system: The Cuban business system is undergoing a restructuration, in compliance with Guideline No. 6 of the Economic and Social Policy of the Party and the Revolution that was passed in the 6th Congress of the Cuban Communist Party, and stipulates the separation of the state and business functions. There are currently 10 014 entities in the country organized as companies, trading companies, cooperatives and subsidized units.
Business opportunities in Cuba will be promoted through a diverse Portfolio of Opportunities prepared by MINCEX and approved by the Council of Ministers, and published on a yearly basis, which will offer general information on every sector or activity and will provide investors with the key elements of the projects prioritized in the country.
The description of the proposed foreign investment opportunities appearing in the aforementioned Portfolio, according to Article 5 of Decree No. 325 entitled “Foreign Investment Act Regulations”, will include information related to:
a. Name of the project.
b. Objectives, scope and bases.
c. Identification of the domestic investor and his participation in the business.
d. Foreign investment modality.
e. Term of validity.
f. Estimated investment amount and main profitability indicators.
g. Microlocalization.
h. Current situation of the industry or service to be executed, which requires the incorporation of foreign capital.
i. Market.
j. Other aspects.
According to Article 11.1 of Law No. 118, foreign investment may be authorized in all sectors except for:
According to the Constitution of the Republic of Cuba, the press, the radio, the television, the film industry and other mass media following media shall never become private property.
The sectors considered priorities are agriculture and forestry, the pharmaceutical and biotechnological fields, the food, sugar, light, chemical, electronic, iron, steel, and machine industries, as well as tourism, transportation, health care, construction, energy and mines, and wholesale trade and audiovisual.
In September, 2013, the Mariel Special Development Zone (MSDZ) was created; it is located to the west of Havana city, at a distance of 45 km and has an area of 465,4 km².
The Zone has very favorable location and logistic conditions, especially after the investment made in the Mariel Port. It constitutes a space in the national territory that is not delimited within the customs boundaries, and in which special policies and regimes are applied, with the goal of promoting sustainable economic development by attracting foreign investment, technological innovation and industrial concentration, with a view to increase exports, effectively replacing imports, and generating new sources of employment, in constant articulation with the domestic economy.
Activities and sectors prioritized in the MSDZ:
At the moment of deciding on a foreign investment project that could be of economic interest for Cuba, foreign investors could select the project included in the Portfolio of Opportunities that would be the most compatible with their economic interests and possibilities, or could also bring a proposal of a specific project not included in the aforementioned Portfolio, following the steps listed below.
In order to establish an international economic association, domestic investors must negotiate with foreign investors every aspect of the investment, including its economic feasibility, their respective contributions as appropriate, the management and administration form of the association, as well as the relevant legal documents for its formalization (article 19.1 of Law No. 118).
In the case of a totally foreign capital company, MINCEX shall indicate the foreign investor the Cuban entity in charge of the branch, sub-branch or economic activity in which he intends to invest, and with which he must analyze his proposal and obtain the relevant written authorization (article 19.2 of Law No. 118).
Chapter III of Law No.118 stipulates the following:
The investment of foreign capital is governed by Law No. 118 “Foreign Investment Act” dated March 29th, 2014, and enforced on June 28th of the same year.
The legal framework, which includes supplementary rules of the Law, was published in the Official Gazette No. 20, Special Issue, on April 16th, 2014. It includes Decree Law No. 325/2014 of the Council of Ministers, Resolutions No. 46 and No. 47 of 2014 issued by Banco Central de Cuba (Central Bank of Cuba-BCC by its Spanish initials), Resolution No. 16 of 2014 issued by the Ministry of Work and Social Security (MTSS by its Spanish initials), as well as resolutions No. 128 and No. 129 of 2014 issued by the Ministry of Foreign Trade and Investment (MINCEX).
On May 24th, 2014, Agreement No. 7567 of the Council of Ministers was adopted. Such agreement delegates to the ministers of Foreign Trade and Investment, and Tourism, the duties of approving and authorizing the international economic association agreements aimed at the management of production and services, and the rendering of professional services; and the hotel management agreements respectively.
Foreign investment, according to Article 12 of Law No. 118 can be defined as:
a. Direct investment, in which the foreign investor participates as a shareholder in a joint venture or in a totally foreign capital company; or makes contributions to international economic association agreements, thus participating, in an effective manner, in the management of the business; and
b. Investments in equities or other securities or bonds, either public or private, which do not fit the definition of direct investment.
In addition, foreign investment according to Article 13.1 of the Law shall adopt one of the modalities appearing below, according to the definitions included in Article No. 2:
Cuban trading company which adopts the form of a corporation with registered shares in which one or more national investors and one or more foreign investors participate as shareholders. (In Article 14 and its items in the Second Section of Chapter IV of Law No. 118, the main aspects regarding this modality are presented).
The establishment of a joint venture shall require the drafting of a public deed as an essential condition for its validity.
The Articles of Association (which will include the provisions related to the organization and operation of the company) as well as the Authorization and the association agreement will also be attached to it. The joint venture will acquire legal personality upon being registered in the Market Registry.
Joint ventures may establish offices, representations, branch offices and subsidiaries both within the national territory of Cuba and abroad, and participate in entities abroad.
An agreement between one or more national investors and one or more foreign investors for the realization of activities fitting an international economic association even without this being a legal entity distinct from that of the parties. (In Article 15 and its items in the Third Section of Chapter IV of Law No. 118, the main aspects regarding this modality are presented).
According to article 13.2 of Law No. 118, international economic association agreements include, among others, the risk contracts for the exploration of nonrenewable natural resources, construction, agricultural production, and hotel, production or services management and the contracts for the provision of professional services.
Trading entity with foreign capital without the involvement of any national investor or natural person with foreign capital.
(In Article 16 and its items in the Fourth Section of Chapter IV of Law No. 118, the main aspects regarding this modality are presented).
In this modality, the foreign investor shall manage the company, enjoy all the rights thereof and be liable for all the obligations established in the Authorization. In addition, upon the company’s registration in the Market Registry, foreign investors shall be able to settle within the national territory of Cuba:
a) As natural persons, acting on their own behalf;
b) As legal entities, by setting up a Cuban subsidiary office of the foreign entity they own, by means of a public deed, in the form of a corporation with registered shares; or
c) As legal entities, by establishing a branch of a foreign entity.
A totally foreign capital company incorporated as a subsidiary shall be able to set up offices, representations, branches and subsidiaries both within the national territory of Cuba and abroad, and have interests in entities abroad.
Although with regards to joint ventures and totally foreign capital companies, Law No. 118 stipulates that they shall be able to set up branches within the national territory of Cuba, the purpose of such entities would be to carry out the business activities for which they have received authorization, so they must not be mistaken for other kind of branches created in the Republic of Cuba, under Decree No. 206 of April 10th, 1996. Such Decree enforced the Regulations of the National Registry of Branches and Agents of Foreign Trading Companies, which stipulate in their Article 26 that the registration in the said Registry implies an authorization to engage in commercial activities related to the sector of the trading company or business person in question, in compliance with the license issued in each case, which forbids the execution of the following activities:
a) to import and export directly, with commercial purposes;
b) to engage in the wholesale and retail trade of goods and services, except the after-sales and warranty services, specifically agreed upon in the contracts that allow foreign trade operations; and
c) to distribute and transport goods within the national territory.
These conditions open the way for cooperatives, both agricultural and nonagricultural to be regarded as national investors on account of their status as legal entities.
Article 25.1 of Chapter IX of the Foreign Investment Act stipulates that joint ventures, national investors and foreign investors, which are parties to international economic association agreements, and totally foreign capital companies, shall be entitled to open bank accounts in any bank of the National Banking System, through which they shall receive and make payments related to their operations, according to the monetary regime in force. Likewise they shall also be entitled to access the services offered by the financial institutions established in the country.
According to Article 25.2 of Law 118, joint ventures and national investors which are parties to international economic association agreements shall be entitled to open and operate accounts in freely convertible currency in banks established abroad, with the previous consent of Banco Central de Cuba and in conformity with the regulations in force. Likewise, they shall be entitled to engage in lending operations with foreign financial institutions in accordance with the relevant regulations in force.
On the other hand, Resolution No. 46/2014 of Banco Central de Cuba stipulates that natural persons or legal entities, once the investment has been approved, shall request in a bank authorized to operate in the national territory by Banco Central de Cuba, the opening of a demand deposit account intended to receive funds in Cuban pesos or freely convertible currency during the institutionalization period. Once the company has been incorporated or the international economic association agreement has been formalized, it will be possible to transfer the funds to the current account of the newly established company, or of the parties to the international economic association agreement.
According to the provisions of Law No. 118, businesses shall operate in compliance with the monetary regime in force, that is to say, in freely convertible currency (MLC by its Spanish initials) and in convertible pesos (CUC). Nevertheless, Law No. 118 includes several temporary provisions referring to monetary aspects, which read as follows:
FOURTH: Joint ventures, parties to international economic association agreements and totally foreign capital companies, may exceptionally be authorized by the Council of Ministers to make and receive certain payments in Cuban pesos.
FIFTH: In order to make a payment in Cuban pesos, as established in Article 30, item 4 (payment to the Cuban and foreign staff with permanent residence in the Republic of Cuba), such amounts should be previously obtained in Cuba convertible pesos.
SIXTH: The payment of taxes and other collectable customs fees by investors shall be made in Cuban convertible pesos, even in those cases in which the amounts are expressed in Cuban pesos.
SEVENTH: The aforementioned Fourth, Fifth and Sixth provisions shall remain valid until the monetary unification is established in the country, after which the obligors under this Act shall be governed by the rules established for this purpose.
Article 26.1 of Chapter X of Law No. 118 corroborates that all forms of investment shall be entitled to import and export directly whatever is needed for their operation, in accordance with the relevant provisions established. The commercial registration shall be carried out through MINCEX, which will approve the code for the products that the company is authorized to import and export directly. Nevertheless, the acquisition of goods and services in the national market will be encouraged, provided that the said goods and services meet the conditions of the international market.
For the execution of these activities, it will be necessary to take into account the content of Resolution No. 50/2014 of MINCEX, which approves the “General Regulations on the Export and Import Activities” aimed at defining the principles and basic standards that are mandatory for the entities authorized to engage in the import and export of goods.
Article 2 of this Resolution establishes that, for the purposes of the aforementioned Regulations, the term “entities” shall apply to those institutions that engage in the import and export of products, and are registered in the National Registry of Exporters and Importers, attached to the Chamber of Commerce of the Republic of Cuba, excluding totally foreign capital companies.
Joint ventures and foreign and national investors, which are parties to international economic association agreements, shall, for the fulfillment of their tax obligations and their rights as taxpayers, abide by Tax Law No. 113 of July 23rd, 2012, published in the Official Gazette No. 53, Regular Issue, on November 21st, 2012, including the adjustments indicated as part of the Special Tax System in Chapter XII of Law No. 118 “Foreign Investment Act”, which stipulates the following facilities, among other aspects:
Totally foreign capital companies shall be required, for as long as they remain operational, to pay taxes under the law in force, without prejudice to the tax benefits that are to be established by the Ministry of Finance and Prices, provided that this be of interest to the country.
Law No. 113 of the Tax System, (Tax Law No. 113 of July 23rd, 2012), published in the Official Gazette No. 53, Regular Issue, on November 21st, 2012, which establishes the following taxes, contributions and rates:
1. On personal income
2. On profits
3. On sales
4. Special tax on goods and services
5. On services
6. On the ownership of houses and vacant lots
7. On the ownership or possession of agricultural land
8. On idle agricultural and forest land
9. On land transportation
10. On the ownership or possession of ships
11. On the transfer of property and inheritance
12. On documents
13. On the use of labor force
14. On the use or exploitation of beaches
15. On the approved dumping of waste in drainage basins
16. On the use or exploitation of bays
17. On the use and exploitation of forest resources and wild fauna
18. On the right to use terrestrial water
19. Customs duties
1. To social security
2. Special contribution to social security
3. Territorial contribution to local development
1. On toll
2. On airport services for passengers
3. On the establishment of ads and advertising