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The Sunshine Economy

U.S. Cuba Policy Changes: Opportunity Or Entrenchment?

WLRN

Miami is not a top departure point for American goods headed to Cuba. So say the official U.S. government trade statistics. Port Everglades in Fort Lauderdale is the second-largest American port from which goods are sent to Cuba.

Yes, despite the 53-year-old trade embargo, America still does a little business with Cuba. The U.S. sells fresh and frozen chicken, soybeans, corn and an assortment of other food and medical supplies. 

The business America does with Cuba is paltry now but the announcement President Obama made on Dec. 17, 2014,could begin to change that. The president's plan would increase American exports to Cuba, allow U.S.banks to open accounts on the island to facilitate trade, and allow U.S. companies to provide certain communications gear, software and other technology to the island.

The new rules of engagement face fierce critics on Capitol Hill, including South Florida Republicans like Senator Marco Rubio and Reps. Ileana Ros-Lehtinen and Mario Diaz-Balart.

Trade was never mentioned when President Obama announced the historic changes to the U.S. policy toward Cuba, at least not by name. But among the intents of the policy changes is increased business between the U.S. and Cuba -- especially the growing number of small, private enterprises there. So where does the business America does with Cuba today come from?

Here are the top 10 U.S. ports exporting to Cuba:

 

And here is what those U.S. ports are exporting to Cuba, according to data from WorldCity:

Cuba exports to the U.S. totaled $0 in 2014, according to the U.S. Census Bureau, which tracks trade data. Cuba does do business with dozens of other countries, though the island's exports are dominated by commodities such as gasoline and sugar. Commodities are traditionally low-margin exports.

Critics argue any easing of business between America and Cuba will go to help entrench the Castro regime, rewarding it despite its awful human rights record and lack of basic freedoms. Supporters of the change in U.S. policy toward Cuba call it an opportunity after a half-century of economic and political hostility.

Credit Tom Hudson
Thomas Herzeld of Thomas J. Herzeld Advisors in Miami Beach reviews the price chart of his Herzfeld Caribbean Basin Fund. The closed-end fund invests in companies doing business around the Caribbean, including Cuba.

Thomas Herzfeld is one of those supporters, though he says 10 years ago he was a full-throated defender of the U.S. trade embargo, even as he was an investor around the Caribbean.  

In 1994, at the suggestion of his then-school-aged daughter Brigitta, Herzfeld began the Herzfeld Caribbean Basin Fund (NASDAQ: CUBA). It is a closed-end investment fund focusing on the stocks of companies the fund's managers think will do well around the Caribbean, including the opening of Cuba. When President Obama announced his policy changes, the price of the fund shot up in anticipation of more business flowing through the island.

Credit Tom Hudson
The chart of prices of the Herzfeld Caribbean Basin Fund (NASDAQ: CUBA). It's founder, Thomas Herzfeld, had to add graphic paper to the chart after the price shot up the day President Obama announced a thawing of relations between the U.S. and Cuba.

The day of the announcement Herzfeld had just returned from his regular morning run on South Beach.

"I felt this was an enormous event of historic proportion and that the consequences were going to be very significant," he said. Only time will tell how significant.

Herzfeld's evolving views on Cuba and the American embargo mirror those of many in South Florida. The 2014 FIU Cuba Poll found almost three-quarters of Cuban-Americans in Miami-Dade County believe the embargo has not worked. More than half are against continuing on with the business ban.

Tom Hudson is WLRN's Senior Economics Editor and Special Correspondent.