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The Implication of Trump’s Cuba Policy on Foreign Investment

August 08, 2017

Trump’s new policy towards foreign investment in Cuba reverses rapprochement and will have significant implications on the U.S., Cuba, and other nations with heavy investments in Cuba.

June 16th, President Trump publicly announced his stance towards U.S.-Cuba relations, stating he would cancel the Obama administration’s policy of rapprochement. In response, the Department of Treasury and Department of Commerce began writing new regulations, defining Trump’s new policy towards Cuba.[1]

The specific regulations should be revealed in the next few months, and will constitute one of Trump’s first defining foreign policy steps. The potential effects of the new Cuba policy on the U.S. economy, including a likely cost of $6.6 billion, are well researched.[2] What is less understood is the effect of a U.S. policy shift on foreign investment in Cuba.  Have Trump’s U.S. policy and attitudes towards Cuba established a global precedent? The threat that Trump poses to rapprochement may likely have a marked effect on foreign investment in Cuba as well. The current formalization of U.S.-Cuba policy will have implications for not only the U.S. and Cuba, but also for foreign nations with significant investments in Cuba.

For much of Fidel Castro’s rule, foreign capital was rejected by the Communist party. Simultaneously, the U.S. embargo, established in 1958, perpetuated the use of virulent rhetoric towards the island nation. The transfer of power to Raul Castro has ushered in an “update of the Cuban economic model” thus loosening restrictions upon foreign investment.[3] A manifestation of this is the Portfolio of Opportunities for Foreign Investment, an annually updated guide to hundreds of Cuban investment opportunities, as determined by the Cuban state.[4] These opportunities range from sectors such as Agriculture Forestry and Foods, Energy, Tourism to Biotechnological.   

In 2014, secret negotiations between President Obama and Raul Castro announced fundamental relaxations to the structure of foreign investment in Cuba. On March 29th, 2014, Law no. 118 entitled the “Foreign Investment Act” was announced, and by June 28th the law was in place.[5] Law no. 118 loosened regulations on the influx of foreign capital to Cuba, thus offering steep tax cuts, promising a climate of investment security, and helping to solidify a new U.S. policy of rapprochement towards Cuba.[6]

U.S. financial policy had significant implications for foreign investment in Cuba during the 2014 renegotiations during the Obama administration. According to Marc Frank of Thompson Reuters, “The best proof of this is the massive wave of officials and business delegations from around the world that followed the December 2014 announcement of efforts to normalize relations… The risk lessened and opportunity increased.”[7] 

Is the international investment community likely to react again, this time to a reversal of U.S.-Cuba policy? What evidence exists of the influence of U.S. financial policy on foreign investment trends in Cuba? The nature of the communist state presents many challenges to a quantitative assessment, and statistics on foreign investment in Cuba are limited. Government data on international capital flows, including primary international investors and the size of their investments, is not within the public domain.[8]

Vastly different estimates have therefore been arrived at. The United Nations Conference on Trade and Development estimates that between 1990 and 2009, roughly $215 millions of foreign investment stock was invested in the Cuban economy. The World Bank suggests $210 million in foreign capital for the period of time ranging between 1994 to 2009.  However, the International Monetary Fund’s Coordinated Direct Investment Survey states that Spain alone had invested $583 million in the Cuban economy up until 2010.[9]

Cuban government statistics on foreign capital were, however, released by Minister Rodrigo Malmierca of the Ministry of Foreign Trade and Investment (MINCEX) in November 2016 at a MINCEX conference. Malmierca indicated that while the annual goal for foreign capital per year is $2.5 billion, between November 2014 and November 2016 only $1.3 billion had been approved.[10] These approvals are likely to come from both the Portfolio of Opportunities for Foreign Investment, as well as independently negotiated foreign investment. 

Extensive American media coverage exists surrounding the economic involvement of foreign adversaries in the Cuban economy, most notably Russia, China, and Venezuela. On May 10, 249,000 barrels of Russian oil arrived in Cuba as part of a 1.9 million barrel agreement between Russia and Cuba, the first oil this century.[11] The New York Times also reported that Russia was seeking to reopen military bases in both Cuba and Vietnam; these developments, as well as the reestablishment of aggressive rhetoric towards Cuba, highlight the remaining cold war tensions between the U.S. and Cuba. 

It has been suggested that threatening rapprochement might present a national security risk to the U.S. Frank, however, points to a 2015 internal document from a major Chinese manufacturing company. In the period immediately following negotiations between Obama and Raul Castro, “the risk analysis team states that they see less chance of damaging the company’s U.S. activities and recommend a small percent of investment funds for the island,” points out Frank.[12] The pervasive, if illusive, influence of U.S. Cuba financial policy on foreign investors must not be underestimated. 

It must be noted, however, that ideological adversaries such as Russia and China are not the only actors with significant financial investment in Cuba. Canada, for example, has long had sizable financial capital invested in Cuba, as does Spain. 

Frank, however, emphasizes that “U.S. virulent rhetoric on, and sanctions of, Cuba have always presented real and imagined risks versus opportunity questions for foreign investors.”[13] As a result of strong evidence correlating U.S. financial policy in 2014 with increases in foreign investment, it appears likely that an opposite reaction from foreign investors might be expected in response to a policy that risks rapprochement between the U.S. and Cuba. 

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.



  [1]Williams, Jennifer. “Trump’s tough new Cuba policy isn’t nearly as tough as he wants you to think.” Vox. June 16, 2017. Accessed August 08, 2017. https://www.vox.com/world/2017/6/16/15820484/trump-new-cuba-policy-speech-obama.


  [2]Zanona, Melanie. “Rolling back Cuba policies would cost US $6.6B: report.” TheHill. June 01, 2017. Accessed August 08, 2017. http://thehill.com/policy/transportation/335932-rolling-back-cuba-policies-would-cost-us-66b-report.


  [3] “Foreign Investment.” Cámara de Comercio de la República de Cuba. Accessed August 08, 2017. http://www.camaracuba.cu/index.php/en/business/foreign-investment.


  [4] “Cuba: Portfolio of Opportunities for Foreign Investment, 2016–17.” Foreign Affairs. February 13, 2017. Accessed August 08, 2017. https://www.foreignaffairs.com/reviews/capsule-review/2017-02-13/cuba-portfolio-opportunities-foreign-investment-2016-17.


  [5] “Foreign Investment.” Cámara de Comercio de la República de Cuba. Accessed August 08, 2017. http://www.camaracuba.cu/index.php/en/business/foreign-investment.


  [6] “Cuba says wants to speed up foreign investment drive.” Reuters. November 01, 2016. Accessed August 08, 2017. http://www.reuters.com/article/us-cuba-tradefair-idUSKBN12W582.


  [7] Mark Frank: Interview. July 5th, 2017.


  [8] “Foreign Investment in the New Cuban Economy.” NACLA. Accessed August 08, 2017. https://nacla.org/article/foreign-investment-new-cuban-economy.


  [9] “Foreign Investment in the New Cuban Economy.” NACLA. Accessed August 08, 2017. https://nacla.org/article/foreign-investment-new-cuban-economy.


  [10] “Analysis: Cuba’s Call to Foreign Investors.” Cuba Trade Magazine. April 13, 2017. Accessed August 08, 2017. http://www.cubatrademagazine.com/cubas-investment-portfolio/.


  [11] “Russia resumes oil shipments to Cuba, helps fill Venezuelan breach.” Reuters. May 03, 2017. Accessed August 08, 2017. http://www.reuters.com/article/us-cuba-energy-russia-idUSKBN17Z2B8.

  [12] Mark Frank: Interview. July 5th, 2017.

  [13] Mark Frank: Interview. July 5th, 2017.


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