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A
What if you could have more wins, more support, more sound effects? At LPL Financial, we like the sound of that because LPL offers more advisors. What if you could have more ways to help your clients ready to invest? What if you could find an advisor that really understands you when it comes to your finances, your business, your future? At lpl, we ask what if you could Paid Advertisement Investing involves risk, including potential loss of principal. LPL Financial LLC Member FINRA SIPC Small businesses are the pulse of every community. They bring people together, create opportunities and drive growth. Chase for Business helps business owners like you with personalized guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more@chase.com business chase for business Make More of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply JP Morgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co.
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B
The thing about AI for business? It may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced cost by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Hello and welcome to the Votes and Verdicts podcast hosted by the Litigation and Policy team at Bloomberg Intelligence. Bloomberg Intelligence is the investment research platform on the Bloomberg Terminal, with 500 analysts and strategists working across the globe and focused on all major markets. Our coverage includes over 2,000 equities and credits, and we have outlooks on more than 90 industries and 100 market indices, currencies and commodities. This podcast series examines the intersection of business policy and law. I'm Elliot Stein. I'm an analyst with Bloomberg Intelligence covering financials litigation.
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C
And I'm Nathan Dean, an analyst with Bloomberg Intelligence covering financials policy and Today's
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B
topic is the Trump administration's approach to Cuba and what the business implications are of that approach. To get smart on the topic, we are delighted to be joined by Ricardo Herrero, executive director of the Cuba Study Group and a longtime observer of U.S. cuba relations, Cuban economic policy, and the evolving relationship between Havana and Washington. And and more importantly and most importantly, Rick is one of my closest friends from law school, where we were classmates together over 20 years ago. Now, I hate to say, and not just from Law school, but indeed in life, we are great friends. Rick, I've wanted to have you on for a long time. Finally, the stars aligned, the timing made sense. And so with all of that, Rick, welcome to votes and verdicts.
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D
It's great to be here. Good to see you, Elliot.
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B
So, Rick, why don't we start by having you tell us briefly what the Cuba Study Group is and what it does and what your role is there.
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D
Sure. The Cuba Study Group is a nonpartisan policy and advocacy organization, membership based, founded in 2001 by Cuban American business and professional leaders. We're based in Washington D.C. and our aim is to help inform foreign engagement with Cuba from a diaspora perspective, mostly engaging with the US Government and helping educate policymakers there, but also increasingly with European and Asian governments who are now also seeking our counsel. We not only do we do the educational bit, sort of more think tank type product, but we also take institutional positions on policy because our own members concluded a long time ago that a policy of isolation, of just sanctions only approach to Cuba, hoping that that'll change things on the ground, doesn't work. It has failed. And we really believe that the path to change in Cuba runs through engagement with the Cuban government, but more, more importantly, engaging in direct support with the island civil society and private sector. My role is as executive Director. I lead our policy and advocacy work in Washington D.C. i write and speak every day on Cuba and advise our sister initiative, the Proyecto Cubemprende, which is an entrepreneurship training program that we've been co running with the Catholic Church, co organized with the Catholic Church in Cuba. It's been running Strong now for 12 years and has graduated close to 13,000 entrepreneurs, teaching them the fundamentals of how to run a small business in Cuba within the legal, very restrictive legal framework of that island.
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C
So Rick, let's start with the big picture for some of our listeners. When people look at the administration's foreign policy playbook, they've seen pressure campaigns at Venezuela, Iran, and the news cycle has always just said Cuba is next. So, you know, we've seen expanding sanctions, tighter travel restrictions, effort to cut off the energy supplies, new actions targeting the military, linked entities, even an indictment of former Cuban leader Raul Castro. You know, there's a lot happening here. So broadly speaking, how would you characterize Trump's overall strategy and approach to Cuba? How is it different than President Obama's engagement strategy, the Biden approach, and maybe even through President Trump's first term? What's different now?
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D
Sure. So I, I'll start with Obama because it actually links back to Obama. There's a. There's a lot of Obama in this second Trump administration's policy towards Cuba, though it's of a more. It's a darker or more coercive nature, but the, the saints, many of the same elements are there. So Obama bet basically on unfriendly engagement with Cuba and saw the embargo as a relic of the Cold War and sought to normalize relations. Reopened embassies, loosened all sorts of restrictions on travel and remittances, allowed for greater trade with Cuba, particularly with a growing private sector on the island. And the wager was that by normalizing relations and increasing trade and people to people contact, that would help empower Cubans on the ground and reduce tensions between United States and Cuba, sort of getting rid of that. That scapegoat that the Cuban Communist Party and Fidel Castro and everybody else in leadership and long relied on to basically just run the place like an island prison. The hope was that by reducing those tensions and getting rid of that boogeyman that they needed to run the island. That way it would lead to a more enabling environment for internal reforms. The first Trump administration reversed much of that opening, but really in. In a conventional way and mostly geared towards trying to win the Florida vote in 2020. So much of what Trump did in, in, in his first term was what Cuban American policymakers were asking him to do. Same measures that don't really. Don't really help advance anything on the, on the ground or reduce suffering on the ground for the Cuban people, but that played well within the base. So it was, you know, shut down travel, shut down remittances, throw Cuba back on the state sponsors of terrorists with which Obama had lifted them from and so on, but really not geared towards trying to promote changes on the island. It was mostly about showing that they were tightening the screws on a weekly basis to try to sort of consolidate that support for Trump for 2020. During the Biden years, you know, he shared sort of the, The. The idea that we should be engaging with Cuba, but he was genuinely uninterested in the issue. He just thought here in Washington, there's very little political upside for me to, to devote much political capital on this. There were so many other fires to put out. Covid trying to fix transatlantic relations, and you had Ukraine issues, you know, Israel, Gaza, like so many other things, took over that they just. He was in many ways just neglectful of Cuba. It was just not a priority. He did restore some of the travel and remittances and restaff the embassy. But by and large it wasn't really much of a focus area. The second Trump term is in many ways more similar to the Obama termination term, the Obama approach because it is, you know, it is very sanctions heavy. It's very aggressive in piling on the sanctions on Cuba. They throw them back very early on back in the state sponsored terrorists. We now have a whole new sanctions program on Cuba. Cuba sanctions are so old that it's, it's the one country that was still under Trade with the Enemy act sanctions. Right. That those were the Cuba Asset control regulations that were put in place in the early 60s that when then were codified under Helms Burton and the Cuban Democracy act in the 90s. But what governs the, you know what the authority, the framework is all under Trade with the enemy. They just now added a whole new sanctions program under ipa, the International Emergency Economic Powers act that allows now for to add all sorts of entities that were already sanctioned now to be under SD and SDnless. Right. So much more aggressive in that regard. But I think what's interesting about the Trump administration, it's also very proactively engaging their Cuba counterparts in the government to try to force them to make concessions at the, at the negotiating table. There are ongoing high level talks between the Trump administration and the Cuban government and have been since at least February. So that, that makes the policy very different. It's also much more targeted. They're going after government entities, state owned enterprises and things of the sort. They haven't shut down travel, they haven't shut down trade. If anything trade, bilateral trade is breaking records every month. They haven't gone after the private sector. It's a very different approach.
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B
Yeah. What do you think is different in this term under Trump from the first term? And I mean is it related to Marco Rubio as Secretary of being Secretary of State or is it something else? You know, why the change?
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D
Well, I think what Rubio brings to the table is that he, he makes it a priority. Let's be real. For most Americans, Cuba is not a priority. For most of Washington, Cuba is not a priority, does not represent any vital national interests for us. For Rubio, this is a personal issue. Part of the reason why you saw this focus during Obama, after Obama won Florida twice, is that you also had somebody like Ben Rhodes and his national security as his deputy national security advisor who took great interest in the issue of Cuba and trying to turn the page on relations during Biden, the Biden years. You really had, you had people that had worked on that policy during Obama, but it wasn't really like their, their specialty. They were supportive. But if nobody that really tried to make a case for why we should do this, been here with, with Rubio, you have the state Secretary and National Security advisor who is daily making the case for why we should try to bring, bring about change in Cuba and now. And I think that's a big part of it. But then the other part of it is they're actually trying to get something done. It's not just about winning the vote in Florida. It's not about just tightening the screws and saying, oh, we're tightening the screws on the regime and Cuba will one day be free. It's about actually trying to get something done. So that's why you have this engagement component. Because as we see with policy, with everywhere else in the world, and particularly with all our adversaries all over the world, engagement is a key component. Look at the ongoing negotiations with Iran, the ongoing negotiations with Russia or with China. Cuba was somehow this special case where, particularly for a Republican administration, you just could not engage. Why? Because it will cost you votes in Florida, but you can engage with all the other baddies across the world. Democratic administrations had been a little bit more proactive or precautiously so, engaging the Cuban government. But for Republican administration, this is very much a first.
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B
And so how would you compare it to what Trump did with Venezuela, where they went in, took Maduro, and then I guess started engaging with the folks who were left there? I'm trying to think of what the Trump administration was trying to achieve, for example, with the indictment of Raul Castro, who's not, not leading the country anymore. Right. You have a different precedent is the idea that maybe you indict him, you arrest him and bring him to the US and then you engage with whoever is left and you try to get rid of the old cast, whatever's left of the old Castro regime. What exactly was the game plan there, do you think?
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D
I'm not sure how clear they are on the game plan because you, you do get some mixed signals. Obviously, Trump has the final say on everything. Right. And I think he wants a deal. He said it very early on, and he's been very consistent in his talking points. Whenever Cuba comes up, it's like we're talking with the Cubans. The country's in a bad state. They're going to collapse soon. But we're talking with them and we're going to get a deal. We're going to get a deal. But I want to do good by my Cuban American friends in Miami. A lot of people that lost their properties, I wanted them to be able to go back. And so from the very, from very early on, he was signaling two things to, to audiences that resisted these ideas. For one, he was signaling to his own base. We're going to negotiate with the Cubans and we're going to reach a deal, which implies there's going to be compromises. Not everybody's going to get everything they want, but we're, we're trying to get to a new place with the Cubans. What now, what the extent of the concessions that we're expecting from them. We're expecting political and economic changes. I don't know if you can get to that deal, but he made it clear we're going to try to get that. Get a deal. And then, but he also made it clear to the Cubans in this deal, you're going to see the interests of the diaspora reflected to a great degree. So be preparing yourselves for how you're going to accommodate that. So, and I think that, so that, I think that's where the President has been coming along, and it's consistent with his approach with most of the world. I mean, he tends to sort of, you know, come in like a bull in the China shop, just bust everything but broken, but, but, and then try to fix it through negotiations. There's a little bit of that here, too, through sanctions. But ultimately, he is trying to strike a deal with Rubio. It's harder, it's harder to read how much on board he is, because, yes, he's, you know, he's also saying, and he's got to be very consistent. There can be no sunlight between Rubio and Trump, obviously, but Rubio is really setting the bar very high for how you actually reach a deal and what kind of concessions they're expecting from the Cubans. Right. Because it's not just, it's not just dealing with bilateral issues like outstanding property claims or national security issues. It's, you got to change your political system, you got to change your economy. And we just saw Cuba announce a whole raft of 176 economic reforms very much in line with the kind of reforms we've seen in, we saw in Vietnam and in China late last century. But this, but reforms that Cuba had resisted all along. So allowing more space for, for free enterprise, allowing much more activity for the private sector, more freedoms for that private sector to operate and promote its, its economic integration with the world. But that's, you know, that's so far, big deal. Like, it's the biggest package of, of reforms, economic reforms we've seen in Cuba in 67 years. But already Rubio made it clear that it's not enough. They need to see political changes. So. So I think there are some around Rubio that what they're angling for is societal collapse. Basically, the only way, recognizing that, the only real way that you're going to get political change in Cuba is through military intervention. So can you create conditions so severe that finally people rise up and as soon as the images start popping up on all our feeds of clashes with government forces that will force the hand of Trump and the White House to intervene militarily? I'm not saying that that's what the secretary wants himself, but there are people around him who are sort of quietly hoping that it'll go in that direction because they know that short of that, it's going to be very hard to make a case for military intervention in Cuba. Now perhaps there'll be a case for like an extraction operation like we saw in Venezuela. Right. That would help sort of. Then if you identify a Dely type person within the Cuban government or within the military or security forces that can get everybody in line and commit to all sorts of deals with the United States. You know, I still think that that's what they're looking for, but it's harder to identify that Delsey character in Cuba. There's just a lot more elite cohesion. There's a lot more ideological cohesion. It's a, it's a collect. You know, after that system was built for Fidel Castro to run, he passed away. Then his brother ran it for a few years. He retired. He retired. How many years ago now? Eight years ago. From, as president, five years ago, as, as first secretary of the Communist Party. Without a strong leader, you have this collective leadership blob left behind that if they need to reach consensus in order to get anything done, and it's very hard for them to do so. So it's very hard to identify a Delsy within that blob. But I think that that's what they're going for.
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C
So you mentioned the economic reforms that they just pursued or that Cuba just announced, putting it more in line with the Vietnam China system. Is that a signal that the Trump administration's sanctions and policies are having an impact on Cuba's economy? Or do you think there needs to be further increasing pressure on the Cuban government for the United States to achieve its goals?
- [19:13]
D
Well, I mean, the, the president of Cuba Miguel Diaz Canel admitted as much in a news interview that he did yesterday that was published this morning, where he said that he admitted that because of the maximum pressure campaign that they're under, they had to accelerate some of these reforms. These reforms have been deliberated, you know, exhaustively over the course of years, if not decades. And the problem is that there has been lack of consensus internally because there's too many different bands within the Cuban state with veto powers. And unless everybody's on board, nothing gets done. So, you know, all these economic reforms in some way endanger the, the market share that the military owned business conglomerate has GAESA over certain sectors of the economy, particularly the flow of hard currency. It, you know, reforms could also endanger the grip of the party over, over the country. It could endanger ideological cohesion since you're basically embracing capitalism and markets and as communists, you're supposed to not want that. But they admitted that the sanctions forced their hand and they had to accelerate these reforms. Now, sadly, the takeaway then is that if we want to see more reforms, then pressure works. So if they, you know, they've kind of boxed themselves into a corner now. If it, because if it wasn't obvious now, they're, they're before, they're definitely admitting it now that, you know, if only pressure is getting us to do the right thing.
- [20:57]
B
That's an interesting point. What, what's, what's the sentiment among Cubans in Cuba today? You know, when you talk about these economic and some political reforms that are being implemented, how are Cubans reacting to them? You know, is it benefiting them? How do they view the leadership in Washington? How do they view the leadership in Havana? Do they want change, things like that? What's your view?
- [21:25]
D
So I think we'll start with the leadership in Havana. I think most Cubans on the ground today, it's really hard, by the way, to get a sense for where public opinion lies because it's very hard to conduct polls or surveys in Cuba. They're mostly prohibited. But some outfits have been able to do it, including an independent outlet called El Doque that was recently able to poll tens of thousands of Cubans both at home and abroad on a whole series of issues, trying to sort of gauge where their, where their views are on some of these questions that you just asked. By and large, in Cuba, there is strong support for the ideals of the revolutionary project, right? So social justice, strong welfare state, et cetera, but less so the adventurism of the 1960s and trying to spread revolution throughout Latin America. None of that, but sort of trying to promote a more a socialist or social democratic society. There's definitely still support for that. What there is very little support for is the current leadership. You know, there was a. Fidel Castro was a very hard act to follow. Even his brother had a hard time following that act. And what you have now here is a bunch of technocrats with very little vision, very little creativity that don't really inspire confidence in anybody. And right now, these reforms, for example, that were announced, people are very skeptical as to whether they're going to be implemented in an efficient way because the current leadership, as I mentioned, because there's such lack of co. Of consensus in the decision making and there's also like clear capacity issues. Often the brain drain is most evident in Cuba. Often within the government. You notice it. Not everybody. There's some very smart people still there, but there's also other folks that live in a very insular bubble and wouldn't, would really struggle with trying to implement these, these reforms. But the point is people don't trust that the same, the same people, because it's the same people that put them in this hole over the course of the last, particularly the last six years since COVID because really things went downhill fast after Covid that somehow these same peoples that dug them in the ditch all are going to be able to dig them up. So they, the government suffers from a serious credibility issue. Right now Cuba, the, the electric grid is in a state of near collapse. The thermoelectric plants are operating at under 40% capacity. There are daily blackouts, in many case multi day blackouts. I was just hearing earlier, I think it was early this week or late last week. Four day blackouts. You can't function as a society across the whole island. Oh yeah, yeah. In some places it's worse. Depends. You know, if you're in the capital, it's, it's, they're, they're less pronounced. But if you go into the provinces, it gets it. Yeah. You, you, you will go three, four days without, without electricity and then you'll have electricity for about three or four hours.
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B
Wow.
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D
You can't function as a society that way. You're literally in the dark ages and you can't preserve food, you can't, it's hard to cook, you can't run a business. The island right now is in survival mode and people are fed up. So what kind of opinions are you hearing about Trump? You're hearing a lot of hurry up, what are you going to do? When is the invasion coming, you know, oh, you're all talk. We were expecting more from you. There's, there's a lot of impatience because people want to see things change fast. I hear people, the comment I hear most often from people that up until a couple years ago would have never supported any kind of US Intervention is whatever's going to happen, let it be quick, but make it quick because we can't stand this anymore. So there is a lot of support now. That doesn't mean that there's support for, you know, there's some talk of annexation, that there's not, it's not that people are necessarily aligning with the United States or, or the views or values of, of, of us and its foreign policy. It's more that they're fed up with their own system and they want to see change. And if that means that it's going to come at the end of a barrel of a gun or, I mean, they don't want violence, but if something kinetic needs to happen, let it be quick. But they are, they are desperate for change right now.
- [25:55]
B
And you mentioned earlier that, you know, there's some in the, in the administration who, you know, hope that all the pressure leads to a revolt by Cubans against their own government. I mean, do you see, I mean, and now you're talking about how, you know, the population is fed up with current leadership. They want change and they want it quickly. Do you see any path to them revolting and sort of initiating that change themselves?
- [26:24]
D
It's a, it's a path rife with peril because something like that happened five years ago on July 11th of 2021, during the COVID during the, the second wave of the COVID pandemic, there was a situation in Cuba was, was very bad. They had completely, they, it's a country that took that very heavy handed, you know, lock everything down approach and they completely shut down the economy. Economy that was already in crisis because Cuban's been on various levels of crisis since the end of the Cold War. But, but it just, at that point that economy went in free fall and people were having a really hard time. And thousands on July 11 took to the streets all over the country to protest the government. They were calling for, they were calling for everything from freedom to food to medicine. They were just airing all sorts of grievances with, with the government. They're airing grievances with the current president. And the government responded with a very heavy hand. They locked up close to 3,000 protesters, many of them kids. They were sentenced. I mean, they Were they were handed exorbitant sentences. There are kids that are spending over 10, 20 years in jail for having protested participated in those protests because they threw a rock or something. It's, it was a very hand heavy handed response and it was meant to, to click to send a very clear message don't try this again to this to today there are still over a thousand political prisoners in, in Cuba. Many of them were protesters from that participated in those nationwide protests five years ago. So and then what happened shortly after that they reopened international airports and international travel and you had about by some estimates 15 to 15%. 15 to. I've heard up to 20% of the population leave.
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B
Wow.
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D
So we're talking about a couple million people, 850,000 of them reaching US borders alone in the, in the following four years. So imagine that is more. And just during, just in the four years of Biden, that is more Cubans arriving at the US borders than all previous migratory waves since the start of the revolution combined.
- [29:02]
B
I had no idea combined.
- [29:04]
D
And most of those people were young, working age, reproductive age. So you bled a lot of that, that youthful vigor and energy and a lot of that discontent and the others ended up in jail. So if you, if, if folks take to the streets now, they're very well aware that there could be serious repercussions for them for that themselves and their bodies. And so it's hard. Could it happen? Could. It's happened before, there's no reason why it wouldn't happen again. But the Cuban government has taken very, very severe steps to make it clear that it would come at a high cost. So we'll see. But again, because the electricity situation is so bad because there's all sorts of shortages on the island, you can, if you have desperation and you and, and you can have skirmishes like clashes with security personnel, with police officers, with boy nas negras they call them, which is like the, like the shock troops that they bring out when there's public unrest. If, if they through those protests may not be able to bring down the government, but it could force the hand of Washington.
- [30:26]
B
That could be an impetus for. Yeah. More military action or something.
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D
Yeah.
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B
All right, let's, let's shift to the business implications because most of our listeners are particularly interested in that. You talked earlier about how important Cuba is as a trading partner for the US or maybe vice versa. I was wondering if you could just talk a little bit more about that. I imagine when relations began thawing during the Obama administration, there was considerable excitement among investors and Corporations, what kind of business opportunities were ultimately lost when some of those openings were rolled back or were stag, stagnant after that. And you know, you talked about Trump 2.0 imposing some new sanctions under IPA, for example. You know, which industries and companies have been most affected by these renewed restrictions.
- [31:18]
D
So I would, I would clarify that. It, it's not that trade with Cuba is important for the United States. Trade with the United States is very important with Cuba.
- [31:28]
B
There you go.
- [31:30]
D
It's, it's the natural market, right, because they're 90 miles off key west and it's where today most of Cuba's, most of the, the household staples that are imported into Cuba like chicken, you know, rice, beans, household appliances. Most of that stuff is imported from the United States today under exceptions to the embargo sanctions. And most of that stuff is exported to private sector actors on Cuba who then sell it in, in both now in wholesale, but also previously in retail, mostly in retail. The most of that trade that was previously authorized remains in place. It hasn't been touched. And again, like I mentioned earlier, it breaks records every month. Maybe now it might be going down because just things are so, so bleak. But up until a couple months ago it was still like month after month the flow, the export volume was, was increasing and all, again, all of that authorized under U.S. regulation. What has been mostly impacted is foreign trade and commerce with, between foreign entities and state owned enterprises in Cuba. Right? So European banks, things like Spanish banks, Spanish hotel chains like Iberostar or Melia, their partners on the ground in Cuba and Gaisa and Gaviota have been added to SDN list under ipa. And so as you know, for, for your audience under ipa, if you are added to an SDN list, that means you're blocked out of the U.S. you know, any trade with the U.S. or any sort of trade that has a nexus with the United States, if you have any assets in the United States, they're automatically blocked. And so, but it also raises the risk of all the, the, the foreign suppliers and partners of those entities because if they, even if they don't, if those other entities don't have trade that has a nexus with the United States, they, because they continue to support that entity, they themselves run the risk of also ending up on the SDN list. So it has kind of a domino effect. It's more, it's like making the embargo contagious. And that has had a very big impact on, on foreign foreign firms and businesses that were up until recently risking it in Cuba and they've had to pull out because it's just not worth it anymore.
- [34:10]
C
So if we're looking at Cuba right now and we're looking at, let's just say going forward, there is a deal that opens up Cuba. Are American firms at a benefit or are they going to go into Cuba playing catch up? Because foreign firms have already solidified their position in the ground. And if so, are there any specific sectors where you think American firms would be either have an advantage or a disadvantage? Maybe you just mentioned tourists as one, like energy, telecommunications, infrastructure. What are your thoughts there?
- [34:42]
D
Well, it's been long understood. I don't think anybody's, if anybody stated it publicly, I'm not aware, but it's sort of. It was just conventional wisdom in Cuba. I've been in Cuba many times that I've met with business people from foreign firms there. It was long understood that a lot of those businesses that started going in at the end of the Cold War when Cuba started opening up its market to doing joint ventures with foreign firms, but there was always a joint venture with the government. They, that the calculus was let's move in first since we can. And the United States still still has this embargo and when the day comes that the United States and Cuba make amends and they lift these sanctions, they can buy us up. Right? So that was for many of these firms, kind of the long term play, right. They get in before the Americans and then the Americans can buy us up. Right. Now what you're seeing, and there's nothing that's really being announced officially, but there's a lot of chatter about, and actually you've seen some signs of this where you have a foreign firm that is buying out the, say the, the equity stake on. An equity stake on Share it, which is a Canadian mining firm that has long had the mining concessions, the, the key mining concessions in Cuba. You know, here an Australian firm that's buying them out, but then there's American firms that are lining up to buy out the American, the Australian firm. And then the idea would be if they secure a specific license and can cut a deal with the Cubans, then all of a sudden that mining sector is in the hands of US firms. There is a lot of that right now and it's hard to, I'm, I'm sharing chatter here. It's nothing that, that I can, that can be verified right now. But the, the, the belief is that there is the push is to particularly sectors that are key to national security interests. Right. So energy, mining, but also tourism because it is the sort of the key sector in that island, in that Caribbean island that there are US firms that are sort of lining up looking at structure packages and hoping that there's a deal cut with the Cubans where a lot of those assets that are now distressed because, not just because of the Cuban's own mismanagement, but now because they're all on SDN list, they can be bought out and sort of fire sale prices and then you secure a specific license with OFAC and you can operate them as you know, US Firms could then operate the big firms in these sectors. We'll see where that goes. There's a lot of ifs there, but there are parties lining up and hoping that this will happen.
- [37:28]
C
So if you are advising these companies though, and let's look at it from two angles. Let's look at it from the compliance side and let's look at it from the C Suite side. If you're advising this company from compliance, like how should companies be approaching Cuba right now? Is this a situation where, and maybe this works for the C Suite as well. Is this a situation where you just need to be hands off and let things play at the moment? Is it a growth risk, sorry, growth market? Is it a political risk? Is it a missed opportunity? You know, what, what advising or what thoughts would you give those individuals?
- [38:03]
D
Well, I mean they're mostly aware. It's just, there's just too, the compliance risk is too high and the upside is too small for most firms to be seriously considering this. The ones that are is because they're buying out equity stakes of foreign firms that are already there, or at least they're hoping to and they have. Part of something that's key here is you have some sort of, you know, lying to the administration. You're, there's a lot of, you keep hearing chatter of, of sort of self dealing not just in Venezuela, but also, you know, firms that have, that have relations with this administration or with the Trump Center Circle have will. What it seems like is that they may gain preferred access. We'll, we'll see if it actually plays out. But certainly that's what the, the, the chatter to date sent seems to suggest. But without a specific license and clear and legal clarity on the US side, forget about whether you can, you know, lose your hat in, in Cuba because of the political instability or because you can't trust your partners over there and they may, they may rob you blind. Forget about that. The first order, order of business when it comes to reducing risk is what's your relationship with OFAC and Treasury. Right. And can you get a specific license to operate it and legal clarity and guidance from ofac, from Commerce, depending on what kind of business you're doing that what you're doing is authorized under US law and preferably not only authorized but has legs like this will not change if there's another change of administration. Right. If you can't meet that, you're not going to see any big firm going in. Then that's exactly what's happening. Right. As of right now, there's no US firms moving into Cuba. Now that also applies to trade at a, at a, at a lower level with small medium sized enterprises working with that small private sector to export whether all sorts of goods, whether it's food, household appliances. A lot of US Vehicles are being, are being exported from the United States of Cuba right now because, because the risk there is lower because you have carve outs in U.S. regulation that allow trade with independent actors in Cuba and much of and how independent they are can be largely verified through due diligence practices that most banks and most and most entities, everybody that's working in Cuba has to have a very robust compliance program. Right. But with, if you, with, with the due diligence standards for most of those, most of that trade is on are understood. And so it keeps flowing but it's hard to, it's. But still because of all the other limitations, it's hard to scale it. For example, in 2024 Biden authorized the opening of US bank accounts for private Cuban entrepreneurs, meaning a private Cuban entrepreneur on the island to open up a US bank account so that they could basically pay foreign suppliers for all sorts of things that they're importing. Right. That is to this day authorized under US Regulation. Not a single bank has moved to service or onboard Cuban private businesses because due diligence standards are not clear and the market is so small and the downside is so high if they run a file of OFAC that all banks have basically said thanks but no thanks until there is legal clarity and it's and with, and we, and we can go in with a high degree of certainty that nothing we're not going to run afoul of treasury, we're just not going to service the sector. So to this day it's not happening. Much of that much of those payments are being done through cross border liability swaps and other sort of mechanisms that they come up to to basic to make sure that payment is remit is, is remitted in one way or the other. Mostly through informal channels.
- [42:15]
B
Yeah. What about crypto?
- [42:16]
D
So I keep hearing that there is a, there is a pretty active and growing closed crypto market in Cuba. So, you know, if, if I get my terminology right, if non custodial wallets are the ones that don't link to a bank account, so you're just, it's closed and so you're just trading crypto from one wallet to the other. And, and there's no, you can't then sell it to dollars and, and put it, and automatically put it in your bank account like you would with, say, Coinbase. All those other wallets that just operate strictly with crypto. Those are very popular on the, on the island. And I, and I constantly keep hearing chatter of whales that come out of nowhere, we don't know who they are, and then just dump a whole much more, more crypto in the market sometimes to stabilize prices. Who they are, nobody knows. But, but yes, there is a, there is a very active crypto market in Cuba.
- [43:20]
B
So, Rick, I want you to put on your prognosticator hat here. Looking forward, let's say three to six months, what are you looking for next in terms of the Trump administration's approach to Cuba and then looking ahead to the end of this Trump administration in, let's call it, January 2029,
- [43:46]
A
how do
- [43:46]
B
you think things will look at that point?
- [43:49]
D
Yeah, well, I would say in the immediate term. So right now and through the summer, I think is the time of highest possibility in which we'll see some sort of major action taken against Cuba, especially now if finally Iran winds down and the, and the deal holds, and then they have more bandwidth to focus on Cuba. Although you had a major natural disaster now in, in Venezuela and Colombia. So that now steers attention in that direction, which helps the Cubans buy time. But ultimately they don't want to be launching kinetic strikes on Cuba during the midterm elections. Right. No one's asking for this. There is not even in the Republican base are people calling for an invasion of Cuba in Miami? Yeah, yeah, in Miami people are for it and very much hoping for it to happen soon, but Miami's already kind of locked in. In many ways. The Republican hold here in Florida is pretty strong, but it's, it's not really anything that the American people are calling for, that the base is calling for. If it goes sideways and it ends up with, you know, with, you end up with US Casualties, it could be also very harmful, embarrassing the United States somehow. And there's already enough pressure on the Trump administration and Republicans in Congress going into the, these elections because of inflation, because gas prices, because of affordability crisis and so on that adding more just, there's, there's no upside to it. So it's kind of hard to see if, if something doesn't happen within the next month or two, it's hard to see that something big will happen before the election. Now after the election. Trump has. And by, and when I say big, what do I mean? I mean kinetic action against Cuba, some sort of strikes or extraction operation, something that will force the hand of the Cubans to make more concessions at the, at the negotiating table and strike a deal with, with the United States. And a full scale invasion is harder to envision because that would require, by some estimates, we're talking up to a hundred thousand troops. And getting that kind of support internally in the White House with, you know, Defense Department Joint Chiefs, very hard to do. Also, it's just a mobilization the likes of which we, it's hard to foresee that happening soon.
- [46:21]
B
Right.
- [46:22]
D
You would know if all those assets were, there's plenty of assets around Cuba right now, but not for that kind of operation. Right. So let's say it's just kinetic strikes going, you know, to what I was saying before. You could see that early in the next couple months, if you're going to see them at all. If not, it's hard to see them. As we get closer to the election though I wouldn't discount anything from this administration because Trump could wake up the next, you know, in the middle of October and say, screw it, we're going to do it.
- [46:49]
B
Surprise, surprise.
- [46:51]
D
So fast forward to that. You still got two years of the administration. So I would say, you know, the big driver in this internally is still Marco Rubio. Now, Marco Rubio has, you know, the expectations that he's going to run for president in 2028. He hasn't formally announced or tried not to give any explicit signals that he's considering doing it, but sort of conventional wisdom would be that he would. I would say that the window after for, for some sort of big operation on Cuba is however long Rubio is still in the, and in the administration because at some point he's going to have to pull out, right. If he's going to run for president, he's going to have to resign his posts and then it's hard to see even if whoever comes up behind him, they'll keep doing, you know, they'll keep the pressure campaign on Cuba. But, but that's such a focused effort to try to Bring about real changes and potentially regime change in Cuba. It's hard to see it without Rubio at the helm, but. So you got potentially two years, especially if he doesn't run and doesn't lose his job or doesn't. Or doesn't leave his job. But, you know, if not that, then however long he's there after the midterm.
- [48:00]
B
Got it. So we'd like to end all our episodes with a, you know, sort of fun question. And we. We asked this of all our guests to get a little more insight into them. I'm really excited to ask this question of you and, And. And the, you know, the question. I'll. I'll state the question first. And that is, if you were stranded on a desert island, not Cuba, but some other island, what are three pieces of music that you would take with you? It can be albums, it could be songs, it could be soundtracks. And the reason I'm so excited to hear your answers is because you and I actually went to a lot of concerts together. We listened to a lot of music together. I like to think that I got you into Bob Dylan. You got me into. Yeah, you got me into.
- [48:42]
D
And the Dead.
- [48:43]
B
And the Dead. There you go.
- [48:44]
D
And the Dead.
- [48:45]
B
Great success. You got me into things like Los Amigos Invisibles and other good Latin American music. So go for it. What would you take with you to an island?
- [48:56]
D
Three albums that I would not tire of, especially Stranded in a beach for the rest of my life. Exile on Main Street.
- [49:03]
B
Oh, nice.
- [49:05]
D
Rolling Stones. D' Angelo's Voodoo.
- [49:09]
B
Ooh, interesting.
- [49:10]
D
I cannot do not tire of either of those albums. All time classics. And then there's an album by. There's an album called La Rimas Negras by Bebo Isigala. Bebo Valdez is a Cuban jazz pianist. Y El cigala is a Spanish flamenco singer. And it's basically Cuban jazz renditions of sort of Cuban songbook or Latin songbook classics. Cuban, but sung with flamenco vocals. It is a beautiful, just immaculate album.
- [49:43]
B
I feel like maybe you introduced that to me at some point.
- [49:46]
D
I probably.
- [49:46]
C
I.
- [49:47]
D
So, so funny. My grandma introduced me to that album, and it was while I was at Cardozo, so I saw.
- [49:52]
B
You probably did. Yeah, yeah.
- [49:54]
D
But it's just I can't recommend it highly enough, and I would happily spend the rest.
- [49:57]
B
Say the name again.
- [49:58]
D
On a beach listening to that. Bebo and Cigala, or Bebo I Cigala. And the album's called La Grimas Negras Black Tears.
- [50:06]
B
All right. I'm gonna go listen to it again.
- [50:08]
D
Yeah.
- [50:08]
B
All right, Rick. Well, I think with that, we have to wrap up this episode of Votes and Verdicts. It was so great to have you on Rick Herrero of the Cuba Study Group. As a reminder to all of our listeners, you can find all of our BI research on the Bloomberg Terminal at BI Go. You can access our litigation and Policy dashboard at Bilawsgo. We want to thank our producers, Aditya Somani and Mariam Traore, without whom this episode would never publish. Thank you again and have a great day.
- [50:59]
D
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