Cuba is a nation lost in time, with significant need for investment in infrastructure, transportation, power, electric transmission, telecommunications, internet, tourism, etc. This presents an unprecedented opportunity for US businesses – it is not every day that a country with a population of 11 million people, located less than 100 miles from the US coast, with an economy targeting 7% growth, suddenly reappears on the world scene
There are a lot of clichés about the importance of timing that are apropos to this discussion: The early bird gets the worm; he who hesitates is lost; you snooze, you lose.. . It is a well-established fact that being an early market entrant usually creates a substantial and long lasting market-share advantage over later entrants. When looking at new markets, the advice is to be first, or a close second, and do not pause for breath. But corresponding to the great rewards for being first are also greater risks of failure – so it is important to understand and strategize around the pitfalls – and be poised to act quickly.
Cuba presents a number of challenges for first market entrants, but here are three that may quickly change into golden opportunities for those who have positioned themselves:
- Currency: And while we are talking about money, Cuba maintains a dual currency, with different valuations, neither of which is traded on the international exchange. The peso (CUP) is typically used in the domestic economy, and the “convertible peso” (CUC) is more frequently used by governments and foreigners. Last summer, residents and tourists could purchase CUCs at government exchange offices at a rate of one for 25 CUP (.04) but state and foreign companies were required to exchange CUCs at the official one-toone rate. This often requires two sets of books and legitimate questions about valuation of assets (as well as the opportunity for hiding illegitimacy). But watch this space. . . Cuba has been planning to unify its currency for years and as Cuba reintegrates within the modern world economy, there is more pressure to finally take action.
The resolution of the challenges listed above will help new market entrants gain a foothold in Cuba, but other challenges will remain, including the heavy hand the Socialist government rests on the economy (redtape,
bureaucracy, regulation, taxes, etc.); immature business norms (rule of law, contract enforcement, black market
dealings); and more. Cuba is not for the faint of heart. But for those with intestinal fortitude, wisdom, persistence and a strategic plan, this is the right time and Cuba is the right place to be.