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Private Equity Strategies

LatAm Spotlight: Investors Head For Cuba

Wednesday, October 26, 2016

Latin America is once again in the investor spotlight when it comes to private equity. In this issue, we wanted to highlight new investor data on allocations to the region and in our opening feature wanted to highlight Cuba.

As relations have normalized between the US and Cuba, investors have moved quickly to find opportunities and funds that could get them exposure to this reinvigorated economy. Enter Cuba Avanza Partners.

Cuba Avanza is launching a fund specifically focused on investments in the country. The firm has a four person investment team along with two operating partners. The Cuba Avanza Opportunities Fund will be targeting $250 million for a handful of investments in the country. “We expect to see investments in areas like infrastructure, energy, telecommunications, to hotels, to ports. We’ll also be looking at companies that can service the growth of the country as well,” explains Michael Andrews CIO, Co-Managing Partner, in an interview with Private Equity Strategies. “We’re going to be working with several operating partners in Cuba who have the experience on the ground already.”

The investment team at Cuba Avanza, which includes Andrews as well as Co-Managing Partner Victor Hugo Rodriguez and Partner Ted Kanarek, circled around to the idea for the fund through conversations they were having about how to invest in Cuba and also regionally, throughout Latin America.

Alongside the normalization of relations with the US, the Cuban government is also LatAm Spotlight: Investors Head For Cuba launching development zones to incentivize foreign investors like Cuba Avanza. The Special Economic Development Zone of Mariel, located near Western Havana, will offer special incentives to foreign investors that bring cutting-edge technologies that are environmentally sustainable into Cuba. The initial focus in Mariel will be on the development of industrial, agro-food, biotechnology and alternative energy sectors.

“The Cuban government has fully realized the need to attract foreign capital, and I think that issue is even bigger now when you look at what is happening in Venezuela,” notes Kanarek. “They are fully aware that they have to work to develop new capital relationships.”

The Cuban government remains a primary asset owner and a significant owner in many businesses throughout the country, but the team at Cuba Avanza thinks that the potential risks that come with high levels of state ownership can be effectively managed.

Potential investors seem to agree. “Everyone wants to have a conversation about Cuba,” Andrews says. “We’re really looking to help grow the economy in Cuba - we want it to be to the benefit of Cubans. We want to see the growth of a middle class there.” The fund is institutional grade but has also captured the attention of family offices that are interested in frontier markets.

“I think a lot of investors are looking around and asking themselves what do we make of the last emerging markets - the frontier markets - and within that, Cuba has become an attractive target,” Rodriguez contends. “It’s very important to remember how close Cuba is to the US. It’s going to be a very good relationship competitively for Cuba, to be so close to a very large investor base in the US.”

This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
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