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Investments in Cuba 1958 [GENTE, Vol. 1, Havana, January 5, 1958, No. 1, American Edition]
PHOTO CAPTION - Fertilizers are packaged in the Perez, Galan y Cia., fertilizer plant in Regla, across the
bay from Havana proper and on the shore of Havana Bay. The factory was installed with
the financial cooperation of the BANFAIC.
PHOTO CAPTION - A view of the modern "Vaquerias Unidas, S.A." plant, one of the more important milk
pasteurization plants serving the city of Havana. Built with BAFAIC funds.
The Growth of Investments in Cuba
"There is no doubt about the excellent economic possibilities in Cuba. This nation is very well advanced in comparison with other Latin American nations. It is a fortunate country. It has an active and hard working people, a fine soil, magnificent ports, considerable mineral riches and vast agricultural wealth and is situated close to large
PHOTO CAPTION - An interior view of the totally modern "Vaquerias Unidas" plant at the "Moraralitos [Moralitos] Ranch".
an important markets. It provides a fine field for general economic diversification, and for agriculture in particular".
The speaker was John J. McCloy, at that time president of the International Bank of Reconstruction and Finance and on a visit to Cuba, Mr. McCloy continued:
"The establishment of a solid economic base alone will suffice to attract capital. And by a solid economic base, I mean a firm currency, coordination between the country's economic and political life and an atmosphere of confidence..."
Mr. McCloy added that he had been amazed at the firmness of Cuba's currency in a world where strong currencies were at a premium. This, he said, should be taken into serious consideration, as also should Cuba's excellent credit rating abroad.
We believe, above, all, that capital is not attracted by the mere enactment o laws offering facilities for foreign investments. The question is deeper than that. Capital flows freely to areas where investors believe it will increase and produce in an atmosphere of safety and peace. Such an atmosphere is the creation of many conditions, some of which were outlined by the Joint Committee on Economy and Finance of the S.N.D. in a meeting held at Princeton University in 1945. Several of the conditions favorable for foreign investments were listed by the committee as follows:
1. That the country's natural conditions and sources of raw materials offer remunerative possibilities for an active economy.
2. That political, social, economic and administrative institutions and agencies and their development be such as to permit business to develop in an atmosphere of peace.
3. That equality of opportunity and fair competition exist in both small and corporative business.
4. That economic and social progress not be obstructed by the actions of any domestic or foreign interests.
5. That the introduction of foreign capital and foreign skills be permitted and that they be guaranteed favorable treatment.
6. That local business leaders and workers be capable of, and desirous of cooperating voluntarily with foreign investors in the utilization of funds, skills and technical advancements.
7. That the foreign trade balance or national balance of payments have a surplus sufficient to cover dividends, interests and amortizations, of the foreign capital invested, or of the foreign persons making the investments.
8. That the fiscal and monetary policies of the country be such as to permit the free transfer of profits without payment of duties or taxes, and that as a result the value of foreign holdings not be subject to depreciation.
9. That in general the treatment of foreigners be such as to promote relations between the two nations involved on a basis of mutual understanding and respect.
Cuban has, first of all, a privileged geographic position which in the near future will make this nation a vital commercial center for the entire Caribbean region.
Equally as important, it has more than 20 natural and well protected deep-water ports, numerous natural and economic resources, an important internal market (and one of the largest in Latin America for American products), a hard working population, a strong desire to prosper and build a happy future and sufficient means to secure full economic development.
PHOTO CAPTION - The "Titan" cement factory in Santiago de Cuba was built with money provided by the BANFAIC. Two more cement factories are being planned, in addition to those now in operation.
PHOTO CAPTION – Another chemical fertilizer plant was established with BANFAIC funds on the shore of Havana Bay. It is the "Productora de Superfosfatos, S.A." plant in Regla.
But possibly the one most important asset that Cuba possesses is a well-coordinated national policy for the development of investments for economic growth and the maintenance of a high standard of living which, in turn, will mean robust purchasing power.
Since 1952 the Cuban government has created several agencies to help in the promotion of foreign investments. In addition and Industrial Stimulation Law was created for the regulation of tariff exemptions, consular fees and taxes.
Groups interested in establishing new enterprises, industries or businesses have at their disposal ample investigative and advisory services which are offered by the newly-created government agencies, among them the National Economy Board, the Bank of Agricultural and Industrial Development (BANFAIC), the Bank of Economic and Social Development (BANDES), the National Financing Corporation of Cuba, the Cuban Bank of Foreign Commerce and the Federal Housing Administration (FHA).
Thanks to these agencies, many business backed by foreign capital, or mixed capital (Cuban and foreign funds combined, or private funds and state capital) have succeeded in establishing important outlets in Cuba to supply the needs of an extensive domestic market and expanding foreign markets as well.
PHOTO CAPTION - The notable expansion of the Cuban petroleum industry has required the establishment of new refineries and the expansion of those previously in operation. Shown is the model of the Esso Standard Oil "Habana" refinery, recently opened in Belot on the shore of Havana Bay with funds put up by th Financiera Nacional de Cuba. Two more refineries are under construction, also financed by official Cuban investments.
Natural and Economic Resources
Many of Cuba's natural resources, never fully exploited in the past, are now being developed to the utmost.
These resources are many, and their availability has been enhanced by development of Cuba's many natural ports its rapidly-growing highway system and its wide-spread farm-to-market road network.
One of the nation's most important resources is its great mineral wealth. Cuba possesses important deposits of copper, chrome, iron, manganese, nickel and tungsten, as well as gold, the production of which is under the supervision of the National Bank of Cuba.
Close to $100 million in United States capital is at present being used for the exploitation of important nickel and chrome deposits in Oriente Province. Other minerals found in abundance in Cuba include beautiful marbles, asphalt, kaolin, barite, manesite, iron pirite and others.
Oil exploration has recently been intensified throughout the island, while three new refineries have been constructed in Havana and Santiago de Cuba by American firms with the aid of Cuban government finance agencies. Cuban Oil stocks are sold on the New York Stock Exchange.
To facilitate mineral development, the Cuban Bank of Agricultural and Industrial Development, a government credit agency, has put its large laboratory at the disposal of the mining industry. The Ministry of Agriculture has also offered its vast facilities.
Cuba's mining industry got its start shortly after the discovery of the Americas by Christopher Columbus in 1492. But it was during World War II that mining reached its highest peak of development. Cuba aided the allied war effort inmensely [immensely] with larger shipments of nickel, chrome, copper, tungsten, manganese and iron.
Cuba's agricultural resources are many and include, beside sugar cane and tobacco, many kinds of cereal grains, vegetables, rice, red and black beans, lima beans, corn, cacao and coffee. After long years absence from the foreign coffee market, Cuba resumed export of coffee in 1956 to the United States and Europe. This was abetted by the Cuban Foreign Commerce Bank, an official agency created to cooperate with business and industry in the strengthening of foreign trade.
PHOTO CAPTION - The Cabaiguan Refinery recently expanded through use of BANFAIC funds, is located in Caboiguan, Las Villas Province. Expansion was ordered by the recent surge in Cuban oil requirements.
The "Revista GENTE" completed in 1952 a study of articles manufactured in Cuba. A resume of statistics from the study follows:
----------RESUME OF STATISTICS----------
Vegetable production includes avocados, squash, eggplant, pepper, tomato, cucumber, okra and others. Also grown in quantity are such tubers as sweet potatoes, arums, yams, potatoes and yucca (cassava), all of which have a high starch content and are utilized in industry as well as on the Cuban menu.
A large variety of oil seeds are also grown, among them sesame, castor, sunflower and peanuts. Several plants for the processing of vegetable oils have been established in Cuba.
Cuban fruits are easily distinguishable for their rich pulp and exquisite flavor. Many of those which are exported in bulk include bananas, pineapples, mangoes, mamey, guava fruit their juices pastes and preserves. Many plants for the manufacture of fruit preserves have been established throughout the island. And in the citrus fruit line, Cuban oranges, grapefruit, lemons and limes are consumed in great quantity domestically and exported to other world nations as well.
Cuba's forestry resources are represented by cedar, mahogany, "majagua", pine and other hardwoods. These are found in many lovely colors and are used in the manufacture of cabinets, furniture and boxes. Some of the more common woods are used to make "tobacco poles", railroad ties, wooden crates packing boxes and charcoal.
(Text Continued on Page 75)
Most of the large furniture factories in operation here use Cuban woods. A recent addition to the wood and pulp processing field in Cuba was the establishment of a plywood factory; installation of another such plant is expected shortly.
In the textile fiber line, Cuba produces hemp, kenaff, ceibon or drago and yarey. All of these fibers are used in the manufacture of cordage and rope, hats, baskets and allied articles such as shoes and slippers. A plant for the manufacture of rayon yarn is in full production here. Sacks are also manufactured, although in limited quantity. Large amounts of cotton are imported, mainly from the United States, for Cuba's large textile industry which turns out many types of men's and women's apparel, including shirts, underwear, stockings and socks.
Cuba's marine resources have attracted growing attention in recent years. The waters that surround this lovely island are teeming with over 100 species of fish which are dragged from the deep for sale in the markets and also for use in the industrial process. The recently-created National Fisheries Institute has undertaken wide-ranging studies and investigations of Cuba's fish reserves and is publishing its findings at periodic intervals. Off Cuba's coasts are found vast areas for commercial and sport fishing. Several fisheries and fish factories are in operation throughout the island, processing and canning fresh and salted fish as well as lobster and crab. Sharks, which abound in Cuban waters, are cut up for their liver with its highly valuable vitamin C content. Other phases of Cuba's fishing industry include oyster fishing and sponge diving, salt production and sand extraction.
The Cuban Bank of Agricultural and Industrial Development, the Felipe Poey Fisheries Credit Association the National Fisheries Institute have provided constant economic and technical aid to the fast growing industry throughout the island.
Cuba's cattle are excellent in quality and varied of breed. For the most part they are Cebu and Brahma. The hogs produced in Cuba are also of the highest quality. Wight a thriving livestock industry, the consumption of fresh meat is very high and the processing of by-products wide-spread. For instance, Cuba has four plants for the processing of evaporated milk, and several others to produce powdered milt, butter and cheese. Meat products treated and packaged here include sausage, jerked beef and preserves. Hides are tanned into leather. Tallow, glycering and tankage are also produced. Hand in hand with the livestock industry, the poultry industry also is
A LIST OF NEW ENTERPRISES financed by foreign and local capital in Cuba. Foreign capital, combined with local funds and money put up by Cuban finance agencies is creating a series of new industries and businesses throughout the island.
PHOTO CAPTION - The Owens-Illinois Glass Factory of Cuba is nearing completion in San Jose de las Lajas, Havana Province. The factory is being built with BANFAIC funds. I will produce glassware and other household equipment. Shown is tre rear of the plant with seven truck-loading bays used for the shipment of merchandise.
reaching new heights, with a resulting slash in Cuban egg imports. Honeys and bees wax, also, have created two new and thriving export items for the nation's foreign trade.
Cuban capitalists have, until recent years, favored investments in real estate, building construction or in high-interest mortgages. Cuba's present building boom has done much to stimulate this type of investment even more.
However, experience acquired during World War I and the economic crisis which hit Cuba at almost the same time that the great depression hit the United States (1929-1930) helped divert the flow of Cuban investments. In some instances investors turned to foreign securities (stocks and bonds), mostly American. In other instances, they sank their money into a variety of activities.
It is only fair to acknowledge, however, that the Cuban has always invested in sugar cane, tobacco, livestock and coffee production. But a realistic appraisal of the situation would dictate that Cuban capital be invested in the following fields:1. Rural properties, farms, buildings and mortgages.
2. The traditional agricultural fields of sugar cane, tobacco, coffee, livestock and fruit production.
3. In industries like sugar, foods, fishing, lumber, transport, graphic arts, footwear and leather articles,
pottery, household furniture and jewelry.
4. In banking, insurance, finance and allied fields.
5. In certain types of small and retail businesses.
At present there is no way of determining exactly the national savings which might be used to form Cuban capital. However, using estimates prepared by the Truslow Mission of the the International Bank of Reconstruction and Development, it can be shown that in th years since 1950 when a $100 million loan was totally absorbed within the country, that Cubans collectively have used their income in the following principal ways:
a) To purchase consumer goods and services, including government services.
b) To increase and maintain their capital.
c) To increase their assets abroad.
The savings habits has grown in Cuba in recent years, as has t he habit of investing adequately in profit-making or reproductive fields such as stocks and bonds or the purchase of a home. This investment habit has led to the urbanization of great sections of he principal cities, construction of new residential zones and re-evaluation of property in what were previously low rent areas.
This has been brought about, logically, through the coordinated action of private capital and government money. The National Bank of Cuba finances
PHOTO CAPTION - A copper cable and wire factory recently began construction in San Jose de las Lajas, Havana Province. It is the "Cia. Productos de Cobre de Cuba, Phel-Deak". BANFAIC money is being used in the construction.
the so-called capitalization banks, while the Federal Housing Authority (FHA) grants long-term credits for the rapid construction of residential housing. Large cooperative apartment buildings have also been constructed by use of exemptions on the importation of construction materials, tax exemptions, financial cooperation and state aid.
Approximately $312 million have been invested by Cubans in the United States in short and long-term loans, according to the U.S. Treasury Department. This includes bonds, stocks and other securities, bank deposits, funds deposited merchandising operations, U.S. Government bonds and individual deposits.
FOREIGN INVESTMENTS IN CUBA
On the establishment of the Republic of Cuba in 1902, foreign investments throughout the country, in the order of their importance, were as follows: (1) Spanish; (2) British; (3) Cuban and in lesser proportions British, Canadian, Dutch, Chinese, Italian, Mexican and others.
At the present time the most important foreign investments in Cuba are American. Such is the extent of American investments here that Cuba ranks in third place among the nations of the world which have received heavy U.S. investments. Furthermore, the uses to which such investments have been put have been si diversified that today in 1957, total American investments in Cuba have surpassed the $919 million previous high established in 1929.
The statistical chart which accompanies this chapter shows the variations of direct U.S. investments in Cuba. After reaching a peak in 1929 of $919 million, they dropped off to $666 million in 1936 and to $642 million in 1950. In the following years they started to climb again, reaching $686 million in 1953 and $713 million in 1954.
An today, in 1957, U.S. investments here are expected to climb close to $952 million.
Therefore, between 1952 and 1956, more than $600 million were invested in Cuban business, industry and diverse other economic activity. But mentioned
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Direct American Investment in Cuba
here will be mainly those industries and businesses established by American companies, many of which have received the full cooperation of official Cuban government agencies, banks and other finance groups.
For example, Cuba's two most important public utilities, the Cuban Electric Company, an affiliate of the American and Foreign Power Company, Inc., and the Cuban Telephone Company have only recently been granted sizeable loans for expansion and development by Cuban Government banking agencies.
Other large American companies like the Owens Illinois Glass Company manufacturers of glassware), the Freeport Sulphur Company and the Nickel Processing Corporation (Minerals), the W.R. Grace Company (building a bagasse paper plant in Cuba), the Esso Standard Oil, Texas Company and Shell Oil, to mention three large petroleum companies – all have received government financing for either construction or expansion.
Other firms which have received government funds to help develop new outlets and production facilities include Firestone Interamericana (auto and truck tires), Reynolds International (aluminum products) Compania Rayonera Cubana (rayon and textiles) and several dozen more. In many cases the companies themselves have put up part of the money and borrowed the rest.
A review of the new investments made in Cuba since 1952, as compiled by the National Bank of Cuba, are as follows:
Source: National Bank of Cuba
NEW INVESTMENTS IN CUBA
1952 TO 1956 (In millions of dollars)
Mining and related activities $95.9 Food 12.4 Beverages 7.8 Textiles 14.4 Sugar cane bagasse 2.4 Rubber and tires 6.5 Chemical products 50.5 Petroleum, derivatives 78.8 Non-metallic minerals 24.5 Various metallic articles 14.5 Electrical appliances 1.4 Various manufactured articles 3.7 Electronics, communications 262.0 Small industries 8.9 Total $583.7
PAYMENTS OF AMERICAN COMPANIES
(In millions of dollars)
Salaries Percentage Royalties
Argentina 566 112 22.2 0.6 17.7 Brazil 657 81 12.4 1.2 11.6 Chile 350 89 25.4 0.6 53.2 Colombia 292 70 24.1 2.4 9.4 CUBA 431 129 29.4 1.7 14.5 Mexico 603 80 16.0 1.8 18.8 Peru 147 39 26.7 2.2 15.9 Venezuela 989 246 24.9 1.5 42.2 Central America 182 81 44.0 0.5 21.4 Other Nations 221 50 22.7 5.1 19.5 Latin American
4298 987 23.0 1.3 24.8
(1) Data supplied by U.S. Department of Commerce
(2) Included are statistics on 300 companies with approximately 1000 subsidiaries in Latin America
(3) The survey includes more than 85 percent of all the active American companies operating in Latin America.
ANALYSIS BENEFICIAL FOR CUBA
(a) Cuba, with total taxes running at 14.5 percent, provides one of the most favorable climates for investment in Latin America.
(b) In interest payments, royalties and dividends, Cuba pays higher rates than the average for all Latin American nations.
PHOTO CAPTION - In Los Pinos, near Havana, t he "Ceramica Kli-Per, S.A." tile factory has been constructed
with financial aid of the BANFAIC.
CAPACITY OF THE CUBAN
There is no doubt of the important role played by banks in the economic life of a nation. Upon them depend the allotments, of capital and credit which go into the development of the nation's production and marketing activities.
In its drive for full economic development, Cuba is channeling its economy in such a way as to free itself from its historic dependence on sugar. In this task it looks for aid to its fine banking system, headed and directed by the National Bank of Cuba. This huge, central bank has many functions. It issues new currency, regulates the monetary stabilization fund and controls compensations. It was the creator of the Deposits Insurance Funds, It supervises the exchange of foreign currencies and the balance of payments. It finances the bonds issued by such government and autonomous agencies as the BANFAIC, BANDES, Financiera Nacional, the F.H.A., and others.
In addition it helps direct member banks through its constant economic research program. The member banks are stockholders in the National Bank and are represented on its board of directors.
The stability and solidity of the Cuban currency (equivalent to the American dollar) has permitted the National Bank of Cuba, to establish a system of traveler's checks, exchangeable in any nation of the world in which the National Bank or any of its affiliated banks have agencies or correspondents.There exist in Cuba several government banks, among them t he Bank of Agricultural and Industrial Development (BANFAIC), the Bank of Economic and Social Development (BANDES), the Federal Housing Administration (FHA), the National Finance
(1) Start of operations of the National Banks of Cuba.
(Millions of dollars)
1949 (1) $573 $233 $340 1950 (2) --- --- --- 1951 727 387 340 1952 728 396 331 1953 704 386 318 1954 717 406 310 1955 815 490 325 1956 (3) 931 567 364
(2) Complete figures not available
(3) Only 11 months of 1956 included.
Sources: National Bank of Cuba, U.S. Department of Commerce, "Invest in Cuba", by H.C. McCclellan, 1956.
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Bank of Cuba and the Cuban Bank of Foreign Trade. All of these institutions may lend their own funds directly or through the floating of bond issues to new industries and businesses which are considered financially sound.
The bulk of the private capital investments made in Cuba during the last five years have been matched by capital from one or more of these banks, and in many cases with capital of private banks associated with National Bank of Cuba.
At the present time 55 domestic and foreign banks are members of Cuba's national banking system. Also these banks have some 230 branches throughout the leading cities of the island. There also exist three banking associations: the Havana Clearing House, the Association of Banks and Bankers Institutions. The last specializes in regulating working conditions between the banks and their employees.
The following chart shows how bank deposits are distributed in Cuba and the number of domestic and foreign banks in operation here since establishment of the National Bank of Cuba:SUMMARY OF 1956 LATIN AMERICAN
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