MFA: Strategic opportunities for foreign exporters
The negative effects of the US embargo and the coronavirus pandemic are hampering the possibility of economic recovery after a severe recession in 2020, when the Cuban economy saw a drop in GDP of 11.3%. The coronavirus crisis has paralyzed all major sectors of the Cuban economy – tourism, remittances, exports and investments. A gradual GDP growth of 2.7% is expected in 2021, and stronger economic growth is likely only in 2022-25 in anticipation of positive steps towards Cuba under the new US administration.
It is now in the worst economic crisis in 30 years and struggling with structural problems in its centrally planned economy. Due to the coronavirus crisis, it has practically lost all sources of foreign currency income, which the Cuban government is trying to compensate by exporting services, specifically by sending doctors and medical personnel to more than 40 countries around the world. The public budget is burdened by spending on the health sector, isolation centers and subsidies for the rationing system that has existed in Cuba since 1963.
The island’s own industrial production and imports fell significantly. Foreign importers are faced with unpaid claims for several years. The Cuban regime tries to protect its own exports, especially tobacco, rum, nickel, biotechnological products, and generally favors national production over imports. Unemployment is rising, especially in the tourism sector.
As of January 1, 2021, a currency reform took place in Cuba and the unification of both currencies (the Cuban convertible peso CUC and the Cuban peso CUP) took place in favor of the Cuban peso with a single exchange rate of 1 CUC = 24 CUP. This process brings with it an increase in the prices of food, services and energy, which is not compensated by an adequate increase in salaries. According to estimates, the rate of inflation will range up to 400%.
At a time when most countries in the world are trying to restart the economy through increased financing, in Cuba it is quite the opposite, and the Cuban government has approved an adjustment of the economic plan in 2020 following the coronavirus crisis and is applying austerity measures. This trend continues in 2021 and Cuba finds itself in a deep crisis and running into a lack of resources in basically all sectors of the economy.
Post-covid-19 opportunities
Due to the US embargo, which is still valid and has been strengthened in the last two years, which greatly limits the possibilities of exporting to Cuba, Cuba is trying to gain greater independence from imports and start its own production. However, it is faced with very limited financial resources. In connection with the long-term food shortage on the island, which was exacerbated during the coronavirus crisis, the Cuban government has identified ensuring the country’s food self-sufficiency as a priority for the following period. The main emphasis will therefore be placed on agricultural and food production. There are also opportunities for Czech exports in the energy and construction sectors.
The possibility of establishing a mixed company, the so-called empresa mixta, opens up for Czech companies. In practice, this works on the principle that the Cuban side invests in the joint venture, for example, an important local brand including production facilities or real estate, and the foreign company invests capital, know-how and the ability to expand to foreign markets. This form of cooperation is mainly used in the tourism industry, where foreign hotel chains operate Cuban hotels, but also in various branches of industry, especially the food industry.
In 2020, Cuba opened up the possibility of import and export also for private cooperatives and small entrepreneurs, who can request foreign goods or offer products from their production through state import companies. For now, this new way of cooperation is at the beginning and is facing organizational difficulties, it is too early to evaluate the contribution of this option for the development of the economy at this moment.
When exporting to Cuba, the risk of chronically bad payment morale caused by extremely low liquidity in the long term must be taken into account. By default, the Cuban side requires deferred payment for 360, 720, and sometimes even more days, and unfortunately, even after such long periods, there are further delays in payments, to partners from all over the world. In the current situation, when tourism, Cuba’s main source of foreign exchange earnings, has been practically paralyzed due to the coronavirus crisis, Cuba’s payment morale and import options are even more limited.
In terms of investment, Cuba is currently placing the greatest emphasis on the development of the Special Zone in the Mariel port area (Zona Especial de Desarrollo de Mariel, ZEDM). This zone, where 49 mainly industrial companies from 22 countries of the world already operate, offers space for the construction of new factories, whose ambition is not only to supply the Cuban market, but also to export to the surrounding countries of Latin America. The advantage is that Cuba applies not only an accelerated approval process in this zone, but also tax breaks and other benefits. Currently, the plans for the development of the Mariel zone are rather ambitious and the overall pace of progress is very slow.
Energy industry
Although the country has considerable underwater oil reserves, it is still dependent on the import of energy resources. As Cuba has long been dealing with a chronic energy deficit, the government’s priority is to create, expand and modernize production capacity and support oil exploration projects.
The need to modernize power plants and repair the outdated and loss-making distribution network also represents a significant opportunity for Czech industry. 96% of electricity production in Cuba is realized by burning fossil fuels, mainly sulphurous oil, in thermal power plants of Soviet and Czechoslovakian provenance.
Renewable energy sources, the use of which is declared as part of the country’s long-term economic and social development program, are also becoming an interesting opportunity. The Cuban government plans to generate 24% of electricity from renewable sources by 2030. Now it is only 4.3%. Priority will be given to energy production from biomass, solar and water energy.
Construction industry
According to allcountrylist, the need for modernization is very extensive in Cuba and far from covering only the sectors mentioned above. The ravages of time are inexorably evident on virtually all Cuban architecture and infrastructure. However, in addition to the traditional lack of liquidity, efforts to repair it and build a new one run into a related lack of quality building material. Cuba’s interest in new modern technologies for increasing the efficiency of construction, production of materials, spare parts, but also reconstruction and repair of buildings can be seen as an opportunity for Czech exports. Construction opportunities also exist in the design and construction of hotel complexes.
Agricultural and food industry
Cuba imports 80% of all food and animal feed from abroad, which, with rising prices on world markets, puts increasing pressure on the central planning of the economy. Due to outdated and inefficient agricultural production with virtually no mechanization, there is an urgent need to modernize food production, processing and storage. Increasing food self-sufficiency is even described by the Cuban government as a matter of national security, and investments in this area are considered a priority. However, the whole process is quite lengthy and runs into long-term liquidity problems.
According to the statement of the Cuban government, the following agricultural commodities will be prioritized for the following period: rice, bananas, beans, corn, sweet potatoes, eggs, pork and chicken meat and small cattle.
In agricultural production and transport, draft animals are still used on a large scale, most of the tractors used are the remnants of Soviet and Czechoslovakian trucks from the 1970s. The need to modernize them, whether through the supply of spare parts and service or the purchase of completely new machines, also creates a significant export opportunity.
6. Contacts
Subchapters:
- Contacts to Czech embassies in the territory
- Practical telephone numbers (emergency services, police, firefighters, information lines, etc.)
- Important Internet links and contacts
Contacts at the embassies of the Czech Republic in the territory
Embassy of the Czech Republic in Havana Ave Kohly 259, entre 41 y 43 Nuevo Vedado La Habana
Cuba Phone: (+53) 78833201, 78833467 Fax: (+53) 78833596
E-mail: havana@embassy.mzv.cz, commercial and economic department: commerce_havana@mzv.cz Facebook: facebook.com/EmbajadaChecaLaHabana
Territorial jurisdiction of the Embassy of the Czech Republic in Havana: Cuba, the Bahamas, the Dominican Republic and Haiti.
Information and a map with the location of the ZÚ can be found at www.mzv.cz/havana in the chapter “How to find us”.
Practical telephone numbers (emergency services, police, firemen, information lines, etc.)
Police – 106
Firefighters – 105
Ambulance – 104
Taxi service – 7555555
Cira García International Clinic – 7204 2811-14
José Martí Airport – information – 7266 4133
Important web links and contacts
President of the Republic of Cuba: https://www.presidencia.gob.cu/es/
Ministry of Foreign Affairs: http://www.minrex.gob.cu/
Ministry of Foreign Trade and Investment: http://www.mincex.gob.cu/
Ministry of Agriculture: https://www.minag.gob.cu/
Ministry of Economy and Planning: http://www.mep.gob.cu/
Ministry of Industry: http://www.mindus.gob.cu
Ministry of Communications: http://www.mincom.gob.cu/
Ministry of Transport: http://www.mitrans.gob.cu/
Ministry of Culture: http://www.ministeriodecultura.gob.cu/
Ministry of Construction: http://www.micons.gob.cu/
Ministry of Finance and Prices: http://www.mfp.gob.cu
Ministry of Tourism: https://www.mintur.gob.cu
Ministry of Education: http://www.mined.gob.cu/
Central Bank: http://www.bc.gob.cu/
Cuban Chamber of Commerce: http://www.camaracuba.cu/en/home/
Newspapers and magazines (official): www.granma.cu, www.cubadebate.cu, www.juventudrebelde.cu, www.somosjovenes.cu, www.juventudtecnica.cu, www.almamater.cu, www.temas.cult.cu, www.cubaliteraria.com
Radio (all radio and television stations are state-owned): Radio Habana Cuba – www.radiohc.cu, Radio Progreso – www.radioprogreso.cu, Radio Reloj – www.radioreloj.cu, Notinet del Cubaweb – www.nnc.cubaweb.cu
Information and promotion agencies: Prensa Latina – www.prensa-latina.cu, www.plenglish.com, Agencia de Información Nacional – www.ain.cu, AIN Camagüey- www.adelante.cu/AIN
Independent information sources: www.cibercuba.com, www.14ymedio.com, www.cubanet.org, www.cubaencuentro.com, www.diariodecuba.com, www.cafefuerte.com
