Establishing an FDI project in Cuba requires case-by-case government authorization at the highest levels of government.
Projects must be authorized by either the Council of State or the Council of Ministers, depending on the circumstances of the particular project, as described below. According to observers, the Cuban government is most likely to approve investment proposals that fulfill a social objective and proposals that bring hard currency into the country.
Council of State
The Council of State must approve all FDI involving prospecting for or exploiting non-renewable natural resources (except in the case of IEA agreements that are approved and authorized by the Council of Ministers). It must also approve FDI aimed at the management of public services, such as transportation, communications, and electric power. Once an FDI project receives Council of State approval, the Council of Ministers will issue its authorization.
Council of Ministers
FDI projects involving the following must be approved by the Council of Ministers, but not by the Council of State:
• Real estate developments.
• Totally foreign capital companies.
• The transfer of state ownership or other property rights over state goods.
• IEA risk agreements to exploit and produce non-renewable natural resources.
• A foreign company working with public capital.
• The use of renewable sources of energy.
• The business system of the health and education sectors and the armed forces.
• Other foreign investments that do not require approval by the Council of State.
The Ministry of Foreign Trade and Investment is responsible for approving all IEA contracts for production and services management, as well as the provision of professional services. The Ministry of Tourism will approve IEA contracts for hotel management businesses. Approval is reportedly a lengthy process, with projects being approved only after the Cuban government determines that the project meets its own criteria. The approval process is reportedly faster and easier for investments located in ZED Mariel, most of which are finalized in 65 days.
Requirements for foreign investors under Law 118 include limits on exports and imports; the purchase of insurance, with right of first refusal to Cuban carriers; financial reporting requirements; and an environmental and technological review. A number of other, more specific requirements for foreign investment for particular sectors or projects are listed in the Portfolio of Opportunities.
Given its relatively recent enactment, there are few examples of Cuba’s approval process under the new foreign investment law. As of 2012, under the previous investment system, Cuba approved FDI projects individually and for a fixed time period only—as little as 15 years. A 2012 set of case studies of FDI in Cuba reported that several foreign investors experienced significant problems when trying to get projects reauthorized, including demands from the Cuban government to have SOE joint venture partners awarded a majority share.
Here is a more recent – and encouraging – example of a joint venture with Unilever plc at ZED Mariel.
Business Licenses
Besides obtaining the initial approval, doing business in Cuba requires specific licenses and approvals from various ministries and administrative bodies. If a foreign company wishes to have an office in Cuba, for example, a license through the Cuban Chamber of Commerce is required. Business licenses are sector specific, and the exact details of procuring such licenses differ from case to case.
For investments within ZED Mariel, once a project is approved, Cuban officials will assist with the various licenses and approvals required, simplifying the procedure. At least one prospective U.S. investor reports that the approval process for Mariel is timely and straightforward.
Business licenses are generally short term: the standard duration is five years, with three possible extensions (each extension is good for an additional three years).