Island for Sale – Looking for a Sugar Daddy

By S.E. Lewinski

HAVANA TIMES – Considering my experience in real estate, property sales, and business ventures…let’s take a look at who would want to purchase Cuba. Being in Cuba multiple times, I will apply my first-hand knowledge to assess the property:

• 60 years of antiquated government management driving the economy into shambles

• Little water, electricity, food, money, medical care, and gasoline

• Infrastructure dilapidated maintenance including utilities, streets, and buildings

• Natural resources are available but mismanaged into worthless assets

• Human resources highly educated but no jobs available besides being a taxi driver

• Island living on life support for oil, food, and money from other countries

• 500,000 human resources escaping the island between 2021-2023

• Multiple over-built resorts with limited or no return on investment

Assessment of Property: Distressed Property Sale

“A distressed sale transaction can occur in a business that is showing losses consistently or is on the verge of insolvency. The business owner sells his/her business at a substantially lower price than the real value to liquidate the residual earnings from the investments.”

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Potential Country Buyers:

China: Already has a foothold in more prosperous countries in South America. The primary interest of China is making money and access to resources and any potential political advantage. China currently has its eyes on Taiwan, which has electronics, materials, and industrial manufacturing, which, of course, Cuba has none of these items.

Russia: Once the major sugar daddy for Cuba, has lost interest as a political ally. Cuba in the past possible military strategic location, but with high technology weapons maintaining a presence has zero economic value. The island also reneged on its financial payments including: “President Vladimir Putin forgave over 90% of the debt owed to Russia by Cuba. The forgiveness totaled $32 billion.”

Mexico: Stocks have performed well and currencies, including the Mexican peso, remain strong. All this due to prudent fiscal and monetary policies, balance in external accounts, important remittances, higher interest rates than elsewhere, less volatility of the peso and a relatively good macroeconomic position. There is the element of the Mexican Cartels, and Cuba is not an attractive market for foreign criminal groups due to its poor economy.

Venezuela: Currently has its eyes on Guyana as a territorial dispute, but everyone knows it’s all about the oil. For sure Venezuela could foot the bill to purchase Cuba and extend its compatible socialism to a larger landmass. For the people of Cuba, they would be trading one totalitarian government for another.

Spain: Historical globalization and funded Christopher Colombus to discover Cuba in 1492 and claimed the island for Spain. Then in 1511, Diego Velázquez de Cuéllar set out from Hispaniola to form the first Spanish settlement in Cuba, with orders from Spain to conquer the island. During the last 27 years the exports of Cuba to Spain have increased at an annualized rate of 1.5%, from $92.7M in 1995 to $139M in 2022. In 2022, Spain exported $812M to Cuba. Spain’s primary issue is capital to finance a purchase considering at the end-2023 public debt-to-GDP stood at a historically high level of 108%,

USA: Is the wild card buyer who has the resources to develop Cuba back to a state of higher valuation. With an estimated 2.4 million Cubans currently in USA, the exchange of resources would be an advantage including entrepreneurial repatriation and economics. Cuba could be redeveloped into a proximity country versus. resources in Asia which are subject to political, environmental, and distant supply chain logistics.

Israel: The nation could do a slow migration of their population from the Middle East and forget about angry neighbors, incoming missiles, and political needs to wage wars. The increase in land area would be 5X over the current state. Compatible social, religious, and prior culture of turmoil so Israelis should assimilate quickly into the island life. In addition, resolves island relationships with the USA, and becomes a global ally in Latin America.

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Property Classification: D

• This class is called the “war zone.” The neighborhood is older or in a serious stage of neglect.

• Repair costs and other expenses very high. No capital preservation with this class of asset.

• No decent access to good amenities, schools, industries, or jobs.

• Crime is high and often violent. The tenant mixture is approaching 75 to 100 percent with very low pride of ownership. Even law enforcement will hesitate to visit these areas.

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Property Valuation:

Cuba is a property that is well-positioned for re-development, industrial growth, and human resources utilization. The GDP (gross domestic product) in Cuba is forecast to amount to €85.65B (100B USD) in 2024. General government gross debt in Cuba is expected to be 54.16% of GDP in 2024. The major issue is that the infrastructure requires extensive investment to modernize for the local population as well as industrialization. Cuba is a strategic purchase as a distressed property that can be developed into a world-class country under proper management and economic planning.

Read more from S.E. Lewinski here on Havana Times.