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Speaking on December 17, 2014, President Barack Obama sketched out a suggestion to restore normal U.S.-Cuba ties and turn away from a half-century U.S. external stand. The US Havana Consulate has since re-opened, restrictive travelling has eased, and certain US banks and credit cards companies have begun to do businesses on the Isle.
Quick changes like these have the capacity to open up new horizons for the US building sector and have led some to create "Cuba teams" to tap into a potentially attractive and insecure one. Prior to continuing, it should be noted that the US trading ban on Cuba will remain in place.
In practice, this means that US residents and corporate owners are generally forbidden to do any business in Cuba and to enter into contracts with the Cuba Government. In addition, the ban prohibits the exports of US goods to the islands, with the exceptions of some restricted product groups. It was recently announced in March when President Obama and President Raul Castro of Cuba jointly called for the lifting of the ban.
In spite of this declaration, the President does not have the power to take this measure one-sidedly, since an act of Congress in 1996 consolidated the ban. The majority of analysts agreed that the end of the ban is unavoidable, with significant changes possibly taking place during the next president's term of office. Accordingly, U.S. contractors interested in Cuba would be prudent to use this period to analyze the present economic climate and assess the benefits of investments in Cuba.
By 2014, Cuba adopted Act No. 118, which opened the country's business sector to attracting overseas investments and offered various fiscal stimuli and advantages to potential investments. As a result of this legislation, companies such as Unilever have been forced to go back to Cuba to build facilities in a specific geographical area in Cuba which is subject to a 0% income and capital gains levy for the first 10 years of its existence.
In addition, the US Cleber LLC was granted a specific permit by the Department of Commerce and the Department of Finance at the beginning of the year to build a tractors plant in this area. If this plant is built successfully, it will be the first US plant to have been in operation in Cuba for over 50 years. Part of the efforts of the Cuba Government to lure overseas companies, the Cuba Ministry of Trade and Investment has recently begun to issue an annually "Portfolio of Opportunities for FDI " listing the suggested investments waiting for financing.
Among these there are several related to the building sector. All of these companies are organized to include different layers of partnerships between overseas and Cuba companies. Complementing the options identified in the country's governance portfolios, several areas of Cuba' infrastructures are in need of modernisation and upgrading.
In particular, transport infrastructures, sanitation and power generation are all areas of the island's infrastructures that need updating in order to cope with the large inflow of people anticipated in the near term. Although this list of possibilities may be tempting, keep in mind that the shadows of the government of Cuba will play a big role over any prospective projects.
Whilst Law 118 opens the way to greater overseas participation, it also establishes possible traps that US companies should consider when navigating. Firstly, if the authorities find that a particular scheme has caused pollution, the body in charge is obliged to make payments to restore the former pollution condition.
Secondly, a governmental authority in Cuba is responsible for the selection of the labour workforce, which means that it is forbidden for overseas companies to recruit workers directly and that they are subject to certain restrictions on the dismissal of temporary workers. In addition, the agent will require a commission for this facility and reimburse workers in the lower Cuban equivalent CUP, while billing overseas companies for the more precious Cuba Convertable Exchange Rate (CUC).
After all, US companies should pay attention to the Foreign Corrupt Practices Act (FCPA) in their relations with the Cuban state. It makes it unlawful for the FBCPA to corrupt public servants in order to do commercial things, and it covers all U.S. individuals and corporations. In view of Cuba's narrated corrupt record, US companies must be vigilant in adhering rigorously to the Free Craft Treaty (FCPA) as the country's federal administration would participate in any possible building work.