Cuba
Cuba is another country that we are not yet able to invest in, but are watching closely. There has been a lot of excitement recently about what appears to be a new chapter in Cuba-U.S. relations, including the possible restoration of diplomatic ties between the countries and the end to decades of U.S. sanctions. The U.S. State Department has conveyed that the U.S. aims to lift restrictions on travel, commerce and financial activities with Cuba. However, with a Republican-controlled Congress and a strong anti-Castro Cuban diaspora still holding some influence in the U.S., it seems unlikely that rapid progress will be made unless there are more signs of democratic reforms in Cuba.
Nevertheless, it seems obvious there will be some opportunities for airlines to increase flights to the island following relaxed travel rules—and we’ve already heard that message from a few U.S. carriers eager to service or expand existing charter services to Cuba. U.S. banks could also benefit since U.S. tourists visiting the island will be allowed to use credit and debit cards issued by their banks, and U.S. bank accounts of Cuban citizens living on the island will be unlocked.
Remittances from the U.S. to Cuba are being raised from a maximum of $2,000 to $8,000 annually, but unless the 1962 embargo instituted by U.S. President John F. Kennedy is lifted, foreign investment from the U.S. into Cuba will remain severely restricted.
In my view, the impact on U.S. firms of the new relationship with Cuba will likely be limited, at least in the short to medium term, but the gains for non-U.S. firms could be substantial. I think Cuba’s ability to access the U.S. market could make investing in export-oriented Cuban enterprises more attractive. If the embargo were to be lifted, then Cuban companies that escaped to the U.S. after the revolution could return and relocate there.
The Castro government’s tight grip on the economy remains an additional barrier to wider investment, but there are some signs it could loosen, and food could be the first item of trade to be liberalised in Cuba.
A U.S. Agriculture Commission for Cuba including about 30 U.S. companies and food-related groups headed by an executive of a U.S. food giant has been lobbying the U.S. Congress to lift the trade embargo with Cuba and ease trade sanctions. Despite the obstacles, we think the long-term opportunities for potential investment in Cuba look enormous.
