Cuba approves law aimed at attracting foreign investment

Cuba approves law aimed at attracting foreign investment

By Daniel Trotta



HAVANA (Reuters) - Cuba's National Assembly passed a new foreign

investment law on Saturday that aims to bring badly needed capital to

the communist economy by offering steep tax cuts and promising a climate

of investment security.



The assembly voted in a special session to approve the law, state

television reported without providing a vote tally. It will become valid

within 90 days.



The new law halves the profits tax from 30 to 15 percent and exempts

investors from paying it for eight years, though it also appears to

withhold many of the tax benefits from companies that are 100 percent

foreign-owned. Those incentives are reserved for joint ventures with the

Cuban state and investments linking foreign and Cuban companies.



Analysts and Cuban-based diplomats have expressed skepticism over the

law, uncertain whether the one-party state has undergone a genuine

change of heart and truly wants to attract foreign investors on

international terms.



Areas such as agriculture, infrastructure, sugar, nickel mining,

building renovation and real estate development are considered ripe for

investment.



Cuba needs to attract $2 billion to $2.5 billion in foreign direct

investment per year to reach its economic growth target of 7 percent,

minister for foreign trade and investment Rodrigo Malmierca said on

Cuban state television on Friday night.



Cuba does not publish figures on FDI, which economists estimate to be

several hundred million dollars a year at most. Cuba's gross domestic

product is expected to expand 2.2 percent this year, compared with 2.7

percent growth in 2013.



"If the economy does not grow at levels around 7 percent ... we are not

going to be able to develop," Malmierca said.



"We have to provide incentives in order for them to come," Malmierca

said of foreign investors.



Cuba is cut off from U.S. investment by a comprehensive trade embargo

and has failed to meet its investment targets for each of the past five

years.



The new investment law continues the structural economic reforms under

way in Cuba since President Raul Castro took over from his ailing

brother Fidel in 2008. It has been anticipated since 2011, when Cuba

enacted a 300-point overhaul of its domestic economy to encourage more

private enterprise.



(Additional reporting by Nelson Acosta, Rosa Tania Valdes and Marc

Frank; Editing by James Dalgleish)



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