Thursday, March 19, 2009

Calling All Canadians - Last Chance for Cuba?

Canadians have always enjoyed a relatively friendly relations with Cuba in trying to be more independent from the US (remember Nixon calling Trudeau an "asshole"?)

Canadians have always enjoyed (relatively) cheap Cuba vacations and cigars.

An interesting point to note, is that while Obama is beginning the healing process between Cuba and the US and is being touted as a hero, the only loser in this win-win scenario is the Canadian consumer. If the US finally starts to open its doors to Cuba and chip away at the embargo, US travelers will suddenly have a new, cheap and relatively unexplored vacation spot nearby. This is a HUGE shift in the demand curve to the right for Cuba's hospitality industry.

Possible side effects include major resort development to accommodate this demand, but demand will probably outpace supply for some time (unless there are some land developers and investors who are willing to make a relatively risky bet and start developing property now - which is difficult with the embargo still in place - maybe international investors?). Chances are this relationship will manifest as demand greatly outpacing supply for some years.

This also means that the relatively affordable rates Canadians have been enjoying in Cuba will dramatically skyrocket if they are forced to compete with their American cousins for vacation capacity in Cuba if things go well.

This of course extends as a general analogy to all things Cuban in the economy as it relates to demand from Canada and the US.

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