Want to invest in Cuba? Learn how to wait

Want to invest in Cuba? Learn how to wait

Published: Tuesday, 16 Jul 2013 | 7:00 AM ET

By: Michelle Caruso-Cabrera | CNBC Chief International Correspondent



Spend just five minutes in Cuba, and it's obvious the country would

benefit from investment. But a large chunk of that money will have to

come from overseas—and it's still not clear when or if the Cuban

government will allow it on a meaningful scale.



The buildings, the roads, the power grid, the water system—all need

updating after decades of neglect under a socialist regime. After CNBC

spent a week in Cuba meeting with the leaders overseeing economic

reforms, it's unclear whether authorities are ready to make the changes

necessary to become attractive to investors on a large scale.



In a rare appearance before foreign journalists, Vice President Marino

Murillo Jorge, the leader in charge of the reform process, said almost

begrudgingly, "We will have to live with foreign investment in Cuba, and

it will be part of the growth program we are designing."



At the same time, Murillo said Cuba is putting together a "portfolio of

investments" in certain sectors that will have a "legal structure that

will stimulate investment."



(Read more: Betting on regime change in Cuba)

That last phrase may be a hint that the government is willing to cede

control, at least in some cases, in joint ventures with overseas companies.



Targeting Certain Industries



Nearly 100 percent of the Cuban economy is government-controlled. But

there are a small number of joint ventures with foreign firms. (The

government describes them as "mixed companies.") The Cuban government

has always insisted in holding at least 51 percent of joint venture

shares, even as outside investors put up most of the money and know-how.



Rumors have been circulating for at least that this ownership structure

will change, and the vice president's statement raised speculation about

its finally happening. Murillo added that the Cuban leadership will make

details clear in future meetings.



Vice Minister of Trade and Foreign Investment Antonio Carricarte told

reporters that the portfolio of possible investments will likely focus

on certain sectors: mining, tourism, renewable energy, food and

construction. Additionally, he pointed to the Mariel Port, which Cuba

has designated as a special development zone, saying that the government

is developing a set of investment norms that foreign firms will find

attractive.



Right now, there appears to be very little foreign investment in Cuba.

Carricarte told reporters there are 190 foreign companies invested there

but declined repeatedly to place a dollar value on the level of the

investment.



(Read more: In communist Cuba, the tax man cometh)

Spain's leading hotel chain, Melia, has long had joint ventures with

Cuba's government, but many of those properties appear dated. Ivis

Fernandez Pena, a representative of the Ministry of Tourism in the beach

area of Varadero, told reporters that there had been no new foreign

investment in beach hotels in the last five years but noted that a golf

project would start in 2014. She declined to identify the co-investor.



Justin Solomon | CNBC

One place where such investment is visible is in the oil and gas

industry. Driving toward Varadero, a team from CNBC spotted at least one

oil drill bearing Chinese flags. In a meeting with reporters, Deputy

Minister of Energy and Mining Arnaldo Batista Fonseca declined to

discuss anything about Chinese investment in the energy sector.



When officials do disclose investment numbers, they're small relative to

the possibilities. Yuri Camilo Viamontes Lazo is the vice general

manager of Energas, a power company that is a joint venture between the

Cuban government and Sherritt International of Canada.



Viamontes told reporters that Sherritt had invested more than $400

million since the venture began 16 years ago. Sherritt owns 33 percent

of the company. While that may be a lot of money for both Cuba and

Sherritt, which has a market cap of $1.15 billion (1.2 billion Canadian

dollars), it is far below what the Cuban power sector could use.



As for any kind of large-scale privatizations, investors will have to

keep waiting. Murillo told reporters that when it comes to Cuba's GDP,

the "socialist state company will have a decisive role, and will

continue to be decisive." He said that five years from now, large state

enterprises "will continue to be decisive in wealth creation in Cuba."



—By CNBC's Michelle Caruso-Cabrera. Follow her on Twitter @MCaruso_Cabrera.



Source: "Want to invest in Cuba? Learn how to wait" -

http://www.cnbc.com/id/100887311