Latin America Advisor

A Daily Publication of The Dialogue

US-Cuba Ties Could Bring Investments to Small Businesses

Ed Yourdon / CC BY-NC-SA 2.0

The establishment of diplomatic relations between the United States and Cuba could lead to new opportunities for U.S. firms to invest in small businesses in the island nation, Fernando X. Donayre, chief investment officer and founder of Miami-based INCA Investments, told the Latin America Advisor Monday in an interview.

The announcements by U.S. President Barack Obama and Cuban President Fidel Castro last week that the countries would re-establish diplomatic relations for the first time since 1961, as well as increase the amount of remittances sent to the communist nation and expand allowed travel by Americans to Cuba are “important steps for increasing and amplifying the relationship between Cuba and the United States,” said Donayre.

However, he added that the extent to which his and other U.S. firms would be able to invest in Cuba depends on U.S. government regulations that Donayre hopes will be released by mid-January. It is still unclear whether firms in the United States would be able to enter into necessary contracts with Cuban entities for investment in small businesses on the island.

If U.S. regulations do allow for such investments, Donayre said restaurants in Cuba could be attractive opportunities for investment. “The restaurant sector is very interesting, and that includes the bar sector,” said Donayre, whose investment management firm specializes in investing in publicly traded equities in Latin America. The firm manages approximately $700 million on behalf of its institutional clients. Because Cuba has no stock market, Donayre said his firm would consider investments in small businesses in Cuba if the regulations allow it.

“We’d hope that eventually the embargo would be lifted,” said Donayre. Attitudes are changing in favor of lifting the embargo, especially among younger Cuban-Americans, said Donayre. Florida Republican lawmakers have been among the most vocal opponents of re-establishing diplomatic ties between Cuba and the United States and lifting the embargo, but Donayre said, “Their support base is going through a generational transition.”

Sen. Marco Rubio (R-Fla.) has vowed to fight the establishment of diplomatic ties between the United States and Cuba and said last week in a statement that Obama’s move toward rapprochement amounts to “appeasing the Castro brothers” and represents a “terrible setback.”

However, Donayre said that U.S. businesses are likely to exert increasing pressure on legislators to lift the embargo. “We would think that Americans, and in particular the business lobby, would say ‘We’re not benefitting from a change that we helped instigate,” he said.

Donayre said that any current opportunities for investment in small Cuban businesses are not likely to be big enough to attract large sums of money from his institutional clients. However, he said examining such opportunities now would help in “laying the groundwork” for future investments.