Risk Watchdog Havana Closer Look At Cuba…
Another week, another summit. This time around it’s the Organisation of American States (OAS) shindig in Port of Spain, Trinidad, and it appears as though US leader Barack Obama has already delivered the perfect Easter present to Cuba by allowing ‘unlimited’ family travel and remittances for Cuban Americans. While this move was hardly a surprise – the president talked up a change of tack towards Communist Cuba during his campaign – Obama will head to the OAS summit with the upper hand over the usual anti-US suspects, most notably Mr Chávez of Venezuela.
In light of the White House’s early announcement, Risk Watchdog doubts whether the ultimate prize – the removal of a 47-year trade embargo – will be seriously on the agenda this week. However, for the risk lovers amongst us (if there are any left), Cuban investment plays could start to look like a cheeky tempter. The free flow of travel and remittances could provide a timely boost to local tourism, transport and financial services. Meanwhile, Obama’s promise to open up telecommunications between the two countries is also a very interesting proposition.
Herzfeld Caribbean Fund, US$
Tempted? Hmmm… Possibly not yet, but let me invite you to take a closer look at the performance of the Herzfeld Caribbean Fund – a closed end fund which is regarded as a diversified way of playing the Cuba economy. While the fund has undoubtedly had a tough time of it in recent years, speculation over a thawing in US policy sent the fund soaring by a whopping 79.9% in just three days to US$7.97 before the ink was even dry on Obama’s proposals!
Before ploughing your money into cigars and sugar, however, let me end with a couple of cautionary notes. Firstly, the vast majority of the fund’s holdings are in Caribbean basin-related companies – chiefly in Mexico, Guyana, the Bahamas, and Guatemala – making it far from a pure play on Cuba. Secondly, this is not the first time that the headlines have driven phenomenal price action. Following the temporary stepping down of Fidel Castro back in late August 2006, the fund enjoyed impressive gains of 92% in Q406, only to retreat slowly once the optimism died down. While we are arguably seeing a genuine change in policy this time around, Cuba-US relations are hardly cut and dried just yet. With this in mind, Risk Watchdog may wait and see whether the headlines die down before making a move.