Cuba's Investments
Abroad
An Information
Service of the Cuba Transition Project.
Institute
for Cuban and Cuban-American Studies,
University of Miami. Staff Report. Issue
50. December 17, 2003. Posted on Thu, Dec.
18, 2003 in The
Miami Herald.
In an increasingly difficult domestic environment
for alluring and retaining foreign investors,
Cuba's Ministry for Foreign Investment and
Economic Cooperation (MINVEC) is now promoting
Cuban investments overseas in an effort
to offset a diminshing flow of foreign capital
entering the island in recent years.(1)
According to the Cuban government's own
figures, in 2002 the island attracted US$100
million in foreign direct investment (FDI).
However, of the 24 new foreign-invested
ventures authorized by Havana during 2002,
10 were outside of Cuba proper. Moreover,
some 20 percent of Cuba's 403 active business
partnerships with foreigners are incorporated
or operating abroad.(2)
In 2003 MINVEC published a new guide on
opportunities abroad for Cuban state-owned
enterprises which "encourages Cuban
industries to analyze their prospects for
working in other lands." Targeting
neighboring markets in Latin America and
the Caribbean as well as the developing
world at large, Cuba's new global investment
strategy seeks to "establish companies
in [developing] countries [employing] Cuban
high technology, specialists, and know-how
with native manpower." From MINVEC's
perspective, the new emphasis on 'working
in other lands' will "facilitate the
internationalization of Cuban enterprises
and increase exports."(3)
While the Cuban government continues to
solicit FDI for key sectors of the island's
economy, particularly in tourism, nickel/cobalt
mining, and oil exploration and extraction,
as of the end of October MINVEC had approved
only 6 (six) new FDI projects in 2003.(4)
Cuba's policy of promoting overseas investments
bespeaks a tacit acknowledgment that the
current economic climate within Cuba is
less than attractive for many firms, including
those owned and run by the Cuban state itself.
TOURISM & ENTERTAINMENT
As is the case in the island, the Cuban
government's tourism and entertainment holdings
have played a leading role in establishing
ventures with foreign partners in other
markets.
Grupo Cubanacan S.A., (US$330 million turnover
in 2002), Cuba's largest state-owned leisure
industry conglomerate with about a 40 percent
share of international tourist hotel rooms
in Cuba (5),
has quietly expanded its foreign presence
in the past few years. In Mexico, Cubanacan
holds an "unspecified" stake in
the Paradisus Riviera Hotel in Cancun in
partnership with Spanish hotelier Sol Melia
S.A., itself the Cuban government's top
strategic partner in the island's tourism
industry.(6)
On nearby Cozumel Island, Cubanacan also
manages the "independently owned"
Hotel Cozumel & Resort. According to
Juan Jose Vega, until recently the group's
CEO (7),
as of 2003 Cubanacan is the managing partner
of no fewer than three Mexican hotel properties.(8)
On the other side of the Pacific, Cubancan
and China's Suntine International-Economic
Trading Co., Ltd., are partners in a jointly
owned 5-star, 700-room hotel under construction
in Shanghai's Pudong district.(9)
In the first quarter of 2003, a Cubanacan
subsidiary, Palmares S.A. (US$42 million
turnover in 2002) which owns and operates
culinary establishments throughout Cuba,
opened its first "La Gloria Cubana"
Cuban-themed restaurant in Shanghai as a
joint venture with the Shanshan Group. Palmares
had previously franchised "La Gloria
Cubana" in Porto, Portugal as well
as its Tocororo restaurant in Milan, Italy
and its Daiquiri Scabrous in Panama City,
Panama. (10)
Another major Cuban government tourism
holding, Grupo Hotelero Gran Caribe S.A.,
has also been successful by offering a 'taste
of Cuba' abroad. Through a subsidiary of
its own, FTB (Floridita-Tropicana-Bodeguita),
Gran Caribe has franchised Havana's famed
"La Bodeguita del Medio" restaurant-bar
worldwide. With five locations in Mexico
alone and a presence in diverse cities including
Dubai, Paris, Prague, and Warsaw, Gran Caribe
also requires that its franchisees serve
products made in Cuba such as Havana Club
rums exclusively.(11)
BIOTECHNOLOGY & PHARMACEUTICALS
"We are not crazy about the patent
system," a senior Cuban scientist has
admitted.(12)
However, despite the fact that the Cuban
government developed the island's pharmaceutical
industry by more than once violating the
international patent system, today Cuba
carefully protects its own intellectual
property rights with some 500 patents registered
around the world. It does so, in part, because
technology transfers to foreign partners
for the production of generic medicines
as well as original Cuban biotechnology
products allow Cuban biotech enterprises
to form joint ventures, enter new markets,
and ultimately turn a profit with a minimum
expenditure of hard currency.
The most controversial of such transfers
of Cuban biotechnology has been with Iran.
In May 2001, Fidel Castro himself visited
a new research and production center under
construction outside Tehran as part of an
ongoing joint venture between Iran's Pasteur
Institute and Havana's Center for Genetic
Engineering and Biotechnology (CIGB). Described
by the official Cuban press as "the
largest and most modern [facility] of its
type in the Middle East," the investment
is valued at US$60 million.(13)
However, as is the case with virtually all
such partnerships, the Cuban government's
equity comes from the transfer of the technology
itself and the know-how provided by Cuban
scientists, rather than in any substantial
infusion of cash.
Less notorious but perhaps more profitable
for Cuba are similar joint ventures established
with biotech firms in other markets, particularly
in developing nations. For example, in October
2002 Malaysia's Bioven Holdings Sdn Bhd
and Heber Biotec S.A., the marketing subsidiary
of Havana's CIGB, formalized the creation
of a biotech joint venture firm, Heber Bioven
Sdn Bhd. The new company will eventually
manufacture in Malaysia Cuban biotechnology
products for Southeast Asian markets. In
exchange for contributing the technology,
the Malaysian partner granted Cuba's Heber
Biotec a 30 percent equity stake in the
new company. (14)
In at least one instance, however, Cuba's
lucrative foreign ventures have run into
regulatory obstacles. After an agreement
was reached in 2002 between Bangalore-based
Biocon India and the marketing subsidiary
of Cuba's Center for Molecular Immunology
(CIM) for the formation of a joint venture
to produce and market Cuban anticancer drugs
in India (with the Cuban firm receiving
a 49-percent stake in the jointly-owned
Biocon Biopharmaceuticals Pvt. Ltd.), New
Delhi's Foreign Investment Promotion Board
rejected the proposed 'investment' in January
2003 because the "share allocation
[for the Cuban partner] is on the basis
of technology transfer...and there is no
money coming in."(15)
Though the decision was ultimately reversed
after lobbying by Biocon, India's largest
biotechnology company, the process revealed
Cuba's growing dependence on its intellectual
capital to compensate for a lack of hard
currency.
In Africa, where healthcare provided by
Cuban physicians has already won Havana
much political capital, Cuba is now set
to reap financial gains as a supplier of
generic drugs. In July 2003, Namibian authorities
approved a joint venture between the Cuban
government and Namibia's Zenith Enterprises
Inc. for a pharmaceutical plant in Ondangwa.
The venture is scheduled to begin production
in 2004 of basic pharmaceuticals, ranging
from penicillin to pain medications, and
will also export Cuban anti-retroviral formulations
for HIV/AIDS from Namibia to other African
countries at a later stage. In return for
the transfer of its pharmaceutical know-how
and training of Namibian technicians in
Cuba, the Cuban state obtained a 30-percent
share of the estimated US$20 million venture.(16)
GUAYABERAS AND ICE CREAM
While biotechnology transfers gain the
Cuban government much recognition in the
developing world, Cuba's foreign investments
also include licensing the manufacture of
more mundane, if profitable, products. In
June 2003, Namibia and Cuba also ratified
a new joint venture to craft typical "Cuban
Guayavera (sic) shirts" with private
financing.(17)
Meanwhile, as of 2003, Cuba's Coppelia ice
cream is being produced in Ipoh, Malaysia
in a joint venture with Jawala Corp. (18)
Whatever the nature of the product or service
involved, Cuban investments abroad are growing
in importance for the critically cash-strapped
Castro regime. The Cuban government's own
tentative figures for 2003 reveal that only
360 ventures financed with foreign capital
were active as of the end of October. Of
this number, 80 are said to be operating
beyond Cuban shores.(19)
With more than 20 percent of FDI now directed
toward business activities and joint ventures
outside of Cuba, and a neglible net inflow
foreign capital within Cuba itself (20),
Cuba's state-owned entrprises have realized
that they too can obtain a better return
on investment elsewhere.
NOTES
1. Interview
with Anaiza Rodriguez, head of MINVEC's
Center for the Promotion of Investments
(CPI), in official Cuban press. See Marta
Veloz, "La inversion extranjera en
la Feria de La Habana," Havana, Opciones,
2 November 2003.(Return)
2. Raisa
Pages, "Ascienden a 270 contratos de
producciones cooperadas," Havana, Granma
Internacional, 3 February 2003. (Return)
3. Cf.
Note 1 above. (Return)
4. Tentative
2003 figures as published in official Cuban
press. Cf. Note 1 above.(Return)
5. Cf.
Grupo Cubanacan S.A.'s official website,
[www.cubanacan.cu], and Carlos Batista,
"Cuba denies corruption prompted ouster
of tourist agency chief," Havana, AFP,
8 December 2003. (Return)
6. U.S.-Cuba
Trade and Economic Council, "Cubanacan
S.A. Has Hotel Investment with Sol Melia
S.A. of Spain in Mexico," Economic
Eye on Cuba, 28 January 2002. For Cozumel
venture, see Hotel Cozumel & Resort
website at http:www.islacozumel.com.mx/hotel_cozumel.asp.
(Return)
7. Cf.
Carlos Batista, "Cuba denies corruption...,"
Note 5 above.(Return)
8. Interview
with then Cubanacan president Juan Jose
Vega in official Cuban press. Cf. Minerva
Hernandez Basso, "Dieciseis anos fundado,"
Havana, Opciones, Oct. 2003.(Return)
9. Cf.
"Inician construccion de hotel chino-cubano
en Shanghai," Havana, AIN, 15 December
2003.(Return)
10.
U.S.-Cuba Trade and Economic Council, "Palmares
S.A. Reports 2002 Gross Revenues of US$42
Million," Economic Eye on Cuba, 10
March 2003. Also see Directorio Turistico
de Cuba (DTC), "Cuban restaurant opens
in Shanghai," Beijing, DTC News, 7
April 2003.(Return)
11.
Alberto Pozo, "La Bodeguita del Medio
hacia otras latitudes," Havana, Granma
Internacional, 20 March 2001, and A. Pozo,
"Lessons of La Bodeguita," Havana,
Granma Internacional, 3 October 2001. Also
see, "Nueva franquicia en Mexico del
legendario bar cubano La Bodeguita del Medio,"
Havana, Caribbean News No. 195, 11 December
2003. (Return)
12.
Quoted by Patrick Michael Rucker, "Cuba
to capitalise on biotech," Havana,
The Financial Times, 4 December 2002.(Return)
13.
U.S.-Cuba Trade and Economic Council, Economic
Eye on Cuba, 7 May 2001, and Elson Concepcion
Perez, "Fidel in Iran," Granma
Internacional, 9 May 2001. (Return)
14.
Liew Lai Jing, "Bioven, Cuban firm
in biotech joint venture," Kuala Lumpur,
The Star, October 2, 2002; and "Chua:
Cuba can play a big part in Bio Valley,"
Kuala Lumpur, The Star, October 2, 2002.
(Return)
15.
Ambarish Mukherjee, "Biocon venture
with Cuban co hits FIPB hurdle," New
Delhi, The Hindu Business Line, 1 January
2003; A. Mukherjee, "Biocon gets nod
for tech-equity swap,"New Delhi, The
Hindu Business Line, 12 March 2003.(Return)
16.
Hugh Ellis and Christof Malestsky, "Namibia,
Cuba Push On With Pharma Plans," Windhoek,
Tha Namibian, 7 July 2003. Also see, Brigitte
Weidlich, "Joint venture with Cuba,"
Professional Management Review (South Africa),
February 2003.(Return)
17.
Government of Namibia, Nambia-Cuba 7th Joint
Commission Communique, "Namibia-Cuba
Joint Continue Cooperation," Windhoek,
24-30 June 2003.(Return)
18.
Paul Gabriel, "Cuba aims for stronger
trade ties to Malaysia," Kuala Lumpur,
The Star, 24 November 2003.(Return)
19.
Cf. Marta Veloz, "La inversion extranjera...,"
Note 1 above.(Return)
20.
Net FDI in Cuba in 2002 was a mere US$1
(one) million according to United Nations
statistics. Cf. ECLAC/CEPAL, "La inversion
extranjera directa en America latina y el
Caribe, 2002 (Santiago de Chile), p. 28,
http://www.cepal.org.
(Return)
|