Advice for British Companies Starting a Company in Cuba

One can be forgiven for thinking or having the impression that the whole world has an embargo against Cuba, when in fact it is only the United States. So much of what one reads in the press always refers to the U.S. embargo of Cuba and in reality, it is important. The U.S. restrictions have made Cuba a somewhat introverted country in respect of business and open borders for trade. Until the United States lift the embargo in totality, it does make it harder for companies worldwide BUT far from impossible, to do trade in Cuba.

The Typology

It can be useful first to understand the situation in Cuba i.e. the typology of the country in terms of business. Much of the country is state controlled, with 9 out of every 10 people employed by the state, and the government owning close to ninety per cent of business and trade. One suspects that these statistics will change quite dramatically over the next twenty years, although, if the speed of change over the last fifty years is anything to go by, one might need to be patient. Many investors though seem to be eyeing up a Berlin Wall style speed of change, in that a drop of the U.S. embargo could result is very sudden and drastic changes to the country and its economy. Only time will tell.

Opportunities

1. The irony of the US embargo is that, in addition to pressuring the Cuban government into running a state controlled economy, the embargo also means that American companies cannot compete in a market-place in which British companies presently can. This creates a very interesting window of opportunity for British companies and for others of you based in Europe and outside of the US.

2. The tourism and service industry sector is fast expanding in Cuba and the government in Cuba seem very aware and keen to develop this industry. Despite the condition of many streets and areas of Havana, the government have given focus on the development of the old town part of the city, realising the economic benefit of all of the Canadian, British, Italian and other visitors to the island.

The tourism statistics for inbound tourists to Cuba (see graph above) quite clearly show a fascination and interest in the island. Arguably, many of these tourists visit Cuba for the very fact that the island is like a living museum and a very unique place to visit and some of this will be lost in the future. The island as a Caribbean island though, has much to offer in the future and tourism numbers, I suggest, will increase ten-fold in the future. Travel and tourism as a sector is and will continue to be a major opportunity for British companies now and in the future.

3. Despite Spanish being the official language of Cuba, the English language is widely spoken and even though language need not be a barrier, the opportunity to deal with English speakers in Cuba is often possible. Do be prepared though for documentation in Spanish and, as I am sure you would consider to do anyway, ensure that you have a Cuban English and Spanish solicitor and translator, or someone in the UK who is familiar with both languages and Cuban law. The lack of information from Cuban ministries can be frustrating but do persist.

4. Healthcare and education are both something which the Castro government have financed heavily in the last 50 years. The result of this is one of the leading healthcare and medical industries in the world and one of the highest literacy rates in the world. Cubans also appear to be hard working as a culture. Finding a business idea which in the future will provide work for Cubans and which is connected to the healthcare and or education sectors could be worth consideration.

5. Mining is another very good opportunity, with nickel in abundance on these shores. Cuba in fact is said to produce over one quarter of the world nickel.

6. Renewable energy is already an area which one British formed company have started to become involved with. The Havana Energy company is a British Cuban initiative, which focuses on creating renewable energy from biomass vegetation and sugar cane. Started by an ex-British energy minister, this project has involved significant investment and shows huge potential to date (Learn more).

The Difficulties

In a country in which so much is state controlled and which is still a closed shop in many respects, there are difficulties in setting up a business in or involving Cuba. Expect, for example, for the whole process in any deal to take many times longer than you are used to. Consider also that sales in Cuba are highly regulated, and that it is quite normal at this time for the Cuban government to expect between 12 and 24 months of credit.

You can also find that you will be restricted to certain banks because not all banks offer banking services with Cuba. Also note that you need to ensure that you do not break U.S. laws by breaching their regulations. If you plan to start a travel company and wanted to offer trips also for Americans direct to Cuba for example, consider US laws carefully.

(I will be updating this page once a month and keeping you informed on any changes - you can subscribe to our RSS feed do not forget, or to our newsletter).

Need to Know

• Rent an office in Cuba - It is possible to have an office in Cuba and this needs to be applied for via the Cámara de Comercio office. You will be asked to provide proof of your funding, technical expertise and other documentation on your company. You will need all documentation to be in Spanish and you will need to meet some quite strict criteria, including capital of at least £35,000, a provable company history for the last five years and proven experience of sales of USD$500,000 or more to Cuba for more than three years.
• Investment Law - In 2014, the Cuban government replaced the old Law 77 with what is known as the ‘Law on Foreign Investment (LFI). The change to the LFI is to increase inbound investment, international investment, to improve technology in Cuba and to open up future export opportunities. The LFI seems to be a stepping stone towards opening up Cuba for the future.
• Offshore Sales to Cuba - You cannot (at the time of writing) have an office in Cuba if you are running a business which sell products or services offshore! It is not advisable to try and run a business from a hotel on the island or from somewhere on the island without permission. You are liable to arrest if doing so. What you are permitted to do is to apply for a ‘business visa’ and then go to Cuba to do business.You are permitted to hire a local Cuban import agent to deal with the warehouse and distribution.
• Customs and Taxes - There is what is known as GST, which stands for ‘Goods and Services Tax’. You need also to consider company taxes and these are paid on any profits, if you are a business formed and based in Cuba. You may also need to consider personal taxes.

Further Information

• Read more on trade opportunities.
• Note: Rules and regulations are liable to change in the future. I will try and update this page as often as possible, but please understand that the information may change.
• We will be adding more information frequently on starting a business in Cuba and trade considerations. If you are a British company or business looking to get started in Cuba, make sure to sign up for our newsletter.