24 Dec, 2014

Billion-dollar Investment Opportunities Seen in Cuba

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WASHINGTON, Dec 24 (NNN-CARIBBEANNEWS) — A leading investment group has identified billions of dollars worth of opportunities in Cuba following US President Barack Obama’s announcement of plans to re-establish relations with the Caribbean island nation. The Cuba Business Outlook, produced by the business intelligence group Global News Matters, reported many opportunities — with investments required in just about every sector.

The report reviewed more than US$2.8 billion of investment opportunities in agriculture, agro-industry, manufacturing, tourism, energy, pharmaceuticals and transportation.

Melissa Marchand, managing director of Global News Matters, which produced the investment analysis, reported her team took extra steps to help newcomers unaccustomed to the nature of the communist island nation’s business practices: “We even went as far as to provide the contact information for each of these projects since most of them are under a mixed ownership scheme with state entities.”

Marchand added: “Investment is one of the top focuses of the Cuba Business Outlook report, because it is important to understand what is planned in Cuba, even if it may be considered premature to execute on an investment while US-Cuba policy continues to evolve.”

Furthermore, Marchand asserted: “It is also important for other jurisdictions in the region, competing for investment dollars, to understand the nature of the projects and sectors where Cuba is seeking investment.”

The Cuba Business Outlook estimates the country will need $3 billion in renewable energy investment by 2030 in order to achieve its energy independence targets, which Marchand noted “is not surprising as fossil fuel-based thermal generation currently accounts for 94 percent of energy generation.”

Cuba has more than 11 million consumers, “a market almost the size of Ohio”, which Marchand contended “makes it interesting to understand what is the real consumer opportunity.”

Identifying a huge retail potential if the US embargo of the island is lifted, the report pointed to the Havana Consulting Group, which estimates that the Diaspora shipped $3.5 billion in goods to Cuba in 2013.

“It would be interesting to see what those figures could look like if the Cubans could actually buy those goods on the local market,” mused Marchand.

In the oil and gas sector, Cuba claims it has 20 billion barrels of oil offshore, while the US Geological Survey estimates the figure could be as low as 5 billion.

The report cautioned, however, that actually finding commercially viable oil has been a challenge, particularly since there are only a few rigs in the world that can comply with the US embargo and actually drill in Cuban waters. However, a new policy landscape could change this.

While the US is just starting to normalize relations after five decades, the Cuba Outlook reported Brazil’s confidence in the future of Cuba’s ports was clear after their national development bank, BNDES, provided more than US$680 million in funding for the Mariel port build-out, to ensure it can receive post-Panamax vessels.

“Most people in North America would be surprised to learn that healthcare exports are the top source of foreign currency for Cuba, even before tourism,” asserted Marchand, “and that the Cuban pharmaceuticals and biotech sectors have been successfully growing their global footprint.”

“The trade embargo of Cuba over the last half a century has prevented the US investment community from benefiting from up-to-the minute intelligence from this important market,” noted Marchand, “so we are determined to help our investors catch up with the significant developments and huge opportunities on the island.”

The general market sentiment is that there is a lot to learn about Cuba, which is the purpose of this report, she concluded.

Meanwhile, experts with the Peterson International Economy Institute in the US estimate that US exports to Cuba could reach $4.3 billion annually, if commercial relations between the two countries are re-established.

The experts added that, if the executive decision by US President Barack Obama is implemented, Cuban exports of good to the United States could reach $5.8 billion dollars, up from zero currently, representing $10 billion in total trade exchanges.

“This is big news, Cuba is a virgin market,” said Seth Kaplowitz, lawyer and lecturer on finance at the San Diego State University, cited by PL news agency.

Bilateral trade exchange between Havana and Washington was cut in 1962 following the US decision to impose an economic, commercial and financial embargo against Cuba.

According to the experts, the lifting of the US blockade could benefit US farmers, manufacturers, airlines, hotel companies, and telecommunication entities, among others.

At present, Washington authorizes the sale to Cuba of foods like corn, rice, soybeans and frozen chicken at about $350 million annually, but requires advance cash payment, since no credits are allowed for the island.

One of the companies interested in doing business with Cuba is Cargill, which is in the business of the sale, purchase, processing and distribution of grains and other produce, as well as animal feed and pharmaceutical raw materials.

Cargill’s vice president Devry Boughner described Obama’s decision as the first big step towards the reestablishment of relations with Cuba, and he noted that financial restrictions are the major obstacle.

Other US entities that have expressed interest in the Cuban market include Delta Airlines and Jet Blue, as well as hotel companies like Hilton Worldwide, Marriott International and Carnival Cruise Line.

And according to the experts, US oil companies could find a new market for their fuels and refining technology in Cuba, if the embargo is lifted.

On another note, a recent survey has revealed that 58 percent of Cubans residing in Miami between 50 and 64 years of age support the re-establishment of diplomatic relation with the island.

According to the survey by Bendixen and Amandi International published in South Florida, Obama decision can count on stronger support from younger generations of Cuban migrants, and from those born in the United States to Cuban families.

The poll found that 53 percent of the youths between 18 and 29 years said they agree with the measures, while 47 percent of those between 30 and 49 years also backed the initiative.

A previous survey by Florida International University in mid 2014 revealed that a large majority of Cuban emigrants living in the United States and their offspring support relations between the two countries. — NNN-CARIBBEANNEWS