The resumption of diplomatic relations with Cuba has pried open the door to business, and investing, opportunities previously closed to Americans. Although foreign businesses from Canada to Spain have been doing business on the island for some time, albeit warily—both because of the strictures imposed by the Cuban government and the potential for damage to relationships with the U.S.—American investors have been restricted from investing in foreign companies that derive the majority of their corporate revenues from Cuban activities and operations.
But no more. The potential is there for outside companies to see some impressive growth from Cuban business in the years to come—particularly since the Cuban government is actively seeking foreign investment to spur growth after having been shut off from much of the global economy for more than 50 years.
That doesn’t mean the business environment in Cuba will be lacking challenges. On the contrary, as of 2012, the Cuban government, according to Pew Research, “was … the source of more than three-quarters of Cuba’s economic activity,” both directly and through state-owned enterprises. In addition, Havana has very specific rules that foreign businesses must follow—or face the consequences. That said, here are four sectors in Cuba that could see the most growth—and offer the best payoff for interested investors.
1. Travel and tourism:
One sector Cuba would like to encourage is travel. Foreigners visiting the island and spending money is something the government would very much like to encourage—and even if tourists don’t flock to its natural attractions, foreign investors will come to size up business opportunities.
And all those people will need amenities: places to stay, ways to get around, and—if they’re investors—ways to open and run businesses of all types. So look for increased flights—which will require more and better airports—as well as hotels, ground transportation and restaurants.
Indeed, many countries are already hoping to be a part of that expansion. In July, Spanish tourism minister Jose Manuel Soria said in reports after a trip to Cuba that his country is engaged in talks to nail down hotel and infrastructure deals there, and that Cuba is looking at a goal of more than $2 billion in foreign investment each year as it seeks to grow its economy.
Soria was quoted saying, “The Cuban government told me of the objective for 30,000 new tourist beds.” That’s a lot of visitors—and Spain is already on the spot. Iberia Airlines operates a Madrid-to-Havana route, and NH Hotel Group SA and RIU Hotels SA also have a presence in Cuba. According to the Spanish government, Spanish exports to Cuba totaled 75.7 million euros ($83 million) in May.
Oh, and Soria was not alone. He was accompanied by representatives from 75 Spanish companies. The Italian deputy minister for economic development, Carlo Calenda, also made the trip, along with representatives from 140 Italian companies. German Foreign Minister Frank-Walter Steinmeier had to cancel his trip because of concerns over the Greek crisis, but is rescheduling, along with German business representatives—and Britain, France and the Netherlands have already sent business delegations there. Looks as if tourism is already on the rise.
If it’s hoping to attract tourists or would-be investors, Havana is also going to need more than a few upgrades to things that people in other countries take for granted: reliable power generation and delivery, as well as more and better roads and airports.
Cuba’s need to increase its power generation capacity is clear; its grid is outdated and inefficient, and it’s looking toward renewables to provide help. In fact, some estimates place potential growth for the renewable energy market in Cuba to total $6 billion in years to come.