So, it's official. After almost fifty years - the longest rule for a head of government- Fidel Castro has resigned as the president in Cuba. Much has been speculated over the last 24 hours about Cuba's future. Will the embargo be lifted? Will Raul, his brother, retain power? How much pressure will the US exercise over the coming months to bring about democratic reforms?
From a business perspective, Cuba would present some unique opportunities if the embargo was lifted and US companies were allowed to invest in the island. The big question remains: if and when these changes occur? I believe change will happen; but it will come slowly, and not without tremendous challenges.
When the Soviet Union collapsed in 1991, Cuba lost about $5.6 billion annually in aid. It was then that Cuba began to seek other sources of foreign resources to support its economy and opened the possibility for Foreign Direct Investment (FDI). Today the Cuban government allows foreign entities to own 100% of the equity in FDI ventures in strategic industries like tourism, communications, science and technology, and agriculture. Even with that though, the stock of FDI today is only about $11B
Companies based in Canada, Spain, Italy, United Kingdom, Japan, France, Israel, Italy and Mexico already have operations in the island.
Tourism in particular is an industry that has benefited greatly by the presence of foreign firms. Today the strength of the Euro makes Cuba a preferred destination for many Europeans for their long summer vacations. Who knows, Varadero could soon become the top destination for Spring Breakers outpacing Cancun or Panama City