US businesses prepare for post-Castro era

US businesses prepare for post-Castro era
July 13, 2007, 06:30

With the medical condition of Fidel Castro, the Cuban president, still
unclear, a growing number of companies in the United States are making
plans to do business in Cuba.

They are doing so based on reports that Raul Castro, the acting
president, is more pragmatic than his ailing older brother and could
move Cuba towards the Chinese economic model. His seemingly conciliatory
tone toward the United States also has led some firms to start
considering future ventures on the island.

In Miami, business leaders and investors are closely watching
developments in Cuba. Many view potential political change there as an
opportunity. Thomas Herzfeld, an investment adviser, has established a
portfolio of American companies set to benefit if the US embargo against
Cuba is lifted.

"From early on we decided that once the trade was resumed with Cuba -
Cuba being the most important of the island countries in size and
population, there would be a boom in that country. This boom we believe
would proliferate throughout the region. But of course being a US
investor and a US citizen we can't invest directly in that country so we
have invested in companies that we believe will do well even if trade is
not resumed with Cuba, but also in companies that would benefit once
trade is resumed."

Basin fund very small
Herzfeld's Caribbean Basin Fund is a small one. Its assets are $14
million and trades on the Nasdaq with the ticker symbol Cuba. It is a
closed-end fund so, unlike a mutual fund, its share price is determined
by the demand on market rather than the value of the fund's assets.
The value of the fund's stock has risen by 120% in the past year, making
it the top performing fund of its kind in America.

Herzfeld says Raul Castro's recent comments give business cause for
optimism. "For those of us who've been listening to Raul since he took
over power last August, he's taken a much more conciliatory posture
towards the US. Now how far will he go towards free elections, releasing
the political prisoners, compensation for confiscated property, return
to capitalism, how far will he go and how soon will he do it? That would
be the key, in my view, towards the US resuming trade with Cuba and
we'll just have to see."

In Cuba, infrastructure is crumbling and Herzfeld says, the country
needs 40 000 new homes. The Caribbean Basin Fund includes US
construction, railroads, water, telecommunications and tourism
companies. Traditional Cuban industries such as rum, sugar, tobacco,
mining and fisheries also present foreign investment opportunities.

Camilla Gallardo is from the Cuban American National Foundation and she
says Cuba will soon need foreign investment. "They're going to need a
lot of investment into the country and a lot of help in reconstruction
and certainly we encourage companies that are looking and dealing in a
post-Castro Cuba to do just that. I mean as they would anywhere else.
And certainly that would be of great assistance to helping create jobs
and industry in Cuba that don't exist today," she said.

Some doubt American business
However, in Miami, some Cuban-Americans doubt that American business can
flourish on the island. Alvaro Fernandez is among them. He campaigns
against the US embargo, but he believes that American industry will be
at a disadvantage once trade is resumed.

"There is an opportunity and the United States of America will come in
late. Anybody who follows what is going on in Cuba will realise that
they are starting to do business with the rest of the world - China,
Europe, Italy, Spain, Mexico, you name it, they've got something going
with them".

But others, like Thomas Herzfeld, are less concerned. He thinks non-US
companies already in Cuba will be shunned in the future for doing
business with the Castro government. He also denies his efforts are
helping to erode the US embargo. Herzfeld is now meeting with hundreds
of businesses on joint ventures, and plans to invest directly in Cuba
once the US embargo is lifted.

http://www.sabcnews.com/economy/business/0,2172,152471,00.html