Significant U.S. institutional investment in Cuba will not occur for years after the last refugee has floated ashore in Florida and any change of regime in the island nation has occurred.
With the resolution of the immigration crisis, some experts think the U.S. trade embargo against Cuba will be lifted, and U.S. companies will be able to trade directly with Cuba for the first time in 32 years. But Cuban-American investment professionals - most of whom have only distant memories of the place - warn the country is still a long way from being a play for U.S. institutional investors.
They say Cuba has potential as an emerging market - including a young, educated population with pent-up demand for goods and services - but it will have to resolve issues of wholesale political and economic change before it can become a viable investment ground.
"I think there's going to be tremendous opportunity there, but things will have to change before it is possible, such as the direction of the government," said Tere Alvarez Canida, managing partner and president of Taplin, Canida & Habacht, Miami, an equity and fixed-income manager with $653 million in assets. Ms. Canida was born in Cuba and came to the United States in 1961, at age 7. She has not been back since, but keeps up on the situation through the media.
"I think it will become part of the emerging markets. I think people are thinking about it, but not very seriously," she said.
James Whisenand, chairman of Whisenand & Turner, a Miami law firm advising companies seeking to invest in Cuba, noted the Clinton White House has not made it part of its policy to lobby U.S. allies against trading with Cuba, as the Reagan and Bush administrations had done.
Mr. Whisenand takes that as a sign that the current administration does not view the trade embargo as a vital part of its policy, and may entertain lifting the ban. "That will have to wait until the political climate becomes clear," he said.
As for "Cuba plays" now available to U.S. investors, there simply aren't any, said Leopoldo Guzman, president of Guzman & Co., a Miami brokerage firm. Direct U.S. investment in Cuba is illegal, and investing in foreign firms with joint ventures in Cuba is not efficient because Cuba makes up only a small part of those companies' operations, he said.
Miguel Uria, president of Oro Financial Inc., a New Orleans broker-dealer, is considerably more circumspect about the chances for U.S. investment in Cuba. The joint ventures allowed in Cuba are efforts by the government to draw in hard currency, not genuine attempts at liberalization, he said.
"Anybody who invests in Cuba sooner or later will regret it, because either Castro doesn't believe in it and will violate it, or Castro falls and the people who replace him will void what (decisions) he made before," said Mr. Uria, who left Cuba in 1960 and returned in 1961 as part of the Bay of Pigs invasion. He was captured and held prisoner for 20 months.
One question that must be resolved, according to investment professionals, is the disposition of claims on foreign property seized after Fidel Castro rose to power. Whether those claims are pressed depends upon a tangle of legal and tax issues, said Mr. Guzman, who himself left the country in 1961 at age 15.
If Castro is replaced by a democratic government, with a legal framework for property ownership established and the property claims resolved, the country will be a great investment opportunity because it needs all sorts of goods and services, said Mr. Uria. He likened that scenario to the "German Miracle" after World War II.
Cuba "is a nation that was paralyzed in the '60s, so there is no area of investment that won't be available," he said.
If change does happen, direct investment will not be enough to overhaul the Cuban economy, according to Mr. Guzman. The country will have to gain access to the capital markets and will need to develop legal and investment regulations to do so, he said.
The prospects for a reopening of trade with Cuba have been improving recently, said observers.
Mr. Guzman guessed the United States could end the trade embargo as soon as January, once Congress returns from the holiday recess and after a planned summit of North and South American heads of state, which will be held in Miami in mid-December.
"Most U.S. companies have a bifurcated perspective of (trading with) Cuba," said Mr. Whisenand. "Publicly they either say nothing or deny it, but privately they are developing their own task forces." Cuba has 11 million inhabitants with pent-up consumer demand, and a large portion is concentrated in the major cities of Havana and Santiago, said Mr. Whisenand, who visits Cuba several times a year. Some of the first industries that would benefit from the end of the embargo would be those trading in consumer goods and smaller durable items such as televisions and air conditioners, followed by infrastructure and housing construction, he said.
The infrastructure investment necessary will be in the millions, said Fernando A. Chacon, acquisition specialist at IBEX Institutional Advisers, a Miami real estate manager. Mr. Chacon, who was born in the United States to Cuban parents, spent a week in late March visiting relatives in Havana and said he saw no commercial activity in the city.
However, Mr. Chacon cautioned institutional investors are not likely to rush into the market when it opens, and probably will wait for the post-Castro shakeup.
"Institutions are typically the last type of investors that go into a country. They want to see a stable government, they want to see a stable economy, and clearly that's not going to be the case in Cuba for a while," said Mr. Chacon. There is no institutional-quality real estate in Havana, he said; the city's skyline has not changed in 30 years, and existing structures are deteriorating.
The first property types that will attract investors likely will be tourism-related, said Mr. Chacon. Tourism is going to fuel any comeback in the Cuban economy because it doesn't require as much infrastructure as agriculture or manufacturing, he said. Institutions may invest in joint ventures to develop resorts and tourism properties along with established companies like Hilton and Marriott hotels, he said.