Cuba’s State Monopoly on Hiring Slows Spanish Investment / 14ymedio

The Spanish Government has not hesitated to put its full diplomacy at the service of its businesspeople, to prevent those from other latitudes overtaking them in a country where they have worked for decades. (Photo: Mariel Special Development Zone - ZEDM)
The Spanish Government has not hesitated to put its full diplomacy at the service of its businesspeople, to prevent those from other latitudes overtaking them in a country where they have worked for decades. (Photo: Mariel Special Development Zone – ZEDM)

14ymedio bigger14ymedio, Madrid, 30 March 2016 – The expectations that the upcoming Communist Party Congress will put forward a reform in the Foreign Investment Law that permits greater guarantees is growing among Spanish businesspeople. 14ymedio has confirmed this with Spanish diplomatic sources, who say that the central demand is an elimination of the State monopoly over employees – currently foreign companies in Cuba must contract for their employees through the State – a limitation that hampers the ability of investors to choose their own qualified personnel directly.

Spain is one of the countries in a better position to invest in Cuba, being the island’s third largest trading partner with more than 200 companies operating on the island, and trade totalling around one billion euros annually. Although Spain’s Commerce Department specified in its 2015 report that the data are always approximate, because Cuba does not detail the names of its investors “to protect them from actions against them on the part of the United States,” the agency estimates that 50% of the foreign projects in Cuba come from the European Union, with Madrid leading in sectors such as tourism, financial services, water supply systems and cement, among others.

The Spanish Government has not hesitated to put its full diplomacy at the service of its businesspeople, to prevent those from other latitudes overtaking them in a country where they have worked for decades. The recent round began in April 2015, with a visit to Cuba by Spain’s Secretary of State for Trade, Jaime García-Legaz, along with representatives of 45 Spanish companies, leaders of the Chamber of Commerce and the employers’ Spanish Confederation of Business Organizations (CEOE).

That meeting promoted future financial support to increase hotel capacity, a priority given the onslaught of tourism raging on the island, as well as the Spanish interest in the renewable energies market, in which that European country is leader and where Cuba has great potential in both wind and photovoltaic.

The arrival of Roca, a Spanish company specializing in bathrooms and toilets, already marked that trip which, however, was only a prelude to another more important one, the visit on 7 July of the Spanish Minister of Industry, Energy and Tourism, Jose Manuel Soria, accompanied on that occasion by 75 companies who held several meetings and information sessions with Cuban businesses.

Later, on during the International Fair of Havana (FIHAV 2015), in which Spain was the country with the highest representation (160 companies), the Minister of Economy and Competitiveness, Luis de Guindos, also arrived on the island to give Spanish businesses a boost, the highlight of which was the announcement of a debt refinancing for Cuba, including forgiveness of the interest already in default as well as a part of the principal. At the beginning of February, Spain announced an additional debt forgiveness, to finance projects on the island. The amount of this second round last December — added to the 1.88 billion dollars of forgiveness — was not disclosed.

The acting Spanish Minister of Foreign Affairs and Cooperation, José Manuel García-Margallo, revealed this March that Spain plans to cancel Cuba’s debt “in the near-term,” after the signing of the political dialogue and cooperation agreement between Brussels and Havana.

But things are moving slowly so far and little progress has been made in relation to the Spanish investment. Salvador Marín, president of the Spanish Company for Development Financing (COFIDES), said that Cuba is “a country that offers many business opportunities for Spanish companies for many reasons” and cites common cultural ties and business traditions among these reasons. In addition, the Spanish authorities value the Foreign Investment Law, although they consider that it should be improved.

“COFIDES has put in place the ‘Cuba Line’ (with an initial endowment of 40 million euros) with which it can finance Spanish companies wishing to undertake an investment project in the Caribbean country, whether commercial or production plants,” says Marin. The agency thus ensures support for both small- and medium-size companies as well as large companies and explains that there are two parts to this product: the General-Cuba Line and the Mariel Special Development Zone-Cuba Line.

COFIDES says that there are currently “around a dozen projects in various stages of study to finance investments in Cuba” but offers no details on any of them, merely clarifying that agri-food sectors, tourism, capital goods, construction materials, consumer goods, chemicals and pharmaceuticals are all highlights.

The same lack of specificity occurs among the few companies that agree to discuss this issue. Iberia is one of them, possibly because its commitment in Cuba already has visible results after the restoration of direct flights from Madrid to Havana which will begin to operate daily “starting on 2 June.”

However, the airline denies that the increase in flights is because of changes that have occurred in Cuba and says it is for internal reasons. “If Iberia has returned to Havana, it is mainly due to the transformation process in our own company, which has enabled us to reduce costs, improve product and service and therefore revenue,” they say.

The Globalia group is also strengthening its presence on the island, with the opening of a new air route and a hotel. The service, operated by Air Europa, will connect Madrid-Varadero from July 14 until Sept. 15 with two weekly flights, as announced by the company on Tuesday.

SEAT, the Spanish subsidiary of Volkswagen, has been present on the island and the Spanish press reported an alleged request from the Cuban Government to Madrid for the company to install a plant in the Mariel Special Development Zone (ZEDM), in order to facilitate the renewal of the battered fleet of cars on the island, but the company remains cautious.

“SEAT took part, along with other companies, in the business delegation that visited Cuba in the framework of an official visit organized by the Spanish Government. On this visit, SEAT knew the situation in the country and the different proposals. Beyond this, we will not comment about future plans,” said Ezequiel Aviles, head of corporate communications for the car company. The company has had a representative on the island since 2007, through which vehicles are sold in public tenders/fleet bids made by the Cuban government through the Ministry of Transport. However, Aviles gave no details on the number of vehicles sold.

Of thirty Spanish companies contacted, only the two mentioned provided brief information to 14ymedio, beyond the usual expansions of the hotel business that Melia has maintained for years, and little is known.

The Urbas Financing Group also announced that it will participate in the development of a major tourism and real estate luxury project in Cienfuegos, although so far there is nothing concrete.