Alaco

30.03.2016 | US and China vie for Cuban business

The easing of America’s trade and travel embargo on Cuba comes as China strengthens economic ties with the island.

While welcoming America’s growing rapprochement with Havana, Beijing betrays concerns that the thaw threatens its own interests in Cuba. On the eve of President Obama’s recent historic visit, the state-controlled press urged Cuba to be wary of America’s motives – the Communist Party newswire Xinhua warning of Washington’s “ideology of interventionism in Latin America".

China has been cultivating ties with Cuba for several decades. Then President Jiang Zemin visited twice, in 1993 and 2001, while Cuban leader Raul Castro travelled to China in 2012.  Trade between the two countries rose by over 50 per cent to $1.6 billion in the first three quarters of 2015, making China Cuba’s second-largest trading partner after Venezuela. At the same time, Chinese investments have contributed to the development of the Cuban economy, notably the agricultural and energy sectors and transport infrastructure.

Since Obama’s move to re-establish ties between America and its estranged neighbour in 2014, the lifting of some restrictions on investment and travel has led to a flurry of American business delegations, despite the challenges and risks of investing in a largely state-controlled economy. However, US companies have had little to show for their overtures.  Most of the new deals are confined to the hospitality sector, the most eye-catching being Starwood’s agreement to renovate and run three Cuban hotels.  American interest in developing the country’s telecoms network is reportedly being resisted, in part due to Washington’s past use of digital tools to try to undermine the regime.

Chinese companies, meanwhile, are taking the lead in helping to build Cuba’s Internet infrastructure and are acquiring a stake in the tourism sector as well, investing nearly $500 million in more than a dozen resort projects. The two countries also recently signed new credit agreements that will allow Cuba to buy agricultural equipment and railway stock from China.

Although the Cuban leadership may feel more comfortable with Chinese investment and trade, it recognises that opening up the country to American commerce is critical to transforming the country’s economic prospects. But Havana has a dilemma on its hands. While keen to see the lifting of Washington’s trade embargo, Cuban leaders are said to be worried that US investment could dominate the country’s economy if too many deals are struck at once.