Cuban Business And American Stocks – Anybody Want To Invest In A Crystal Ball? Back in 1960, the United States government imposed a financial, economic, and commercial embargo against Cuba in response to Cuba’s takeover of properties owned by US corporations and citizens. There have been a number of adjustments to the embargo in the intervening years, some more restrictive, some relaxing to allow humanitarian trade for items such as food and medicine. This embargo is the longest running trade embargo in modern history, and many people both here and abroad are calling for its end.
Not only has the embargo failed miserably in terms of forcing Cuba to make political changes, the embargo is more costly to the US than Cuba. Besides lost export revenue, the US is losing the opportunity to obtain petroleum and other natural resources from a source closer to home.
Now, in the midst of a global economic crisis, the United States and Cuba are negotiating an end to the embargo. Among other topics under discussion, negotiators are discussing economic reparations over seized properties. And such reparations could provide a cash windfall to both the corporations and their investors.
According to the US-based Havana Journal, 3 corporations could especially benefit from economic reparations.
Freeport McMoran (FCX)
This US mining company explores and produces copper, gold, silver and minerals. The Moa nickel mine, which is currently being operated by the Canada-based Sherritt International. (April 23, 2010 price $79.56)
OfficeMax is best known as a retailer of office supplies and furniture. OfficeMax is also the largest property claimant in Cuba. Before the utility was seized by the government after the 1959 Revolution, the Cuban Electric Company was owned by OfficeMax. (April 23, 2010 price $16.63)
Starwood Hotels (HOT)
This hotel and leisure company owns properties in numerous locations worldwide. Under authority of Title V of the International Claims Settlement Act of 1949, amended (22 U.S.C. 1643 et.seq.), the Commission certified Starwood’s claim for $51,128,926.95 plus six percent simple interest. (April 23, 2010 price $53.96)
Reparations could theoretically provide a huge cash windfall to these corporations, and it would be easy for investors to see this as a huge opportunity.
But if profits from stock investments were a sure thing, we’d all be millionaires. And the old maxim “You can’t get blood from a turnip” could easily apply here.
Given Cuba’s crumbling infrastructure and significant recent hurricane damage as well as the current global economy, one wonders where the island nation would get the money to fund such reparations – and get busy in restoring their businesses.
Furthermore, it is entirely possible that claims would be prioritized, with the smaller claims of individuals and families being seen as a higher priority than big corporations,
Any investment requires evaluation of a number of factors, and the reparations issue is just one factor. Yes, Cuba could give Starwood an IOU for 50 million dollars plus interest, but what would that IOU really be worth?