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Investing in Cuba – New fund starts raising capital

Investing in Cuba: New fund starts raising capital
Michelle Caruso-Cabrera | @MCaruso_Cabrera

In the wake of President Barack Obama’s decision to normalize diplomatic
relations with Cuba, the man behind the ticker symbol CUBA is starting
another venture tied to the Caribbean island. Thomas Herzfeld, manager
of the closed-end Herzfeld Caribbean Basin Fund, is now raising money
for a private equity fund geared toward direct investment in the country.

In an interview with Knowledge at Wharton and CNBC, Herzfeld said he
expects initial investments in the fund to run between $10 million and
$20 million each. That’s small when it comes to the world of private
equity, but huge when it comes to Cuba.
Sectors where the money is likely to go would include tourism,
construction, marine transport, telecom and hospitality among others.
“Particularly building materials,” said Herzfeld.
Read MoreHere’s what $100 gets you in Cuba
Herzfeld wouldn’t say the rate of return he’s promising investors, but
he acknowledged that the risks of investing in Cuba mean that he and his
investors will want a much higher rate of return to compensate for the

“We welcome the risk, we want the risk,” he said.

Since the changes in Cuba policy made by President Obama, it’s become
much easier to invest in small businesses run by individuals in the
island nation. However, it’s still illegal to do deals with the Cuban
government unless the contracts involve food, medicine or telecom and
Internet equipment.
“Back-and-forth commerce (that) aggregates between Florida and Cuba will
be a major industry,” Herzfeld said. “Tourism certainly. There is a
tremendous shortage of hotel rooms in Cuba, which will lead you to look
at the cruise lines, because they actually have the most hotel rooms
available that could be put into use immediately. And agriculture is
something we could invest in now. Food’s exempt from the embargo.”
Read MoreCuban cigar market hopes for 25-30% of US market

Cuba is still a communist country—one of the few remaining in the world.
As such, its government controls nearly 100 percent of the island’s
businesses and trade. Recently, however, the country has begun
permitting individuals to start small businesses such as restaurants,
barbershops and clothing stores.

Herzfeld will be one of the presenters at the “The Cuban Opportunity
Summit” hosted by Wharton on April 1 at the Nasdaq market site. CNBC is
the official broadcaster.

Michelle Caruso-Cabrera
CNBC Chief International Correspondent

Source: Thomas Herzfeld and investing in Cuba: A new fund wades into the
fray –

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