K.J.

SOMAIYA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH MUMBAI

AN INTERNATIONAL BUSINESS
PROJECT ON COUNTRY
PROFILES OF CUBA AND
ARGENTINA

Submitted by:
Vaibhav Agrawal(03)
Shatabdi Das(12)
Noopur Jain(19)

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 ARGENTINA:
Argentina, is the second largest country in South America, constituted as a
federation of 23 provinces and capital as Buenos Aires. It is the eighth-largest
country in the world by land area.

Argentina's continental area is between the Andes mountain range in the west
and the Atlantic Ocean in the east. It borders Paraguay and Bolivia to the north,
Brazil and Uruguay to the northeast, and Chile to the west and south. Argentine
claims over Antarctica, as well as overlapping claims made by Chile and the
United Kingdom, are suspended by the Antarctic Treaty of 1961. Argentina also
claims the Falkland Islands and South Georgia and the South Sandwich Islands,
which are administered by the United Kingdom as British Overseas Territories.

Argentina is a founding member of both the United Nations, Mercosur and the
Union of South American Nations. Argentina is one of the G-20 major economies.

Size and area

 The total surface area (excluding the Antarctic claim) is 2,766,891.2 km2

(1,068,302.7 sq mi), of which 30,200 km2 (11,700 sq mi) (1.1%) is water.
Argentina is about 3,900 km (2,400 mi) long from north to south, and
1,400 km (870 mi) from east to west (maximum values).

Demographics

The official population estimate for 2009 is of 40,134,425.Argentina ranks third in

South America in total population and 33rd globally. Population density is of 15
persons per square kilometer of land area. The population growth rate in 2008
was estimated to be 0.92% annually, with a birth rate of 16.32 live births per

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1,000 inhabitants and a mortality rate of 7.54 deaths per 1,000 inhabitants. The
net migration rate is zero immigrants per 1,000 inhabitants.

Climate

The general temperate climate ranges from subtropical in the north to subpolar in
the far south. The north is characterized by very hot, humid summers with mild
drier winters, and is subject to periodic droughts. Central Argentina has hot
summers with thunderstorms (western Argentina produces some of the world's
largest hail), and cool winters. The southern regions have warm summers and
cold winters with heavy snowfall, especially in mountainous zones. Higher
elevations at all latitudes experience cooler conditions.

Governance:

Argentina is composed of 23 provinces and one federal district (Buenos Aires). It

is governed by the 1853 constitution as revised in 1898 and 1994, and has a
federal system of government. The president and vice president are elected by
popular vote for four-year terms and can be reelected once. The popularly
elected bicameral national congress is composed of 72 senators (three from each
province and the federal district), who serve six-year terms, and 257 deputies
(based on proportional representation), who serve four-year terms. There is a
nine-member supreme court. Each province has its own elected governor and
legislature and its own judicial system.

Foreign policy and political issues:

Argentina is a full member of the Mercosur block together with Brazil, Paraguay,
Uruguay and Venezuela; and five associate members: Bolivia, Chile, Colombia,
Ecuador and Peru. From 2003 Argentina has emphasized Mercosur (Mercosul in
Brazil) . Argentina is a founding signatory and permanent consulting member of
the Antarctic Treaty System and the Antarctic Treaty Secretariat is based in
Buenos Aires.

Argentina has long claimed sovereignty over the Falkland Islands and South
Georgia and the South Sandwich Islands, which are administered by the United
Kingdom as British Overseas Territories, as well as almost 1,000,000 square
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kilometres (390,000 sq mi) in Antarctica, between 25°W and 74°W and south of
60°S. The Antarctic claim overlaps claims by Chile and the United Kingdom,
though all claims to Antarctica fall under the provisions of the Antarctic Treaty.
Since 1904, a scientific post has been maintained in Antarctica by mutual
agreement. While Argentina has employed threats and force to pursue its claims
against Chile in the Beagle channel, against Britain in Antarctica and the Falklands
and South Georgia and the South Sandwich Islands, as well as against illegal
trawlers, this is the exception rather than the rule in Argentine international
relations.

Argentina was the only Latin American country to participate in the 1991 Gulf War
under the United Nations mandate. It was also the only Latin American country
involved in every phase of Operation Uphold Democracy in Haiti. Argentina has
contributed worldwide to peacekeeping operations, including those in El
Salvador, Honduras, Nicaragua, Guatemala, the Ecuador-Peru dispute, Western
Sahara, Angola, Kuwait, Cyprus, Croatia, Kosovo, Bosnia and Timor Leste. In
recognition of its contributions to international security, U.S. President Bill Clinton
designated Argentina as a major non-NATO ally in January 1998. It was last
elected as a member of the UN Security Council in 2005.

Neighbouring countries and their relations:

Brazil

 A strong integration and partnership began between the two countries

after democratization. In 1985 they signed the basis for the MERCOSUR, a
Regional Trade Agreement. Also on the military side there has been greater
rapprochement. In accordance with the friendship policy, both armies
dissolved or moved major units previously located at their common border.

 On September 7, 2008, the President of Argentina, Cristina Kirchner,

traveled to Brazil where she was the guest of honor at the Independence
Day celebrations and witnessed the military parade in Brasília. The
following day, she held discussions with the Brazilian President LuizInácio

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 Lula da Silva on a variety of bilateral issues including energy, defense and
nuclear cooperation.

Paraguay

 Diplomatic relations between those 2 neighbors were established in 1811,

with the signing of an agreement on Friendship, Assistance and Trade.
 Both countries were at war between 1864 and 1870 (War of the Triple
Alliance), and never fought each other since.
 Argentina has an embassy in Asuncion and 2 Consulates-General.
 Paraguay has an embassy in Buenos Aires and 7 consulates (in Clorinda,
Corrientes, Formosa, Posadas, Resistencia, Rosario and Puerto Iguazú).

Uruguay

 Uruguay gained its independence after the Argentina–Brazil War, with the
help of Argentina.
 Between the 1960s and the 1990s, there was significant Uruguayan
immigration to Argentina, where today, around 120,000 Uruguayan
nationals live.

 In 2006, both countries had the first diplomatic tensions in decades

following incidents of contaminated waste dumping by a large pulp mill
along the Uruguay River. But it was solved in the internatonal court and
everything went back to normal when uruguay proved the contaminated
waste weren't thrown into the river.
 Uruguay has an embassy in Buenos Aires, 2 general consulates , 3
consulates , 2 honorary consulates .
 Argentina has an embassy in Montevideo and 5 consulates (in Colonia del
Sacramento, Fray Bentos, Paysandú, Punta del Este and Salto).
 Both countries were founding members of the Mercosur.

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Chile

Argentina - Chile relations refers to interstate relations between the Republic of

Chile and the Argentine Republic. Argentina and Chile share the world's third-
longest international border, which is 5,300 km (3,300 mi) long and runs from
north to the south along the Andes mountains. Although gaining their
independency together, during much of the 19th and the 20th century, relations
between the countries chilled due to disputes over Patagonia, though in recent
years relations have improved dramatically.

GDP ESTIMATES AS OF 2010:

The total GDP is $632.223bn and per capita GDP is $15,603.

Economic conditions:

Argentina has a market-oriented economy with abundant natural resources, a

well-educated population, an export-oriented agricultural sector and a relatively
diversified industrial base. Domestic instability and global trends, however,
contributed to Argentina's decline from its noteworthy position as the world's
10th wealthiest nation per capita in 1913 to that of an upper-middle income
economy. Though no consensus exists explaining this, systemic problems have
included increasingly burdensome debt, uncertainty over the monetary system,
excessive regulation, barriers to free trade, and a weak rule of law coupled with
corruption and a bloated bureaucracy. Even during its era of decline between
1930 and 1980, however, the Argentine economy created Latin America's largest
proportional middle class but this segment of the population has suffered from a
series of economic crises between 1981 and 2002, when the relative decline
became absolute.

Argentina's economy started to slowly lose ground after 1930, when it entered
the Great Depression, after which it recovered slowly. Erratic policies helped lead
to serious bouts of stagflation in the 1949–52 and 1959–63 cycles, and the
country lost its place among the world's prosperous nations, even as it continued
to industrialize. Following a promising decade, the economy further declined
during the military dictatorship that lasted from 1976 to 1983 and for some time
afterwards. The dictatorship's chief economist, José Alfredo Martínez de Hoz,
advanced a disorganized, corrupt, monetarist financial liberalization that

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increased the debt burden and interrupted industrial development and upward
social mobility; over 400,000 companies of all sizes went bankrupt by 1982 and
economic decisions made from 1983 through 2001 failed to reverse the situation.

Record foreign debt interest payments, tax evasion and capital flight resulted in a
balance of payments crisis that plagued Argentina with severe stagflation from
1975 to 1990. Attempting to remedy this, economist Domingo Cavallopegged the
peso to the U.S. dollar in 1991 and limited the growth in the money supply. His
team then embarked on a path of trade liberalization, deregulation and
privatization. Inflation dropped and GDP grew by one third in four years; but
external economic shocks and failures of the system diluted benefits, causing the
economy to crumble slowly from 1995 until the collapse in 2001. That year and
the next, the economy suffered its sharpest decline since 1930; by 2002,
Argentina had defaulted on its debt, its GDP had shrunk, unemployment reached
25% and the peso had depreciated 70% after being devalued and floated. In April
2010, Argentina offered to repay a majority of its almost $100 billion in loans from
2001. The economic minister Amado Boudou said that with the offer, the
Argentine government hoped "to end the shame of 2001 once and for all."

In 2003 expansionary policies and commodity exports triggered a rebound in GDP.

This trend has been largely maintained, creating millions of jobs and encouraging
internal consumption. The socio-economic situation has been steadily improving
and the economy grew around 9% annually for five consecutive years between
2003 and 2007 and 7% in 2008. Inflation, however, though officially hovering
around 9% since 2006, has been privately estimated at over 15%,becoming a
contentious issue again. The urban income poverty rate has dropped to 18% as of
mid-2008, a third of the peak level observed in 2002, though still above the level
prior to 1976. Income distribution, having improved since 2002, is still
considerably unequal.

Argentina ranks 106th out of 179 countries in the Transparency International's

Corruption Perceptions Index for 2009. Reported problems include both
government and private-sector corruption, the latter of which include money
laundering, trafficking in narcotics and contraband, and tax evasion. The country
faces slowing economic growth in light of an international financial crisis. The
Kirchner administration responded at the end of 2008 with a record US$32 billion
public-works program for 2009–10 and a further US$4 billion in new tax cuts and
subsidies. Kirchner has also nationalized private pensions, which required growing

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subsidies to cover, in a move designed to shed a budgetary drain as well as to
finance high government spending and debt obligations.

Argentina has, after its neighbor Chile, the second-highest Human Development
Index and GDPper capita in purchasing power parity in Latin America. Argentina is
one of the G-20 major economies, with the world's 31st largest nominal GDP, and
the 23rd largest by purchasing power. The country is classified as upper-middle
income or a secondary emerging market by the World Bank.

Cultural issues and Customs:

 To conduct business in Argentina, it is necessary to obtain third party

introductions through institutions such as law firms, consulting firms or
banks.
 Politeness is essential when dealing with these intermediaries as they
determine the order in which visitors get access to their bosses.
 There is usually at least a week or two delay so it is better to schedule
appointments with these periods of time in mind. Working hours differ: in
Buenos Aires [the capital] people in decision-making positions may work
non-stop from 10:00 am to 5:00 pm with a short break for lunch at 1.00 pm
[which may often be turned into a business lunch]. In the provinces,
managers start earlier and stop at 12:30 to 1:00 pm and resume work at 4:00
to 4:30 pm to finish at 7:30 to 8:00 pm.
 Punctuality: It is appreciated and expected from visitors to Argentina for all
business related occasions. However, you may find your Argentine
counterpart to be 15 to 20 minutes late! Guests to home invitations are
expected to show up some 15 minutes late. For a dinner party, guests can
arrive even 30 minutes late.
 January and February are holiday months. It may be unwise to try to do
business in these summer months.
 Fixed holidays: January 1, Easter, May 1 [Labour Day], May 25, July 9,
December 25.
 Government offices: 8:00 am to 5:00 pm.
 Argentine businesspeople are formal and conservative regarding style and
colours. They prefer to dress well and to follow European designs. Business
casual is not perceived as appropriate in Argentina. For men, blue, grey and
brown suits, white or light blue shirts and conservative ties are the norm.
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 Women also prefer suits in blue or pastel colours with black or brown shoes
made of leather.
 For dinner parties or restaurant outings, men wear a suit and tie and women
elegant, conservative dresses. One might dress more casually in the summer,
in which slacks and short-sleeved shirts for men and more casual dresses for
ladies are prevalent. Avoid wearing shorts.
 Argentines believe they should be frank, open and direct, but they are proud
of being diplomatic. For them, it is important not to offend, so sometimes
they might be indirect when speaking but they are not trying to be confusing,
but rather amiable and tactful. Argentines are well informed and proud of
having the latest, most precise information. They are warm, and they tend to
get closer and touch while speaking. Shaking hands is normal when being
introduced, but after that don't be embarrassed when you see two men
kissing when they meet, as it has become common practice.
 The family is still the centre of life in Argentina and therefore is a great
subject of conversation together with travel, sports, food and wine, sports,
the arts, the country's landscapes.
 Argentines are not overly patriotic but they will take offence at negative
comments about the country as a whole.
 They love sports like football, rugby, polo, tennis and enjoy talking about
famous Argentine sportsmen who stand out in these fields. Argentines have
a vast cultural life, have obtained five Noble Prizes, and are knowledgeable
about the latest in literature, films, and art. Tango, the urban national music,
is highly appreciated. There are tango ball rooms [milongas] that are worth
visiting.
 In Buenos Aires, the tango takes a starring role, as it is the rhythm that
represents its culture.
 Talking about local or international politics, neighbouring countries, and the
Malvinas [Falkland] conflict. Some businesses will not favour conversations
about human rights violations.

Main industries and products:

Argentina's economy has traditionally been based on agriculture, but the

industrial and service sectors have also grown in importance in recent years.
Livestock (cattle and sheep) and grains have long been the bulwark of its wealth;

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its cattle herds are among the world's finest. As an exporter of wheat, corn, flax,
oats, beef, mutton, hides, and wool, Argentina rivals the United States, Canada,
and Australia. Its other agricultural products include oilseeds, lemons, soybeans,
grapes, and tobacco. Argentina is the world's largest source of tannin and linseed
oil.

Although Argentina has a variety of minerals, they are of local importance and are
not completely adequate to support the country's industries. Domestic oil and gas
production has made the nation self-sufficient in energy; pipelines connect the oil
and gas fields with Buenos Aires and other major refining centers. Argentina also
exploits its ample hydroelectric resources. The large coal field of S Patagonia has
low-grade coal.

Food processing (in particular meatpacking, flour milling, and canning) is the chief
manufacturing industry; motor vehicles, textiles, chemicals, petrochemicals, and
steel are also major products. Argentina's principal imports are machinery, motor
vehicles, chemicals, metals, plastics, and other manufactured goods.

Membership in trade blocs and associations:

MERCUSOR:

Mercosur(Union of the South) is a union between Argentina, Brazil, Paraguay and

Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended
and updated by the 1994 Treaty of OuroPreto. Its purpose is to promote free
trade and the fluid movement of goods, people, and currency. The official
languages are Portuguese and Spanish. It has been updated, amended, and
changed many times since. It is now a full customs union. Mercosur and the
Andean Community of Nations are customs unions that are components of a
continuing process of South Americanintegration connected to the Union of South
American Nations.

Mercosur origins trace back to 1985 when Presidents RaúlAlfonsín of Argentina

and José Sarney of Brazil signed the Argentina-Brazil Integration and Economics
Cooperation Program or PICE. The program also proposed the Gaucho as a
currency for regional trade.

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Bolivia, Chile, Colombia, Ecuador and Peru currently have associate member
status. Venezuela signed a membership agreement on 17 June 2006, but before
becoming a full member its entry has yet to be ratified by the Congress of
Paraguay. The founding of the Mercosur Parliament was agreed at the December
2004 presidential summit. It should have 18 representatives from each country by
2010, regardless of population. Israel and Egypt are currently the only non-South
American free trade partners.

Natural Resources:

Argentina offers a solid basis of resources luring investment; different profiles of

qualified human resources having an attractive blend of skills and abilities;
internationally recognized talents developing their work in Argentina and abroad;
renowned universities and high-capacity research centers which provide the
excellent offer of natural and industrial resources with knowledge and value, at
competitive costs on a developing and expanding infrastructure.

Given this stability context, the agricultural sector as well as the different
productive areas, along with the development of new technologies applied to
manufacturing and the growth of international trade (boosted by the Argentine
peso’s high competitiveness) have made this country an ideal place for
investments.  

Main Industries and Products:

The agriculture and livestock sector has become one of the cornerstones of
economic activity. Argentina is the eight country in the world classified under
geographical extension and one of the main places possessing the highest
quantity of farmable land, in addition to other natural resources such as oil and
mining. Moreover, Argentina is suitable for fishing owing to its many rivers and
4000-kilometer Atlantic shoreline.  

Seeking competitive and comparative advantage, Argentine producers have

applied technology to their agricultural activities in order to optimize the results
of their work. Thanks to farming technology, the production frontier has grown 10
millions of hectares in the last 60 years. Thus, the country has become one of the
main exporters of soy, wheat, corn and fruit such as apples, pears or lemons,
among others. 

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Last year, Argentina exported over 15 million tons of animal and vegetable
products to the European Union (EU).  These exports’ main destinations were:
Spain, The Netherlands, Italy, Germany and France. Among Asian countries, China
is a preferred destination for Argentine domestic agricultural products.    Besides
these objective facts accounting for the economic positioning in relation to its
natural resources, Argentina is ready to export its rural management. That is why
many foreign investors are interested in finding Argentine producers in order to
expand their scope in the region. Not only does it come down to natural
resources but also to experience and technical and organizational know-how,
giving rise to this advantage in the world.   

Today, Argentina’s agribusiness constitutes a major industry in the country. The

wine sector also belongs to this industry. At present, Argentina is positioned
among the first wine producers worldwide. This industry’s significant
development has succeeded in conquering demanding consumer markets, as well
as a growing number of visitors wishing to combine leisure and wine-tasting in the
wineries located along Mendoza’s Wine Roads. This sector, characterized by its
ever- growing competition, is seeking to penetrate markets in developed
northern-hemisphere countries such as: the UK, Ireland, Germany, Belgium, The
Netherlands, Luxemburg, Scandinavia, the USA and the Japan.      
 

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INVESTMENT AND ENTRY STRATEGIES FOLLOWED BY INDIAN
COMPANIES:
Indian companies are doing business in Argentina on various levels and all types
of international business formats are allowed like exports, licensing, franchising,
joint ventures and foreign direct investment .Depending upon their risk-taking
ability and scale of operations suitable format can be adopted. The industries
which are best suited for Indian companies to enter are agribusiness,
biotechnology , automobiles and pharmaceuticals. vehicles, two-wheelers, auto
parts, machinery including for sugar industry and railways, solar and wind
energy, chemicals, inputs for agriculture, agrochemicals, bulk drugs, dyestuff,
textiles and handicrafts are exported to Argentina. Indian companies can buy
land in Argentina and expand their business as there is no restriction to foreign
companies to buy land in Argentina. It is advisable for Indian companies  to
think beyond imports and go in for acquisition of land in Argentina to grow oil
seeds, wheat and pulses.

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An interesting Indian product which has found market in Argentina is
Beedi...Ganesh and Ameera brand beedies are imported and marketed
through internet and kiosks in Buenos Aires by an Argentine company.

Freight Rates from

Mumbai to Buenos Aires:

20 foot container: USD 1075

40 foot container: USD 1850
+Local Taxes aprox: USD 580

Argentina has the following competitive advantages for BPO, KPO

and software development:

1.      Argentina has one of the highest literacy rates in Latin America with
ample availability of qualified and skilled manpower, some of whom are
proficient in English.

2.      The cost of operations and salaries are much below to those in Mexico,
Brazil and Chile. The local salaries are somewhat closer to Indian salaries in
some cases.

3.      Indian IT, BPO and KPO companies can offer services to their North
American clients in the same time zone to avoid night shift operations in India.
The operations in Argentina will complement their operations in India to
provide round-the-clock service to the North American clients with 12 hours of
service from South America and 12 hours from India. 

There are already many Indian companies doing business in Argentina or

planning to enter .Some of these are:

TCS,COGNIZANT,CELLENT,HCL-IT

UNITED PHOSPHOROUS LTD. has acquired three companies in Argentina

Glenmark has acquired an Argentine pharma company “Servycal SA” which

specialises in oncological products.

Godrej Consumer Products Ltd has acquired in the second week of June
2010 another Argentinian hair care company Argencos, making it the
company’s second buyout in Argentina.

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Ashok Leyland has signed a MoU with Plaza Group of Argentina for joint
venture in production of buses and trucks.
Tata Motors is exploring possibilities of joint ventures in vehicle production in
Argentina.
Sonalika Tractors has signed a MoU with an Argentine company for tractors
and agricultural machinery.
Reliance has formed a joint venture with an Argentine oil company Pluspetrol
(The consortium includes Westwood of Australia) and they have won a
concession in Peru for oil exploration and production.

 India-Argentina relations:
India and Argentina on Wednesday,17th November 2010, announced
relaxation in the their visa regimes for business visitors as the two emerging
economies seek to more than double two-way trade in the next three years.

Prime minister Manmohan Singh and Argentine President Cristina Fernando

de Kirchner also signed four other memoranda of understanding, which
includes an agreement in civil nuclear cooperation. The two countries have
set a trade target of $3 billion by 2012 from $1.3 billion in 2008. An agreement
on easing sanitary and phyto-sanitary standards, which govern the trade in
agriculture and plant items, will also reached soon said a joint statement
released after the meeting. The statement said that efforts would also be
made to facilitate entry of Argentine agricultural and agro-industrial products
into India and the entry of Indian pharmaceutical products into the Latin
American nation.

Ashok Leyland and Argentina Cirigliano also signed a deal for production of
trucks and buses based on Indian technology. AnMoU between Ficci& LA
Union Industrial, Argentina, was also inked to maintain and further mutual
cooperation and understanding for the purpose of promoting the development
of business relations the two nations.

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CUBA:

Cuba is an archipelago, including the largest island in the Caribbean, located

between the Caribbean Sea and the North Atlantic Ocean.
Location:
Cuba is located between the Caribbean Sea and the North Atlantic Ocean. It is the
westernmost island of the Greater Antilles and the largest country in the

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Caribbean. Its nearest Caribbean neighbors, listed clockwise, are The Bahamas,
Haiti (separated from Cuba by the Windward Passage), Jamaica, and
the Cayman Islands. Cuba is separated from the southern tip of Florida by the
Strait of Florida and from the easternmost tip of Mexico by the Yucatan Channel.

Size:
Cuba is slightly smaller than Pennsylvania. Its land area is 110,860 square
kilometers, including Isla de Cuba (104,945 square kilometers), Isla de la Juventud
(2,200 square kilometers), and adjacent keys (3,715 square kilometers). The island
extends about 1,225 kilometers from Cabo de San Antonio to CaboMais, the
western and eastern extremities, respectively. The average width is about 80
kilometers, with extremes ranging from 35 to 251 kilometers.

Climate:
Cuba’s climate is subtropical, warm, and humid; annual mean temperatures
average 25º C. The hottest month in Havana (24 meters above sea level) is
August, with an average monthly minimum of 24º C to 32° C; the coldest months
are January and February, averaging 18º C to 27° C (with occasional freezing
temperatures in mountainous areas). Cuba’s average annual rainfall is 1,400
millimeters, but the annual amount varies greatly from year to year. The driest
months are February and March, averaging 46 millimeters of rainfall. The wettest
month is October, with average rainfall of 173 millimeters. Most of Cuba
experiences a rainy season from May to October. The country averages about one
hurricane every other year. The most frequent storms occur in September and
October, but hurricane season generally runs from June to November (from
August to November on the east coast). Heavy rains may cause landslides in hills
and mountain slopes in the highlands.
Natural Resources:
In addition to arable land, Cuba’s natural resources include chromium, cobalt,
copper, iron ore, manganese, natural gas, nickel (the world’s second largest
reserves), petroleum, salt silica, and timber. Although generally considered to be
poorly endowed with energy resources, Cuba is one of only three countries in the
Caribbean with significant oil and gas reserves; proven hydrocarbon reserves in

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2005 totaled 750 million barrels of oil and 2.5 billion cubic feet of natural gas. In
2005 Cuba announced its first new discovery of oil since 1999—a reserve of 100
million barrels located 54 kilometers from Havana. The U.S. Geological Survey has
estimated that Cuban territorial waters in the Gulf of Mexico could contain at
least 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas.

Economy:
Cuba has a state-controlled economy with the exception of a tiny and shrinking
open-market sector. Since Fidel Castro seized power, a vast and cumbersome
bureaucracy not conducive to innovation, productivity, and efficiency has
managed Cuban affairs. Since its collapse in the 1990s following the abrupt
withdrawal of Soviet funding, the Cuban economy has been recovering slowly and
remains feeble. The sugar industry, traditionally the economy’s mainstay, is in
decline, and the country now relies more on the nickel and tourism industries, as
well as a barter arrangement with Venezuela under which Cuba supplies doctors
and teachers in exchange for crude oil and petroleum products at a discounted
rate. In the absence of large amounts of capital and access to markets and in the
face of continued U.S. trade sanctions, Cuba’s economic situation is unlikely to
improve substantially. During 2005, however, the surge in the availability of
foreign exchange—as a result of new financing from China, trade agreements
with Venezuela, and the continued strong growth of international tourism—
enabled the government to increase state investment in projects such as repairing
the critically dilapidated infrastructure and to increase wages and benefits.
In addition to the formal economy, Cuba has a large informal, or second,
economy. Informal economic activities include agriculture, where private farmers
control a portion of the land; the sale of certain personal services; and, beginning
in the early 1990s, farmers’ markets and artisan markets. Currently, about 300
farmers’ markets reportedly operate in Cuba. Other economic activities outside of
state control include illegal activities such as black-market operations and
unauthorized use of government resources. For example, there are extensive
informal markets in the exchange of homes, which are often secured by making
illegal payments through intermediaries; and building materials often are stolen
(mainly by insiders) from building projects or warehouses.

Foreign Economic Relations:

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Prior to the Cuban Revolution, Cuba traded mostly with the United States. Since
the United States imposed an economic embargo against the Castro regime in
October 1960, U.S. trade sanctions against Cuba have remained in effect. From
the early 1970s until the collapse of trade with the former Soviet bloc in 1990–91,
more than 80 percent of Cuban trade was with Eastern Europe, mostly in
nonconvertible-currency accounts (in effect, a barter arrangement). As Cuba
sought to develop trade relations with the rest of the world after 1991, it began
to conduct bilateral trade with Eastern Europe, including Russia, at world market
prices. Although Cuba has signed some trade agreements with Russia since 2001,
Cuban diplomatic efforts are more focused on deepening links with other
potential trade partners such as China. The visit to Cuba of Chinese president Hu
Jintao in November 2004 resulted in a set of trade agreements, including one to
export 4,400 tons of nickel per year to China. China has been particularly
interested in investing in Cuban infrastructure projects and in a major nickel mine
in the east of the country. In 2005 China was Cuba’s second most important
trading partner (10 percent), mainly because of China’s sugar imports.
The European Union (EU) accounts for about half of Cuba’s external trade, and
tourism from Europe has become an important currency earner, especially since
Cuba began to accept the euro as exchange currency in 1999. Formal Cuban-EU
relations remain cool, however, because by 1996 EU states had adopted a
“common position” that is staunchly critical of the lack of progress on human
rights and democratization in Cuba. The EU has prevented Cuba’s accession to the
Cotonou Accord, the mechanism through which it channels most developing
country assistance and trade concessions. Nevertheless, the EU reopened
diplomatic relations with Cuba in early 2005, acknowledging the ineffectiveness of
EU sanctions imposed on Cuba in June 2003.
After Cuba lost support from the former Soviet bloc in 1990–91, the United States
tightened economic sanctions against the island with the adoption in 1992 of the
Torricelli Law. In 1996 the U.S. Congress passed the Libertad (Cuban Liberty and
Democratic Solidarity) Act, also known as the Helms–Burton Law, which
strengthened U.S. economic sanctions by threatening penalties for businesses
known to have dealings with Cuba. After 1996 mounting pressure in the United
States to relax sanctions led to some concessions, including permission for Cuban-
Americans to send remittances of up to US$1,200 a year to relatives and, finally,
in 2000 the legalization of food and medicine sales to Cuba beginning in January
2002. Under the George W. Bush administration, U.S. trade sanctions against
Cuba intensified. On May 18, 2001, President Bush affirmed that his

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administration would “oppose any attempt to weaken sanctions against Cuba’s
government…until this regime frees its political prisoners, holds democratic, free
elections, and allows for free speech.”
Cuba’s three most important regional trading partners are Canada, Mexico, and
Venezuela—all three outspoken opponents of the U.S. economic embargo. In
2004 oil-rich Venezuela became Cuba’s main source of imports (21.3 percent) but
only its third most important export destination (10.2 percent). The bilateral trade
is based on the oil-for-doctors program, which reportedly provides health
coverage for 17 million Venezuelans in return for oil. Venezuela began paying
Cuba in 2005 for the approximately 20,000 doctors and other health-care
professionals working in Venezuela, as well as for the tens of thousands of eye
surgeries and other medical operations that Cuban hospitals provide
Venezuelans. As a result of the People’s Trade Agreement signed

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in Havana among Cuba, Bolivia, and Venezuela on April 29, 2006, Cuba will import
Bolivian coca leaves for “legal consumption,” as well as Bolivian soybeans and
quinoa.
Cuba has actively participated in regional trade organizations not subject to a U.S.
veto. It was a founding member of the Association of Caribbean States in 1995;
joined the Latin American Integration Association in 1999 and the Caribbean
Forum of African, Caribbean and Pacific States (Cariforum) as a full member in
2001; completed a trade and economic cooperation agreement with the
Caribbean Community in 2002; belongs to the Caribbean Tourism Organization;
and has indicated a desire to negotiate with the Common Market of the South
(Mercado Común del Sur—Mercosur) and the Andean Community. Fidel Castro
attended the Mercosur summit in Argentina in July 2006.

Investment and market entry strategies for Indian companies:

Main items exported from India are electronics ,petrochemicals, plastics, drugs.
Cuban side has shown immense interest to collaborate with India on
pharmaceuticals, fertilizers ,pumps ,public health and automobiles.

Foreign companies seeking to do business with Cuba cannot go there and simply
set up a representative office there as with many other countries.Until
recently,foreign companies entering Cuba had two basic choices.They could sell
from an offshore base or could enter into a investment relationship with a
government -controlled Cuban partner.But new options are emerging as
government is on a liberalization phase.Beginning in 1997,a fourth option of
setting up of a Cuban subsidiary designed primarily for exports is possible.
Foreign companies seeking to enter the Cuban market cannot simply go there and set up a
repr199
up a Cuban subsidiary designed primarily for export.

India-Cuba Relations:

The Indo-Cuba relations have been traditionally warm and friendly. India was
amongst the first countries to extend recognition to Cuba after the 1959
Revolution.
Both countries have maintained close contacts with each other in various
international fora, such as the UN, NAM, WTO, etc. Both have supported each
other's candidature to various UN bodies. India has been supporting Cuba against

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US supported resolutions at the UN Human Rights Council and also consistently
voted in favour of Cuban sponsored resolutions in the UN General Assembly
calling for lifting of US sanctions against Cuba.
India and Cuba have inked many important agreements such as Bilateral
Trade, Cultural, S&T, Standardization, Sports, Renewable Energy and Consumer
Protection. India and Cuba also have mechanism in place of Joint Commission
meetings and Foreign Office Consultations.
ITEC cooperation has increased in the last few years. Cuba´s utilisation is 100%. In
2008-09, 50 slots were allocated and utilized. In 2009-2010, 50 Slots under ITEC
programme have been allocated to Cuba. A 5Kw solar power plant was donated
to Cuba under ITEC in 1995. It was followed by one time post commissioning
spare parts support worth Rs 5 Lacs. India has donated an IT Centre –
INDIA CUBA KNOWLEDGE CENTRE- to Cuba which is being implemented by NIIT.
Till 2010, 800 Cubans have been trained at the Centre.

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REFERENCES:

www.answers.com

www.argentina.ar
www.indeembassyhavana.cu
www.cubagob.cu

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