International Financial Centres will facilitate the opening up of Cuba

Cuba is becoming more accessible

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.

It is easy to see why there is excitement surrounding Cuba’s development. The tourism industry is set to explode and the relaxation in travel restrictions for Americans opens a previously-untapped market of over 300 million potential visitors. Such a vast influx of people will require utilities, hotels, ports, roads and telecoms, to name just a few things. Massive investment is required to improve the current infrastructure and there is cautious optimism from sponsors eager to participate in the process and Cubans looking forward to the resulting developments.

Why are people wary of investing in Cuba?

Signs point to the lifting of the economic embargo and the unification of the dual currency. But for now, the embargo is still in place and extends to non-US companies who wish to do business in both Cuba and the USA. This means that for most American companies, conducting business with Cuba is illegal, and multinational companies wishing to engage with Cuba have to maintain completely separate US operations.

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.

International Financial Centres (IFCs) can provide a reliable framework for investment

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.

Advantages of BVI companies

BVI companies are ideal investment and joint venture vehicles for use in Cuba. The BVI offers a stable political foundation, a strong regulatory framework and a legal system based on English law; ultimate recourse is to the Privy Council, which provides comfort that any disputes will be determined fairly. Strongly committed to international standards of transparency, investor protection and anti-money laundering (AML), the BVI proactively participates in international measures relating to AML regulations, information exchange, mutual co-operation and transparency. It has entered into bilateral tax information exchange agreements with 27 countries. Finance and legal professionals are knowledgeable and responsive; companies can be set up very quickly and economically, and there are few restrictions on company structures and activities. Crucially, foreign ownership and directorship are permitted, and security interests can be taken (and registered) over assets located in the BVI.


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.