With the markets closed today for Good Friday, we’re going to do something a little different this week.
We’re hitting the pavement while focusing on a “big picture” idea.
Let’s get to it.
The “Cuban Fix”
Industry, Business Loans and Personal Credit
I write to you today 150 miles or so off the coast of Cuba.
Here, from the hustling, bustling “Capital of Latin America,” Miami, Florida.
On this hot, humid afternoon, and with the fate of Cuba always center stage in this town…
We’re talking with Cuban exiles and first generation Cuban Americans about the future of their homeland.
About investing.
With recent geopolitical events, we want to know, from their point of view, what it would take for Cuba to truly transform into the capitalist society they envision.
Without, of course, any US military intervention.
Now, this new Cuban revolution we’re talking about?
It could happen soon. Things are, as they say, evolving and evolving fast.
You see, with its Venezuelan “partnership’ now kaput and the island nation running on fumes…
La dictadura, as Cuban Americans call it, may have no choice but to allow at least some US capital infusion.
In fact, Cuban President Miguel Diaz-Canel recently said he’s open to conversations about “how the U.S. can participate” in the island’s economy.
This, 65 years after Fidel Castro said, “Someday, the capitalist system will disappear in the United States…”
Well, capitalism is still here. Cuban communism is literally running out of gas…
And the participation Diaz-Canel is speaking about?
A capitalist lifeline…
Then, potentially, a fully capitalist Cuba.
Now, of all the feedback from the people we’ve chatted with, there’s one common answer to the Cuba Libre (Free Cuba) question.
And it makes sense.
Gilberto Fernandez, a South Florida business owner, born in a shanty a few miles from the Che Guevara Mausoleum in Santa Clara, summed it up best by saying…
“Most of the Cuban people are already capitalists. It’s the only way to survive there. Without the regime holding us back, we can take care of ourselves and build a new Cuba pretty fast. All we really need after the regime falls is money.”
Money.
But not just cash that Cuban Americans send to the island (which has traditionally been largely confiscated by the regime) …
No. A post-communist Cuba will have to work to attract meaningful investment capital.
Because, as Mr. Fernandez later pointed out, “Cuba will first need capital investment in industry, then business loans and personal credit.”
These, by the way, are the same tools, in the same order, that helped build America into what it is today.
If you haven’t read the March 13 issue of The Alpha Edge Digest, it contains seven stocks to consider if/when Cuba does open its economy. You can read it HERE.
We caught Nando Barragan, a home services business owner and real estate investor who fled Cuba in the 1980s after his father was killed in Havana.
He was toking away on a Dominican Robusto.
We asked him about his thoughts on how to build a capitalist Cuba.
The first thing out of his mouth, after a hefty, sweet puff of smoke, was…
“The true power of the Cuban people will be unleashed once they can get loans and credit.”
Again, money.
Right now, he explains, there are over one million Cubans living in South Florida, waiting for the opportunity to invest in their homeland…
And they’ll do it initially, Mr. Barragan says, by taking out small business loans and building credit for their island-based family members.
Once they’re funded, he says, “the Cuban people already know what to do. They’re doing it now, it’s just illegal. But hopefully not for long.”
Like America, a successful Cuban capitalist system will be built from industrial investment on the top, and small business loans and credit from the bottom, said Mr. Barragan.
It makes sense. It’s the same blueprint used to build economies everywhere.
Next, we chatted with a first generation American whose parents escaped Cuba during La revolución, Abraham Mir.
Mr. Mir, echoing almost everyone else we talked with said, “For Cuba to succeed, the people simply need back what was taken from them. Their ability to think and live for themselves.”
He went on, “My parents barely got out in 1960. After Castro took everything away from them, their business, their land… he gave it to himself. The poor got poorer. Not richer.
“The thing is, we’ll probably never get back what was once ours, but when Cuba is free again, and capital begins to flow, the country will succeed. It’s in our DNA.
“Just look around. In Miami, we’re business owners, we’re investors, we’re capitalists, and we’re ready to bring these ideals back home again. We just need the chance.”
Now, of all the people we spoke with, not one said Cuba needs American military intervention. Not one.
They all say, however, that the fall of Nicolas Maduro was the turning point. That embargos, sanctions and isolation have worked.
And once the regime runs out of options, which it may already be out of, nature will take its course.
According to them, that nature is capitalism. The capitalism that’s embedded in their DNA.
You see, capitalism has a funny way of showing up where it’s needed most.
As summed up by Mr. Fernandez, when a country moves from state control toward open markets, the first thing that arrives is not ideology.
It’s capital. Then credit. Then the machinery of an economy that begins turning again.
But…
If Cuba ever opens its doors to outside investment, which is growing ever more likely, the transformation will not happen overnight.
Yes, the blueprint is familiar. We’ve seen it in Eastern Europe after the Soviet Union collapsed. We’ve seen it in Vietnam. We’ve seen it across Latin America.
But success, true success will take time.
However, the order of operations rarely changes.
First comes capital investment…
Then banks and credit systems…
Then industry and infrastructure…
And finally, the consumer economy that follows.
In other words, the exact framework the Cuban Americans we spoke with described.
Which raises an interesting question for investors.
If capitalism really does arrive on the island 150 miles from where I write to you today…
Who gets there first?
Because the companies that typically move into newly opened economies are not random. They tend to come from industries that finance, build, or power the rebuilding process.
Banks are usually the first wave.
Global lenders like Citigroup in the banking sector and Banco Santander in international banking have decades of experience entering frontier markets and financing economic transitions.
But before large loans arrive, something even more basic happens.
Money starts moving.
Remittances from family members abroad are often the first form of capital that flows into newly liberalized economies. That’s where the payments infrastructure comes in.
Companies like Western Union in money transfers, PayPal in digital payments, and the global card networks Visa and Mastercard in payment processing could quietly become financial pipelines between Miami and Havana.
Once capital starts flowing, the next phase begins.
The rebuilding of…
Infrastructure that is aging. Ports that need modernization. Power grids that require upgrades. Crumbling housing.
That’s when the engineering firms arrive.
Companies in the industrial construction sector like Fluor Corporation, AECOM, and Jacobs Solutions specialize in exactly that kind of work. They design and build everything from transportation systems to power plants.
Behind them comes the heavy machinery.
The bulldozers. The excavators. The equipment that literally reshapes an economy.
That’s where companies like Caterpillar in heavy equipment, Vulcan Materials in construction aggregates, and Martin Marietta Materials in building materials fit into the picture.
Then comes something else entirely.
Tourism.
If Cuba opens broadly to U.S. travel and investment, the island could become one of the most visited destinations in the Caribbean… almost overnight.
Cruise operators such as Carnival Corporation, Royal Caribbean Group, and Norwegian Cruise Line Holdings already dominate Caribbean routes.
And global hotel operators like Marriott International and Hilton Worldwide would likely be among the first to compete for resort developments.
But even tourism needs a backbone.
Modern economies rely on connectivity. Mobile networks. Internet infrastructure. Communications systems.
That’s where telecom providers enter the equation.
Companies like AT&T in telecommunications, Liberty Latin America in Caribbean telecom infrastructure, and Telefonica in international telecom networks already operate across Latin America and could eventually extend services into a newly open Cuban market.
And then there’s the most basic requirement of all.
Food.
Countries emerging from decades of centralized control often rely heavily on imports as domestic agriculture modernizes.
Global agricultural giants like Archer Daniels Midland and Bunge Global specialize in supplying grain, food commodities, and agricultural inputs around the world.
In other words, the machinery of capitalism is not theoretical.
It already exists.
It’s sitting in corporate boardrooms, shipping terminals, engineering firms, and banking systems across the globe.
And if Cuba ever opens its doors to outside capital, the process will not start from scratch.
The players are already waiting.
But…
The real winners in all of this?
The Cuban people.
Enjoy your weekend…
And, if you observe, Happy Easter!
Luke Hodgens
Director of Publications
Alpha Edge Media