When Raul Castro took over from his brother as President of Cuba in 2008, he began a long-anticipated process of political and economic reform. As a result of his strategy, the stagnant economy has been gradually coming to life, galvanised by a fledgling private sector. Diplomatic advances have been made, animosities are thawing and, slowly but surely, relations with the USA are being restored. With this sea change comes the possibility of direct foreign investment, a prospect historically laden with regulatory obstacles and risks – from both sides.
Past forays into Cuba by enterprising persons have resulted in success for some and misfortune for others. The adoption of the Foreign Investment Law in April 2014 has reduced some of the risks, establishing and fixing the goal-posts, but the legal and regulatory framework is still in its infancy and it will take time for familiarity and confidence to grow.
For those with the appetite to venture into the Cuban market, a company incorporated in an IFC such as the British Virgin Islands (BVI) can be an invaluable vehicle. IFCs play a vital role in moving capital from developed to developing countries, many of which would not be able to benefit from foreign capital without the stability and neutrality that can be provided by an investment or holding company in a responsive, well-regulated jurisdiction. The inclusion of an IFC company in a cross-border structure can provide a reliable degree of corporate governance and legal certainty; important factors when making the decision on whether to invest in a potentially volatile market.
While the Cuban economic and political landscape is adapting and adjusting, some potential investors may form the view that the challenges outweigh the opportunities. Others will take the chance to play a part in the development process. As a leading international law firm with expertise in BVI, Bermuda, Cayman Islands, Cyprus and Anguilla law and a reputation for innovation, Harneys is well-placed to advise forward-thinking sponsors on the IFC aspects of their investment structures.