Getting in ahead of the US Invasion

Business Opportunities in Cuba

President Obama’s visit to Cuba and the opening up of US-Cuban relations has made headlines over the past few weeks.   A major part of that story was the enthusiasm of US companies to expand into Cuba – and it gave the impression that a major corporate invasion was under way.  But US sanctions remain in place (but are being eased), so despite the definite interest, it will be some time before significant deals are put into place.

For those of us in Europe, though, there’s no embargo on doing business with Cuba, and now appears to be an ideal time.   Setting up in Cuba isn’t easy, of course. It’s also a destination way off the map for most companies, and there are indeed many that would struggle to benefit.  However, the rewards for SMEs with a suitable business model could be huge, especially if the inevitable US invasion is “designed in”.

Why?  Well, the owners of almost all SMEs will want to plan an exit route at some time in the future, and in most cases that’ll be through a trade sale.  One of the surest ways of growing the value of a business is to expand internationally.   If it’s the sort of business that’s likely to be attractive to American purchasers, having an operation in Cuba could seal the deal and drive substantial additional value – it would provide a fast track for US companies to operate in Cuba, simply by buying an existing business.

It used to be near-impossible to have a foreign owned or JV business in Cuba, but the Foreign Investment Act of 2014 opened up a raft of possibilities.  Specifically, the right to transfer the ownership of property to a third party – and a foreign one – is now accepted.   There are now expectations of over $8 billion of foreign direct investment over the next few years.

What sorts of business could benefit?  Well, Cuba is not a market economy, and it’ll be a long time before consumer goods companies find it worthwhile.  The major opportunities lie in tourism, infrastructure, healthcare, agriculture and technology.    Of these, perhaps the most interesting is healthcare.  Cuba has a very well-developed system and trains a huge number of doctors and medical staff, sending many to staff hospitals in developing nations around the world.  In Cuba itself, pharmaceutical manufacturing grows every year and bio-technology is particularly strong.   When the US embargoes on travel are dismantled, there will be huge scope for health tourism.

Young Cubans are well-educated and hugely enthusiastic to succeed, and businesses can rely on getting the labour force they need to develop effectively and quickly.

But as I said, it’s not an easy market to get started in.  Businesses need help, even for the most basic research.  Trustworthy local partners are essential, as is the Spanish language and a great deal of patience.  Entrepreneurs who are brave and get over all the hurdles, though, will reap rewards – and I suspect that in many cases that will mean millions by selling their businesses on to Americans.

by Oliver Dowson, CEO, ICC – International Corporate Creations