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Cuba: Is the Train Leaving the Station?

    Client Alerts
  • May 17, 2011

Cuba continues to capture the imagination of the hospitality industry. The opportunities presented by a Caribbean country located 90 miles from the United States, with a coastline that is longer than the coastline from Florida to Maine, are difficult to ignore. And there is much to do - there are no master planned resort developments currently. In fact, Cuba only has two golf courses, an 18-hole course and a 9-hole course, compared to the Dominican Republic’s twenty-four.

In August 2010, in an effort to attract more golf and resort development, the Cuban government extended the lease term on state property leased by foreign investors from 50 to 99 years. The strategy appears to have paid off as the Council of Ministers has since approved sixteen golf course projects on island. In addition, several new developments have been announced in the past six months, including an almost 10,000-acre mixed-use project on the Guanahacabibes peninsula developed by a Spanish company, with plans to include villas and townhomes, three boutique hotels, a marina, and equestrian center, and a US$1 billion mixed-use project developed by British and Spanish developers in Bahia Honda, with plans to include 3,000 housing units, three golf courses, and a marina. 

During last month’s Communist Party Congress, several announcements were made signaling additional economic reforms, including allowing Cubans to buy and sell property for the first time since the 1959 revolution. The significance of the event and the proposed changes quickly caught the world’s attention and ignited debate over whether the economic recession was putting pressure on Cuba to move toward a free economy. On May 9, 2011, the Communist Party published a list of 313 guidelines to confirm the reforms proposed at the Congress. It was expected that the guidelines would provide a detailed framework for the reforms. However, the published guidelines contained few details and created additional uncertainty as to the true status of reform in the country. The guidelines are expected to be put into effect either by government decrees or laws approved by the National Assembly of People’s Power, which usually meets twice a year unless an additional session is called.

Despite much uncertainty, many U.S. developers and golf and hotel operators see the opportunity Cuba provides and are eager to get involved. While it generally remains illegal for Americans to conduct business in Cuba, U.S. companies have not been sitting on the sidelines. There are two ways in which U.S. companies have become involved with Cuba: (1) through the creation of an “offshore vehicle” with non-Cuban foreign entities that is used to create another joint venture with a Cuban real estate-related entity, and (2) through non-binding letters of intent to secure future development rights. Both of these methods are subject to strict federal trade legislation, which regulates, among other things, investment percentage and organizational control. 

Even though the wheels of Cuban reform are beginning to spin more quickly, many significant obstacles to doing business in the country remain. There is no constructive legislation in place to allow for large-scale mixed-use development and real estate sales. Moreover, the Cuban government still dictates much of what a hotel or golf course owner can do operationally, which makes it difficult for the project to be profitable. However, the potential in Cuba cannot be ignored and Cuba's tourism impact on the surrounding region should be significant. 

Parker Poe will continue to monitor the latest developments in Cuba and publish alerts on important news. 

For additional information on Cuba, please contact Matt Norton at 843.727.2645 or


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