CUBA AND THE FINANCING OF ITS FUTURE

 

The role of the Inter-American Development Bank (IDB) and CAF – Development Bank of Latin America and the Caribbean will undoubtedly be one of the cornerstones if a future reconstruction and modernization of Cuba’s infrastructure is pursued. These institutions not only provide capital but also act as “seals of guarantee” that mitigate risk for international construction companies and consortia that decide to bid. 

Inter-American Development Bank (IDB)

Founded in 1959, it is the main source of multilateral financing for the economic, social, and institutional development of Latin America and the Caribbean. The IDB finances major state projects through sovereign loans, but it also operates in the private sector through IDB Invest. Its political weight is enormous. 

CAF- Corporacion Andina de Fomento (Andean Development Corporation)

Created in 1970 with an Andean focus, today it defines itself as Latin America and the Caribbean’s “Green Bank.” Unlike the IDB, CAF is an institution born by and for the region, with notably more agile approval processes and fewer strict political conditionalities. Over the past decade, it has gained enormous influence in the financing of roads, energy infrastructure, and urban transport networks.

Cuba’s entry into these organizations to receive large-scale financing requires overcoming complex legal and diplomatic barriers, which a change of regime would undoubtedly accelerate.

To join the IDB

·        Membership in the OAS: Historically, membership in the Organization of American States (OAS) has been required to join the IDB. Although Cuba’s 1962 suspension was revoked in 2009, the Cuban government has not completed the process of active reintegration.

·        The U.S. Factor (Helms-Burton Act): The United States holds the largest voting power in the IDB, at close to 30%. Under U.S. domestic law, specifically the Helms-Burton Act of 1996, U.S. representatives are required to veto and vote against Cuba’s inclusion in any multilateral financial institution. A real change here would require deep political reforms on the island or a legislative shift in Washington.

To join CAF

·        Acquisition of shares: CAF is more flexible; it does not require membership in the OAS or the International Monetary Fund (IMF) in the same way the IDB does. In fact, in 2016 Cuba and CAF signed a memorandum of understanding to begin technical cooperation and pave the way for the island’s entry as a shareholder.

·        Guarantees and macroeconomic reforms: Although the political process is simpler at CAF, the bank requires a framework of legal certainty, sovereign debt restructuring, and statistical transparency. To tender projects with international guarantees, Cuba would need to restructure its exchange-rate model and offer real protections for foreign private investment.

Both the IDB and CAF concentrate their largest credit portfolios in the region’s biggest economies or in those with a high capacity to absorb infrastructure projects.

In recent years, both the IDB and CAF have reached historic financing records for the region, together exceeding US$30 billion annually in credit approvals.

The IDB traditionally balances physical infrastructure with the institutional strengthening of states. Its investments are grouped mainly into:

  • Resilient Infrastructure and Energy (30%–35%): Focused heavily on the energy transition, including solar and wind power and regional interconnections, as well as urban water and sanitation.

  • Institutional Capacity and Finance (25%–30%): Direct loans to governments for fiscal reforms, state modernization, and strengthening the rule of law.

  • Social Development and Human Capital (20%): Financing for health systems, education, and social protection networks.

  • Digitalization and Innovation (10%–15%): The IDB has accelerated lending for rural broadband connectivity, digitalization of government procedures, and cybersecurity.

     

CAF stands out for an approach much more focused on pure civil works, physical connectivity, and, very strictly in its current agenda, climate change. 

  • Road and Transport Infrastructure (35%–40%): It is the region’s major financier of roads, logistics corridors, urban metro systems, and freight trains. For example, it committed to a massive ten-year, US$18 billion plan for low-carbon sustainable transport alone.

  • Energy and Productive Sector (25%): Financing for hydroelectric plants, modernization of electricity distribution networks, and “green” corporate credit lines for companies.

  • Water, Sanitation, and Rural Development (15%–20%): Urban drinking water systems, advanced agricultural irrigation infrastructure to mitigate droughts, and development projects for rural communities.

  • Digital Transformation and Education (10%): Fiber-optic networks and educational infrastructure, including construction and technical equipment for schools. 

For a Cuba mired in the collapse of its basic services, joining the IDB and CAF is not a diplomatic option but a vital necessity for survival. These institutions would provide the tens of billions of urgent dollars the island does not have to rebuild from scratch its failed electrical grid, roads, and other infrastructure. In addition, their financial backing is the only real “guarantee shield” capable of attracting international construction companies, assuring them they will be paid for their work and mitigating the country’s chronic risk profile. 

Francisco Ramírez Perete is Vice President of Grupo Corporación HMS and CEO/CFO of Corporación HMS, based in Spain. Mr. Ramírez Perete holds a degree in Business Administration and Management and has an Executive Master’s degree in Finance. He also serves as a board member on several boards of directors of different companies.