This High-Dividend Caribbean Fund is Too Speculative for Us, But You Might Like It

Monday . . . When Fidel Castro announced his retirement a couple of months ago, a lot of people started wondering when Cuba would be open for business. The American embargo on the island is almost 50 years old and the fervent hope is that Fidel's brother Raul might free Cuba's economy, allowing genuine private investment and a return to some form of capitalism. One thinker on the subject, Graeme Wood, thinks some industries should benefit significantly when — and if — private investment returns to Cuba.

For decades Cuba's construction materials, for examaple, have all gone to the military (for all those big world wars Cuba has been engaging in, I suppose) and as a result, Havana, once a famously beautiful city, has been falling apart for years. Brownouts are common, sewage flows untreated into the sea and fresh water is far from plentiful, so there's big opportunity for infrastructure companies should the time come. Housing developers and hotel and casino chains, and builders in general, will be interested in staking claims, as will big-box stores: Cubans haven't been able to comfortably go shopping since the 1950s and that's a lot of pent-up consumer demand. U.S.-based cruise lines will be lining up to dock at the marina. Cars, trucks and buses are in painfully short supply; so is hospital equipment.  Already a Chinese-Israeli partnership is thinking of building a massive convention center to lure trade shows away from the U.S. mainland.  And given Cuba's educated work force and low-wage labor, pharmaceutical manufacturing could take hold as it has in Puerto Rico.

FYI, one fund invests in companies likely to profit from an open-for-business Cuba: the Herzfeld Caribbean Basin Fund (CUBA). It's not a position in any of the four 21st Century Investor Portfolios and it's too speculative even for me in an aggressive mood; I submit it purely for your further due diligence. The announcement of Castro's retirement sent shares up over 25% as investors rushed to get in. But the jump in the share price wasn't matched by a rise in the fund's investments, and the shares fell; now they're rising again. The fund has a very high year-end payout but so far the share price has barely recovered from the last post-dividend drop.  Herzfeld Caribbean is invested in regional companies in a dozen or so countries throughout the region that could gain if Cuba welcomes business, including food and shipping, water purification, cruise lines, marine freight, orthopedics, banking, communications and conglomerates. There are no Cuban assets since the fund isn't allowed even to own land. It does have some old bonds now worth nothing, although Cuba could redeem them at partial value, which is something other third-world countries have done to reassure potential investors.

When all the excitement subsides, we could still be a very long way from a Havana Stock Exchange. Raul could live for years and there's no guarantee that the island's subsequent leaders will embrace capitalismo. Cuba would also have to take other steps before Congress lifts the embargo, like holding free elections (How do you say "Ha, ha" in Spanish?), freeing political prisoners, and restoring a few basic human rights. The island could start welcoming trade by Christmas, causing the fund to skyrocket . . . or by 2028.  Eventually, Cuba will open up.  For now, Herzfeld Carribean Basin is for investors with a combination of throwaway money, saintly patience and carborundum nerves.