Cuban Warming | FTI Consulting

Cuban Warming

The geopolitical context and future prospects in light of Washington’s détente with Cuba

Forensic & Litigation Consulting

January 16, 2015

The last remnants of Cold War hostilities began to unravel on December 17, 2014 when United States President Barack Obama ordered the restoration of full diplomatic relations with Cuba and the opening of an embassy in Havana. The chasm of hostility and mistrust from the days before and since the Cuban missile crisis is being bridged, opening new avenues for greater international economic and political engagement with Cuba, as well as shining a brighter light on the potential of Latin America. This piece of good news was sorely needed in a region battered by corruption scandals, security issues and slowing growth.

Notwithstanding the President’s December 17 Statement, the Cuban embargo still remains fully in effect, and its provisions must be carefully followed until such a time that Congress enacts a full relaxation of the embargo. But like other emerging markets, Cuba abounds with opportunities that are married with significant risks. Given the island government’s lack of checks and balances found in democratic societies, democracy and its disregard for economic competitiveness, coupled with the traditional political risks (corruption, insecurity, infrastructure, currency, tax systems, among others) facing developing nations, investors and corporations lured by the potential demand of an untapped market should proceed with caution. This article aims to provide the geopolitical context for the current easing of U.S. sanctions against Cuba, to highlight the risks and challenges that new investors may encounter, and to offer insight in regard to the sectors most likely to provide the greatest opportunities.


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