Smoke On The Horizon: Investment Into Cuba

One of my favourite aspects of working in the offshore environment is that we get to speak to fund managers based all over the world about the latest hot and trendy investment opportunities. Over the last few years we have dealt with enquiries about bitcoin, crowd-funding, acquiring a portfolio of oil tankers and real estate opportunities in Puerto Rico to name but a few of the more intriguing conversations. It constantly keeps the team on our (permanently parked under the desk) toes and there is no doubt that recently we have been part of a very regular trickle of Cuba based conversations and how to maximise the gradual opening of the borders.

When Raul Castro took over from his brother as President of Cuba in 2008, he began a long-anticipated process of political and economic reform. As a result of his strategy, the stagnant economy has been gradually coming to life, galvanised by a fledgling private sector. Diplomatic advances have been made, animosities are thawing and, slowly but surely, relations with overseas nations are being restored. With this sea change comes the possibility of direct foreign investment, a prospect historically laden with regulatory obstacles and risks - from both sides.

It is easy to see why there is excitement surrounding Cuba's development. The tourism industry is set to explode and the relaxation in travel restrictions for Americans opens a previously-untapped market of over 300 million potential visitors. Such a vast influx of people will require utilities, hotels, ports, roads and telecoms; truly massive investment is required to improve the current infrastructure and there is cautious optimism from sponsors eager to participate in the process and Cubans looking forward to the resulting developments.

Indeed, it is the tourism sector that US News largely focused on in the following article as the best way to invest in Cuba as a US citizen:

http://money.usnews.com/investing/articles/2016-03-21/7-ways-to-invest-in-cuba

But rather than related company stock-picking, what about direct foreign investment? Is there a way for US based investors to capitalise directly on some of the infrastructure opportunities for example?

It is very interesting to see that other countries have already stolen a march on this aspect. China is Cuba's second largest trading partner behind Venezuela, already having 29 business agreements in place and a recent delegation arrived in Havana with the intention of increasing this...