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Trade Relations

French Touch in Cuba?

France and Cuba have shared a common history of friendship and cooperation, reignited in 2012 and 2015 by the visits of President François Hollande and the visit of President Raul Castro to Paris in February 2016. Photo: Habana Developpement.

Saying that the relations between France and Cuba are strong is a pleonasm… Indeed, both countries, and incidentally the EU, have historical, political, cultural and economic relations, especially since the Revolution in the island.

France and Cuba have, forged throughout their common history friendship and cooperation, relaunched since 2012 by the visit of President François Hollande to Cuba in May 2015 and the visit of President Raul Castro to Paris in February 2016.  Historical meetings since no French and Cuban heads of state had until then carried out such an official visit.  These visits included the restructuring of Cuba’s debt to France, the signing of a joint economic road map and the extension of AFD’s jurisdiction in Cuba.

Many large French companies have worked for many years in Cuba (such as the PERNOD RICARD and Bouygues International groups) and a few others have obtained significant contracts (such as ADP with Bouygues International for the reconstruction of the José Marti International Airport in Havana).

However, it is clear that three years after the Law 118 opening the island to foreign investors, France is not among the first investors or importers.

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The projects proposed by the Cuban authorities, through the portfolio of foreign investments presented each year at the FIHAV (in November), require significant financing capacities and Cuba is not necessarily, it seems, In the eyes of French companies, a priority, a contrario of many of their European counterparts.

After a 4.5% decline in bilateral trade between France and Cuba in 2015, trade has not recovered in 2016: bilateral trade has decreased by 10% compared to 2015, from € 172.3 million* to € 155.3 million.

This contraction is linked to a reduction in French exports from € 146.8 million to € 128.2 million (-12.7%).

French imports from Cuba have increased by 6.5% in 2016, resulting in a contraction in the bilateral French trade surplus: from € 121.3 million in 2015 to € 101 million in 2016, representing a decrease of 16.7%.

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The trend observed in the first half of 2016 (-8.8%) was accentuated at the end of the year, as Cuba faced a major liquidity crisis forcing its trade with the rest of the world: French exports to Cuba finally decreased Of 12.7% between 2015 and 2016, from € 146.8 million to € 128.2 million. These now represent 83% of French bilateral trade with Cuba, compared with 86% a year ago.

The largest decline in value came from the agricultural sector: exports of cereals rose from € 50.4 million in 2015 to € 45 million in 2016 (-10.9%), and exports of malt have even decreased 19.8% (from € 3.2 million to € 2.6 million).

However, there was a sharp contraction in exports of equipment such as automotive parts and accessories (-26.6%, from € 6.8 million to € 5 million) and communications equipment € 8 million in sales last year and only € 3.4 million in 2016).

French exports from other European ports (ie excluding Customs statistics) and, in general, the difficulty for SMEs to obtain export credits on Cuba may also explain this decline.

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Conversely, several export products increased significantly: chemicals (+ 26.3%, € 11.9 million), essential oils (+ 42.2%, € 4.7 million), and dairy products and recreational boats whose sales were multiplied by 3 and 5 respectively (to reach 5 M € and 2.6 M €).

Indeed, the trend towards diversification of the French offer observed since 2013 continues (the relative weight of cereals in French exports rose successively from 50% in 2013 to 46% in 2014, and finally to 35% today).  The needs in all fields are considerable, first for the Cubans themselves but also to meet the needs generated by the massive influx of tourists since 2014 (about 4 million in 2016).

If Cuba seems to be an Eldorado for investors, it should not be forgotten that if the Cubans have needs, they are at home, independent and proud of what they are.

Cuba offers two types of opportunities for a foreign company: the supply of products that the country needs, and, as part of the Government’s import substitution policy, investment in Cuba to develop local productions.

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Cuba, hitherto heavily dependent on its imports of goods, justifying its import substitution policy by strengthening its production capacity, proposes economic partnerships (in the form of a 50/50 joint-venture, ZEDMarket of 100% foreign investments) in many fields  : tourism, health and biotechnology, energy (mainly renewable in order to drastically reduce dependence on imported oil and gas), public and urban works, the so-called “light” industry for the production of high-tech products ), Heavy or waste processing, and agri-food (agriculture, sugar and fisheries).

Finally, patience and perseverance are the key words in Cuba to sign a contract.  Indeed, the Cuban authorities favor a good interpersonal relationship in order to ensure the real motivation of its potential partners.

It should be recalled that, again and again, the US embargo against Cuba is still in force. Cuba does not have access to international funding and the extraterritorial laws Helms-Burton and Torricelli, which sanction foreign companies trading with Cuba (in US $), are still in force.

Cuba remains an enabling territory for any investor who understands, adapts and responds to identified needs. In addition, Cuba is the gateway to other ALBA countries.

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NOTE:  *All figures in this article are those communicated by the French Treasury.

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