Investing in Cuba: it's one thing to try to ease travel restrictions and open an embassy, it's another to lift the embargo.
A number of stocks moved modestly this morning, obviously on hopes that there might be more investment in Cuba: cruise ship companies like Royal Caribbean (RCL) and Carnival (CCL) are up three percent, as are several other Latin-America based companies:
1) Copa Holdings (CPA), a Panama airline company with passenger service in Central America and Cuba;
2) Coca-Cola Femsa (KOF), a Mexican bottler; and
3) Bancolombia (CIB), a Colombia-based bank.
The problem is that it appears the president is not going to ask Congress to lift the embargo, nor is it likely the Republican-controlled Congress would be willing to do so. The Helms-Burton Act was passed in 1996; it strengthened and continued the U.S. embargo of Cuba.
Still, while not lifting the embargo will limit upside for investors, there clearly are impacts. Easing travel restrictions will certainly be of some help to airline and cruise operators, but more importantly even this modest move could have a big impact on the Cuban economy.
Raising the remittance levels, or the limit on money sent from emigrants working abroad, to $2,000 from $500 per quarter will make a huge difference for many Cuban nationals.
There also is a significant expansion of commercial sales for export from the U.S., including building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment for small farmers.
I visited Cuba in 1998 and interviewed Fidel Castro. Havana looked like a city frozen in 1959. From what I can see, not much has changed. Even a small increase in traffic could make a difference in that country.