The news last week that President Fidel Castro had ceded control of Cuba - albeit temporarily - to his brother, Raul, because of health problems has set imaginations alight about what could be the beginning of a new era for the country. It could also mean that Cuban cigars will be set alight in the US for the first time, legally, in nearly five decades.
The Spanish-French tobacco giant Altadis, which owns a controlling stake in Habanos, the marketing and exporting arm of Cuba's state-owned cigar business, is one of a bevy of major foreign companies set to reap billions if the 45-year US trade embargo is lifted. Robbert Van Batenburg of Louis Capital Markets, a New York brokerage, estimates that Altadis could double its earnings before costs if the US, the world's largest cuban cigars markets, were opened to Cuba. Altadis, whose shares ended the week up more than 2 per cent, declined to comment.
Investors are excited, too, by the opportunities for cruise line groups such as Royal Caribbean and Carnival, which currently run no services between the US and Cuba. The prospects for nickel and sugar - Cuba is a major producer of both - would be also be buoyed by trade with America.
Sol Melia, the Spanish group which is Cuba's largest hotelier with 23 hotels, could see its revenues from the country double to $100m (£52.4m) if US tourists are allowed in, said Mr Van Batenburg.
This is all easier said than done. Opening the country's economy would probably lead to an avalanche of lawsuits. When Mr Castro took power, the government systematically appropriated land, companies, properties and natural resources. Thousands of claims have been lodged against the Cuban government by private citizens and companies, many of them certified by the US authorities.
Taken with Cuban exile claims, the potential liabilities come to around $40bn, according to Thomas Herzfeld, who runs a fund designed to benefit from regime change in Cuba. The Helms-Burton Act, passed by US Congress in 1996, allows for foreign investors to be sued in US courts for investments they have made in Cuba. This would also have to be dealt with.
The initial response from Washington, however, was swift. In a speech last Thursday, President George Bush urged Cubans to "work for democratic change". That came less than a month after his administration's Commission for Assistance to a Free Cuba released details of a proposed $80m fund to foster democracy on the island.
In the Senate, Republicans spoke of introducing legislation to repeal the Helms-Burton Act, which sets out an array of radical government and policy changes that must occur in Cuba before the US can provide direct assistance and funds to the country.
Given that the current session of Congress goes into recess in October, the possibility of such a Bill being passed this year is slim. But its proposal does indicate a strengthening tide in the US to engage with the nation that has for so long been its nemesis.
"The fact that [law makers] are saying this now signals renewed interest. They see [Castro's] illness as an opening," said Geoff Thale of the think-tank the Washington Office on Latin America. "The business community has perked up and wants to be able to respond to opportunities that may open in Cuba."
Whether those opportunities materialise depends on the health of Mr Castro, which is still a matter of speculation. In the meantime, it is unclear what changes, if any, his brother Raul will institute, or whether the latter's stint in office will end as soon as the President recovers.
The celebratory cigars have been broken out, but it may be a while before they are lit.
Sunday, November 11, 2007
Source: The Independent