Mining Industry in Cuba ‐ Global Interest January 2016
W hile Cuba lies only 120 miles away from the southern tip of Florida, it's hard for two nations to have taken a more different trajectory. Only within the past decade has Cuba began to open itself up to business developments across the island. As the Castro brothers look to step down from their control of the state within the near future, mining interests are eagerly looking towards developments on the formerly‐sealed‐off island. There's ample reason to think that Cuba could provide a fantastic opportunity for miners of all stripes in the immediate future. The history of Cuba ties in very closely to the history of mining. The first Spanish colonization, some 500 years ago, exploited the gold and silver before turning to cash‐crop agriculture like sugar cane and tobacco. Prior to Castro's revolution, United States interest controlled 90% of the mines on the island; communist sympathizers seized control and forced American companies to return home with empty pockets. The grievances between US and Cuban interests persists up until today: the United States has estimated that Cuba owes some fifty billion dollars to American institutions after the seizure of property and resources. Cuba has fired back that the US embargo cost them half a trillion dollars in the fifty years; neither country looks likely to repay either debt in the future. Today, Cuba sits at the fifth‐largest worldwide producer of cobalt and the sixth‐largest producer of nickel. All mines and ore in the country are owned by the state, but it's not clear how much longer the nationalization of resources and energy will remain the status quo. Some 240 different mining and energy projects in Cuba have the capability to be exploited using foreign financing, according to a US Geological survey, while not enough capital flows out from the
government to get each project up to standard. In order to get a green light, American interests must wait for a number of legal hurdles to be cleared. First and foremost, Congress must lift the Heims‐Burton Act, the official embargo that prevents all US business from setting up shop in Cuba. It's this piece of legislature that requires Americans to set up shell companies in Cuba rather than drop off their products directly. As one example, Coca Cola must be smuggled into Cuba at a steep price tag even though the very first overseas Coke bottling plant set up shop in Cuba nearly a century ago. Luckily, Cuba appears to be much more willing to bring on foreign capital at the moment than in years past, when communist ideology made the island country into a state with few trading partners (and even fewer still with the collapse of the Soviet bloc). Cuba has announced they would lower their corporate tax rate for foreign entities from 30% to 15%, a major step forward in attracting investors, while further offering an eight‐year tax‐free period for companies setting up shop. The World Bank estimates that the Cuban economy requires about three billion dollars per year in outside investment in order to maintain a functional economy. The mining picture, as such, appears to be rather bright for Cuba. With 4500 metric tons exported per year to trade allies in Central America and Europe, the facilities and infrastructure are in place for a mining boom on the island. Nickel is the second‐greatest contributor to the economy, after tourism (also expected to increase with the lifting of American sanctions). Energy also appears to be a favorable investment as well: Cuba is believed to have nearly ten trillion cubic feet of natural gas and nearly five billion barrels of oil reserves which could power an economy as well as a nation that remains prone to power outages.