Investing in Cuba

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Byron Barksdale

Prior to the revolution of 1959, for decades, Cuba embraced capitalism and issued stocks and bonds for commerce and infrastructure. Cuba has, to date, defaulted on its issued bonds and they no longer trade on the New York Bond Exchange because of the Helms Burton Law. Since the ascent to greater power of Raul Castro, many investors are once again looking for enlightened change in Cuba and want to invest, in some manner, to benefit from increasing GDP and business within Cuba. The Obama Administration is also planning a fresh look at USA-Cuba relations similar to the recently announced new look at USA-Iran relations. Any move by Cuba allowing the complete release of political prisoners, pluralism, true democratic process and monitored secret ballot voting will be reciprocated by positive efforts from many nations, esp. the USA to help the people of Cuba.

Cuba needs access to capital and capitalists supplying funds to Cuba expect contracts to be honored. Cuba has bartered physicians and healthcare for oil with Venezuela. Cuba also has sought ventures with Spain, India, China, Russia and others to build out infrastructure, explore for oil in the Gulf of Mexico, improve transportation, and get needed things that are not available from the USA.

How do investors invest in Cuba? One way is to purchase Cuban issued debt. These bonds can be purchased through European broker dealers. U. S. citizens are limited by USA laws as to how they can invest in Cuba. U.S. citizens can buy shares in international securities that do business with Cuba BUT do not receive the majority of their corporate revenues from Cuban activities and operations. Canada, Spain and Mexico have corporations doing business with Cuba.

A closed end investment fund, based in Miami, Florida has a portfolio of companies within the fund that the manager believes will benefit from a lifting of the US Embargo against Cuba. The prospectus of the closed end fund (fund symbol CUBA) lists the companies. Many of these companies can be purchased directly by investors without any need to purchase the closed end fund itself.

Another closed end investment fund, listed on the Channel Island Stock Exchange, has a portfolio of investments inside Cuba. CEIBA Investments Ltd. (www.ceibainvestments.com) is currently the largest listed company exclusively dedicated to investments in Cuba with interests in Cuban commercial and tourism real estate assets. It is the foreign shareholder of the Cuban joint venture that owns the Miramar Trade Center in Havana and also holds interests in four hotels managed by the Spanish hotel operator Meliá. However, US persons are currently prohibited from investing in a Cuba dedicated company such as CEIBA.

Any investor in the World can travel to Cuba without restrictions EXCEPT U.S. citizens. Travel per se is not restricted for U.S. citizens but spending any money in Cuba is illegal unless you have a General or Specific License from the US Treasury Office of Foreign Assets Control. These regulations and restrictions may change under the Obama Adminstration and should be carefully checked before any US citizen contemplates travel to Cuba. Additional ways US investors can legally travel to see Cuba and "kick the tires" to find potential future opportunities is to travel with your State Governor or agricultural trade delegation to Cuba or, if you are licensed healthcare professional, you may be able to travel to help with HIV/AIDS in Cuba through Cuba AIDS Project (www.cubaaidsproject.com).

Diversified investors may be interested in emerging markets and Cuba will emerge very powerfully in the areas of biotechnology, energy (sugarcane, oil) and tourism. There was a cartoon in Barrons several years ago. The image was an alien in a flying saucer asking an Earthling for directions to the next land of golden opportunity: CUBA.