As the United States takes steps to normalize relations with Cuba, South Florida businesses centered on banking, shipping, trade, telecommunications and travel are positioned to reap benefits — over time.
“The immediate implications aren’t anything other than just hopeful watching toward an environment that ultimately becomes a democratic transition,” said Adolfo Henriques, chairman and chief executive of Gibraltar Private Bank & Trust, based in Coral Gables. “It’s going to take a while before the actual requirements, opportunities and so on develop and materialize. It’s not anything that will develop overnight.”
Following a prisoner exchange that brought two long-jailed Americans home, President Barack Obama announced Wednesday a major shift in U.S.-Cuba policy that includes establishing diplomatic relations, allowing U.S. financial institutions to open accounts with Cuban banks, boosting U.S. export capabilities and easing travel restrictions.
Obama’s announcement alone won’t enhance economic relations broken 54 years ago. Regulations related to the policy changes are likely months away, and congressionally mandated economic sanctions against Cuba remain in place.
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Said Barry E. Johnson, president and CEO of the Greater Miami Chamber of Commerce: “It is premature to comment on the effects of this announcement. As with all significant and monumental proclamations, the devil is in details.”
In Miami, the embargo was a hot-button topic among many business executives Wednesday, who declined to comment on the changes or their possible impacts. Still, an impact on South Florida’s business landscape is inevitable given the proximity and cultural ties. “There’s a whole slew of opportunity there,” said Milton Vescovacci, an attorney and shareholder at GrayRobinson in Miami, citing financial services and travel.
According to a senior U.S. administration official, exports of goods needed by Cuba’s cuentapropistas — the self-employed — will be allowed, along with farming supplies for small private farmers and building materials intended for the Cuban populace. Telecommunications and Internet penetration is expected to expand, creating an opportunity for U.S. tech companies.
Shipping companies also stand to gain.
“The initial reaction is it’s pretty exciting,” said Jay Brickman, vice president of government services at Crowley Maritime Corp., which sails between Port Everglades and Cuba carrying food products and medicine under the Trade Sanctions Reform and Export Enhancement Act. Brickman spoke by cellphone from Miami International Airport on Wednesday, awaiting the departure of his Falcon Air Express charter flight to Havana. “There is so much to be sorted out yet. Generally, there is going to be much more in the way of conversation, and those are all good things. I don’t know, I guess I’ll feel better educated when we get there and talk to people.”
Tom Murphy, chairman and chief executive of Coastal Construction Group, a big Miami-based construction firm, said President Obama’s move “is a first step. I’d like to see the embargo lifted. I think a lot of good developers and builders would head to Cuba. The best thing we could do is go in and rebuild the place. And while we’re at it, let’s build a couple of casinos.”
Travel restrictions are also easing. Though the president’s action does not lift the travel ban for all Americans, it does allow 12 groups of authorized travelers to now visit Cuba under general licenses — without the prior approval previously required from the U.S.
“It’s a huge plus for the American people to be able to travel unimpeded to a place that has been heavily restricted, if not forbidden, for the last 50-plus years,” said Steve Loucks, spokesman for Travel Leaders Group, which has an office in Miami. Earlier this year, the company asked its travel agents nationwide if their clients have expressed interest in traveling to Cuba, and 55.3 percent said “yes.”
“Eleven percent said they have already booked some of their clients to Cuba, and we expect that will pick up fairly dramatically,” he said. “Of course, Miami is a key jumping-off point for those people-to-people exchanges, so it can ultimately mean more business for Miami, as well.”
U.S. financial institutions will be permitted to open correspondent accounts at Cuban banks. The new relationship will also eventually allow U.S. travelers to use credit and debit cards for transactions in Cuba.
“From an initial take, this should be a lift for banks in the South Florida area, in the areas of trade finance and remittances,” said David Schwartz, president and chief executive of the Florida International Bankers Association in Miami.
Still, Eddy Arriola, chairman of Miami-based Apollo Bank, doesn’t expect the change to affect his bank until 2016.
“What we will see [affected] are local businesses in the travel and hospitality industry and exporters who want to ship products and go there and develop relationships,” Arriola said. “Our core customer base is small businesses, so it’s great for them.”
The news led shares at the Herzfeld Caribbean Basin Fund, a closed-end fund that focuses on businesses that would benefit from an end to the Cuba embargo, to rise 29 percent to $8.78 per share on the NASDAQ.
“We are watching an historic event with enormous consequences. One of President Obama’s greatest achievements will be resuming relations with Cuba. It’s good, certainly, for American business. It’s good for Cuban people. It’s good for the U.S. and for relations with Latin America, where the embargo has been a source of irritation for years,” said Thomas Herzfeld, chairman and president of Thomas J. Herzfeld Advisors, a Miami Beach-based investment advisor to the Herzfeld Caribbean Basin Fund.
Some of the fund’s holdings that he said would likely benefit from resumed relations with Cuba are Copa Holdings, a Panamanian airline; Coca Cola Femsa, a bottler; Seaboard Corp., a shipping, food and energy firm; and MasTec, a Miami-based, publicly traded company that does engineering and construction for infrastructure such as electrical transmission, oil and natural gas pipelines, renewable energy and wireless networks.
MasTec, he said, “has the technology and resources and the understanding of Cuba” to capitalize on an eventual opening of business opportunity in the island.
Yet MasTec, founded by the late Jorge Mas Canosa, a co-founder of the Cuban-American National Foundation and a staunch anti-Castro lobbyist, is shying away from doing business with Cuba.
Jorge Mas, chairman of MasTec and Jorge Mas Canosa’s son, said that the liberalization of telecommunications and the enhanced access to the Internet will lead to greater freedoms for the Cuban people. But speaking about MasTec, he said: “We would not do business in Cuba in the present or near future. There is no rule of law, to start with, no democratic system … There would have to be significant steps for us to ever consider that.”
Other holdings in the Herzfeld Caribbean Basin Fund include Carnival Corp., Royal Caribbean Cruises and Norwegian Cruise Line Holdings. The president “will permit more travel to Cuba, and I hope that means cruise ships,” Herzfeld said.
Carnival Corp. spokesman Roger Frizzell agreed the destination holds interest for the industry.
“Cuba is the largest country in the Caribbean, and it presents numerous opportunities from a cruise industry perspective,” he wrote via email. “Some infrastructure for cruising already exists in the country, along with several ports, so it offers great potential, but there are other issues that will need to be taken into consideration if this market opens up.”
Miami-based Royal Caribbean Cruises and Norwegian Cruise Line Holdings said it was premature to comment on Wednesday’s news. In a statement, the Cruise Lines International Association said it was “assessing the full implications of President Obama’s announcement today about Cuba.”
“There are a number of factors for consideration before a cruise line would commit to adding a destination to an itinerary,” the statement said. “With Cuba, these include infrastructure and port facilities, and regulatory and policy considerations.”
Still, cruise stocks rose following the announcement, closing 3.5 to 6.6 percent above Tuesday’s close.
In a note to investors, UBS Investment Research analyst Robin Farley wrote that she believes that adequate port infrastructure could be developed at a faster rate than American hotels in Cuba, and could be sold to consumers quickly.
“Cuba would represent a new itinerary with significant pent-up demand from American tourists and a lack of developed hotel infrastructure,” she wrote. “Cuba is the largest island in the Caribbean and only 230 miles from Miami, allowing for it to be part of a variety of itineraries, and has long been in the crosshairs of the American cruise lines.”
Even if Havana couldn’t immediately handle some of the industry’s largest ships, Farley wrote that she would expect cruise operators to make necessary investments.
“Cuba could prompt many cruise passengers who’ve already been to many Caribbean ports to return to a Caribbean itinerary to see a unique and novel port that has gone unseen by many Americans for decades,” she wrote.
Regardless, easing restrictions on travel to Cuba won’t dampen demand for travel to South Florida, predicts William TalbertIII, president and chief executive of the Greater Miami Convention & Visitors Bureau.
“Miami is now a luxury destination,” he said. “So I don’t think you’re going to go to Cuba for luxury travel. It took us a long time to create this Miami luxury brand, and it will take Cuba equally long.”