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Business

Germans Attracted to Cuba's Investment Needs

Since Fidel Castro formally announced his retreat from power in Cuba, foreign firms have begun to hope the island will soon open up to business. There are already indications it may.

A group of Cuban dancers at a tourism trade fair in Germany

Cuba sells itself as colorful and lively place, and investors are anxious to be part of it

As the world's media reported Castro's retirement, on Tuesday, Feb. 19, Germany's business community was analyzing the situation. The Comandante's withdrawal was a "striking turning point," said commercial lawyer Frank Seifert, head of the German-Cuba Business Union, but it came as no surprise. "This step had been in preparation for a long time," he said.


Indeed, nothing is feared as much in Cuba as radical change. The transition from the Castro era to his likely successor, Raul Castro, was intended to be a smooth one.


"The people are afraid that the little they have will be at risk if the change comes too quickly," Seifert said.


A woman and her child look out from a balcony near a banner that reads Long Live Fidel, 80 more

Cubans are afraid they could loose out if the island opens up more

That fear is understandable given the powerful groups of exile Cubans in Florida waiting impatiently for the moment they can reclaim property of which they were dispossessed.


"Politically, we don't expect a change, but we do expect an economic opening," said Peter Roesler of Germany's Ibero-America Club.


Decaying industry

There are indications that change may be in store. Raul Castro has called on Cubans to identify the weaknesses of the socialist system and to submit suggestions for improvement. Media loyal to the government have begun to report -- with unusual outspokenness -- about economic grievances.


Seifert, who has advised companies on investing in Cuba since 1995, said he foresees new opportunities for German and other foreign firms looking to do business with the island state.


"Cuba is an investment country with massive pent-up demand," he said. "Cuba is the gate to the Caribbean. It has a magnificently educated population."


Fidel and Raul Castro

Fidel Castro (l.) and his brother Raul, who is 76


Investment is also needed in every sector of the Cuban economy. The infrastructure is inadequate, the industrial facilities are out-of-date an in many areas there's a lack of modern technology.


High hurdles


Whether generators, medical technology or diesel motors, an ever-increasing stream of products is already making its way from Germany to Cuba. Exports to Cuba amounted to 412 million euros ($606 million) in 2006, according to Germany's Foreign Ministry.

However, investing in Cuba involves fulfilling myriad regulations and overcoming daunting bureaucratic hurdles. In addition, Cuban business conduct takes some getting used to and companies can be fickle when it comes to dealing with accounts payable.


Cuba's 1995 foreign investment legislation requires foreign companies to work with a Cuban partner from the same sector and to get state permission to do business on the island.


The German Foreign Ministry put the number of joint ventures and international business associations with foreign firms in Cuba at 236, with the investments from Venezuela and China increasing especially strongly.


Contingent on US change?


Men walk past a billboard showing a cartoon of the Statue of Liberty at the Malecon area in Havana

100 US Congressman and women said their country's policy toward Cuba had been a failure


The German engagement was "laughable," Seifert said. German firms were involved in only six joint ventures, which included Daimler as well as entrepreneur Stefan Messer, who produces industrial gases and is one of the most important German investors on the island.


Many more companies would like to invest in Cuba, and socialism isn't the only deterrence. They are put off by the United States' blockade on trade with Cuba.

"Laws with ex-territorial effects" like the 1996 Helms-Burton Act, which allows US courts to penalize foreign firms that trade with Cuba, should be shelved, Roesler said. Companies active in Cuba risk being barred from the US market.


But the US won't be able to sustain its blockade much longer, according to Seifert. The economic embargo, in effect since 1962, has been subject to mounting criticism in the United States.


On Tuesday, over 100 members of Congress called on Secretary of State Condoleezza Rice to change the country's approach to Cuba. Politicians from both the Democratic and Republican parties have declared the policy of sanctions and isolation aimed at eliciting change in Cuba a failure. The past 50 years of that approach had had no effect, they said.

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