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Prime Minister Shinzo Abe’s visit to Cuba last month should serve as a catalyst for increased economic exchanges and investment from Japan, which in turn will hopefully promote economic and political reforms in the Caribbean country. Cuba is drawing attention as a potential market and investment destination following the historic thaw in its relations with the United States last year. Japan should seek to build sustainable economic ties with Cuba that mutually benefit both nations.

In the first visit to Cuba by a Japanese prime minister, Abe concurred with President Raul Castro on expanding Japanese investment and aid in the field of medical care. Prior to the visit in late September, Tokyo agreed to forgive ¥120 billion out of some ¥180 billion in Cuban debt to Japan. After its revolution in 1959, Cuba’s economy suffered for decades under the weight of economic sanctions and hostilities with the U.S. following the severance of diplomatic ties between Havana and Washington. The economic difficulties forced Cuba in the 1980s to halt repayment of its debts.

Interest payments, including some overdue on Cuba’s debts to Japan, have snowballed to ¥120 billion from the principal of ¥60 billion. The cancelation will greatly reduce the country’s financial burden. The two governments also plan to discuss postponement of paying off the principal. Once the debt problems are resolved, Japan will be ready to extend large-scale yen loans to Cuba. Abe and Castro agreed to hold a deputy minister-level meeting of officials and business leaders in Tokyo in November to discuss specific investment projects.

Japan will also study establishing a center in Cuba to train medical doctors. Abe disclosed Tokyo’s plan to provide grants worth ¥1.3 billion in medical aid to Cuba and to open a local office of the Japan International Cooperation Agency.

Medical services in Cuba are provided for free. Cuba has the world’s second-largest number of doctors per 1,000 people — 6.723, far more than Japan’s 2.297, according to the World Health Organization. But U.S. economic sanctions have led to a serious shortage in medical equipment, supplies and drugs. Cuba reportedly plans to use the Japanese aid to buy medical equipment.

The restoration last year of diplomatic relations between Cuba and the U.S. is a boon to companies exploring business opportunities on the Caribbean island. During his visit to Havana, Abe called Cuba “an extremely attractive investment destination for Japan.” Noting that Cuba has “huge demand” for improvement in infrastructure such as transportation and energy, he stressed that “Japanese companies can, as reliable partners, make a notable contribution to a Cuba that is updating its socio-economic model.”

Cuba’s investment conditions have much room for improvement, however. Under the country’s socialist system, businesses cannot directly employ local workers. It takes a long time and a lot of money for businesses to open local offices due to bureaucratic red tape. A high tariff makes it practically impossible to buy new cars. Labor costs and living expenses are high compared with other Central and South American countries.

Currently, Cuba’s major trading partners are Venezuela, China, Canada and Spain. Of some 700 foreign companies operating in Cuba, only 18 are Japanese, according to the Foreign Ministry. Cuba is rich in mineral resources, including nickel, and tourism opportunities. Japan should use the November meeting and other channels to get Cuba to improve its investment environment.

Cuba is situated in a key location that links North America with South America, Europe and Africa. As a country that pursues an independent line as a member of the nonaligned movement formed in 1961 by countries wishing to avoid siding with the U.S. or Soviet bloc, it also holds strong influence over nonaligned countries in Asia and Africa. China is seeking to build stronger ties with Cuba, with Premier Li Keqiang last month following up on the 2014 visit there by President Xi Jinping. Along with increased economic ties, it is strategically important for Japan to deepen political relations with Cuba.

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