For investors, Cuba is an island of opportunity

PhillyDeals: For investors, Cuba is an island of opportunity
Joseph N. DiStefano
POSTED: Sunday, April 5, 2015, 1:09 AM

After President Obama on Dec. 17 called for restoring "travel, commerce,
and the flow of information" to communist Cuba, island-watchers at
Penn's Wharton School rushed to gather Cuban American magnates,
scholars, and U.S. officials to brainstorm investors' return.

They met in New York on Thursday for an all-day Cuba Opportunity Summit.

Cuba is roughly as big and populous as Pennsylvania. Better beaches too.
The two were linked from the 1700s to the 1960s by common interests in
tobacco, sugar, chocolate, and medical products. (Milton Hershey also
built a Hershey, Cuba.)

The president is urging the island to separate from Latin America's
state-led Venezuelan and Argentine economic models, and adapt best
practices from Mexico, Colombia, and Chile, where business families
build wealth with "free trade, free markets, and human capital
development," Stefan Selig, U.S. undersecretary of commerce, told the crowd.

First, the United States has to reconsider Cuba's status as a "terrorism
supporter." Then, the countries need to exchange embassies, and end the
congressional trade embargo. After that, there will be much to argue
about, and deals to do.
Some questioned if private investment leads to political freedom.
"Wouldn't it make more sense to focus on the economy, and less on
democracy and human rights?" asked Wharton emeritus management professor
Stephen Kobrin, author of The Road to Cuba, a business guide.

To slash public payrolls, the Cuban government of Raul Castro has been
privatizing restaurants, encouraging cuentapropistas - self-employed
owners - and casas particulares, B&B-style hotels, to ease the scarcity
of modern tourist rooms.

Private groups such as Cuba Emprende Foundation, backed by the Catholic
Church and Mexico's ProEmpleo Foundation, offer boot-camp business
training. Cuba is forming service cooperatives, less ideologically
threatening than private owners. Developer co-ops could make Havana an
offshore software center.

"We are having a one-way conversation here," worried Frank Del Rio, the
Cuban American CEO of Norwegian Cruise Lines. Wharton plans another
conference in Havana this fall.

It's easy to exaggerate Cuba's potential, said Enrique Martinez,
president of Discovery Networks Latin America, which is wrapping
production of its first Cuba TV series, Cuba Chrome, about the island's
1950s car owners. If half of Cuba's households get cable TV, that will
be fewer than two million, he said.

The pharma potential is big, countered Philippe Pouletty, chair of the
French drugmaker Abivax. He said he patiently won license deals where
Americans failed, because Abivax agreed to produce in Cuba, where
scientists, he said, are as good as Europeans. And work for just $60 a
month, added the University of Miami's Steve Ullmann, coauthor of Cuban
Health Care: Utopian Dreams, Fragile Future.

Before investors feel safe, "over a billion dollars in judgments"
against Cuba for seizing family and corporate property need to be
settled, said Coral Gables investor Ralph Patino.

Miami investors Thomas J. Herzfeld and Teo Babun plan a solution: a fund
that would tie partial expropriation compensation to new Cuba investments.

Wharton sociologist Mauro Guillen, one of the day's organizers, told me
a favorite Havana site is the palace-turned-Art Museum, showcasing
"Degas, Monet, Velazquez, and other masters, from private collections.
It shows you the riches there were in Cuba. And the opportunity."

JoeD@phillynews.com

Source: PhillyDeals: For investors, Cuba is an island of opportunity -
http://www.philly.com/philly/business/20150405_PhillyDeals__For_investors__Cuba_is_an_island_of_opportunity.html