A new dawn in Cuba, and what to expect

11/05/2018

Overtime, of course, everything changes. A generation of leaders steps back from power and a new generation steps forward to become the future. The influence of the departing generation is not necessarily lost but people rightly expect new thinking, innovation, progress. After all, they live in the future not the past however much they admire long-standing values.

Cuba is at just such a moment of passage. For the first time since their revolution a Castro is not their President. The choice of Miguel Díaz-Canel means we need to understand the man, the realities he faces, the choices he will need to make and Cuba’s consequent direction of travel. Cuba is very unlikely to forget the lessons of its past but Cubans do not choose to live in the past. It is an island of realities and like island nations, including Great Britain, the borders have never been impermeable.

Miguel Díaz -Canel, the former second vice-President has a low public profile but an interesting one. He superintended a remarkably successful higher education sector both in teaching and research. Technology in the sector and more widely has advanced despite the constraints placed on the island. He is distinctly in the innovation generation and not very different from that generation in aspirations as it comes of political age. Normality is full of technical advances (his area) and global reach since no technologies today respect national borders (his inheritance). Connectivity to the rest of the world is limited but President Díaz -Canel will know this cannot last. No doubt detailed analysis of the President will emerge.

He will be coming to grips with the realities facing Cuba. He will know there is no hostility to a closer relationship with the UK, the EU and wider Europe. Relations with China and Africa will be on a solid footing. All this – and I look to the work we have under-way in the UK – offers significant opportunities. Indeed, the remaining difficulties with the UK lie in the fear of closing banks here of US enmity.

And therein is a distinct problem. Whilst polling of US Cuban-Americans and Americans more generally shows a yearning for normality among significant majorities, Donald Trump has partially ‘cancelled’ the Obama policy of normalisation. 60 per cent of the embassy staff in Havana were ordered home and 17 staff sent home from the Cuban embassy in Washington. Partial policy reversals, threats to choke cash flow and restrict tourism tend to hurt small businesses with the opposite impact to its declared intentions.

The realities the new President will have to deal with are more complex and call for a more honest approach. There are vital positives. Investment is promoted energetically under a new commercial law by an energetic ministry, working closely with external merchant and investment banking expertise – indeed, there will be major new developments in this area. Third country investors are increasingly enthusiastic. Tourism is still growing and demand is strong. Flowers of remittances continue to grow. And, virtually, there is an exceptionally well-educated population largely free of crime and wholly free of terrorism.

But there remain negatives which need the introduction of modern financial institutions. Internal rules overly restrict the private sector – easing them would not lead to run-away problems. The economy is relatively weak with serious liquidity issues. Approval processes are slow and improvements to ease of doing business would accelerate investment. The dual currency system needs urgent reform difficult as this undoubtedly is. The Cuban government of course knows this. Finally, in the background are the debts which were not removed in the Paris Club agreement.

After a sixty year blockade and continued threats to non– USA entities if they engage with Cuba, the fact there is ground to make up is hardly surprising. For the UK, with our traditions of financial and commercial skills, this ought to proclaim itself as opportunity. We are to live in a world of outward reaching trade, rediscovering our history of leaning outward toward opportunity.

Whatever happens with Brexit, and it still seems to me to be madness for the UK, we will need to succeed in global markets. This pre-supposes special attention to the countries left out of global systems for one reason or another. Prosperity pre-supposes proactivity.  Blending Cuban and UK skills has enormous promise.

Lord David Triesman has over 40 years’ experience working with Cuban leaders and their Ambassadors in London, strengthened relationships when responsible for Anglo-Cuban relations as a Foreign Office Minister in the mid-2000s and deepened these with time. The development of such a trusted relationship with partners in-country, aided by a long term vision and presence, has allowed Salamanca Group to be part of the opening of Cuba to foreign investment.

Lord David Triesman is leading this initiative and has developed a blog to provide an assessment of progress and opportunity as we create, together with the Cubans, a new financial hub. Previous blogs are available on the Salamanca Group website.

This article is part of our May 2018 Group Newsletter.

To read the PDF version online, click here, or to read another article online, please follow one of these links:
UK Investment Climate by Martin Bellamy, CEO and Chairman
Doing business with China – the importance of knowing the decision maker by ShaRon Kedar
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