Nestle close to signing off on new factory in Cuba

Nestle close to signing off on new factory in Cuba
SARAH MARSH
HAVANA — Reuters
Published Wednesday, Mar. 08, 2017 3:51PM EST
Last updated Wednesday, Mar. 08, 2017 4:38PM EST

Swiss firm Nestle is close to reaching a deal with Cuba on forming a new
joint venture to build a $50-million to $60-million factory to produce
coffee, biscuits and cooking products, company Vice President Laurent
Freixe said on Wednesday in Havana.

Freixe, head of Nestle's Americas division, was visiting the
Communist-ruled island to negotiate the new investment in the Mariel
special development zone west of Havana as well as to renew for another
20 years an existing joint venture producing ice cream.

Cuba has upped its drive to attract foreign funds in a bid to stimulate
the economy in recent years, introducing a new investment law and
creating the Mariel zone, which offers companies significant tax and
customs breaks.

Nestle has been one of the largest investors in the country since it
opened the door to Western capital in the 1990s after the fall of former
benefactor the Soviet Union.

"The idea is to create a new joint venture to produce and distribute
these products mainly for the Cuban market but also with the idea of
exporting some products," Freixe said in an interview.

Coffee in particular is ideal for export, he said, pointing to the
success of a limited edition of Cuban coffee by Nestle's Nespresso last
year – the first Cuban coffee sold in the United States in more than 50
years.

"Talks are very advanced, now it is more a question of finalizing them
and completing the issue of financing," Freixe said, adding that Nestle
would have a 51 per cent share in the company.

That is comparable to Nestle's share in its two other Cuban factories,
one producing ice cream and the other bottled water and other beverages,
he said. Nestle also imports food products for sale in Cuban stores.

Cuba said last November it had approved 19 ventures so far in Mariel,
which is centered around a container terminal that the country hopes
will become a regional hub.

The development zone is part of Cuba's drive to update the centrally
planned economy under President Raul Castro, who took over from his
brother, the late Fidel Castro, in 2008.

Nestle's new factory, set to begin operations in the second half of
2019, will cater to growing demand after a surge in tourism and help
replace imports with locally made products, Freixe said. It will employ
around 300 people.

"Tourism is going to double in the coming years, meanwhile demand is
today only partially covered by local production," he said, adding that
Nestle was considering expanding its two other factories in Cuba.

Nestle's sales in Cuba grew last year, in tandem with its revenues
throughout Latin America, Freixe said.

"It was single-digit growth, so not spectacular because there are also
liquidity limitations that limit potential, but demand is there and we
are growing," he said.

Cash-strapped Cuba has struggled to pay providers on time recently as
revenues decline due to a drop in exports and the crisis in key trading
partner Venezuela. Its economy shrank 0.9 per cent last year, according
to the government.

Source: Nestle close to signing off on new factory in Cuba - The Globe
and Mail -
http://www.theglobeandmail.com/report-on-business/international-business/nestle-close-to-signing-off-on-new-factory-in-cuba/article34241325/