Cuba libre

At Tricio we focus on economic cycles, market structures and investor behaviour in order to help clients navigate markets with a medium to long-term investment outlook. This blog raises the question of what might happen if the Trump administration actually takes Cuba by military force.

For most European and other investors, the US focus on Cuba is something from the 1960’s Cold War era. Wikipedia offers a primer on the history of US embargoes on Cuba which may be useful. One of the concerns that we have expressed about the 2^nd Trump regime is that investors will need to navigate through a lot of uncertain actions. Tarriff ‘Liberation Day’ in 2025, war in Iran in 2026.

Not many investors were concerned about the capture of Venezuelan President Maduro at the start of this year. The example of a quick military resolution seems to have cemented a course of action for Trump. The pushback on his ambitions for Greenland by the EU and others seemed to genuinely surprise him this year though. The war in Iran seems to be lasting longer than Trump anticipated. The war has few European country supporters, and the supply shock to many countries – especially key oil and gas importing countries in Asia, is not making them fans of Trump’s geopolitical adventures.

The increased economic sanctions against Cuba in this Trump administration have drawn criticism from the UN. Some key countries (Mexico for one) are pushing against some of the US actions. On a personal note, growing up in a few Latin American countries in the 1960’s and 1970’s, doctors and teachers that were trained in Cuba were everywhere and very respected. The current US stance against using them seems to imply that they are forced labour though. So far, there are not that many countries leaning hard against these US policies though.

An excuse for an invasion could be that Cuba is supporting unpopular wars. Long gone are the military adventures and support that the communist regime in Cuba used to embark on in the 1960’s through to the early 1990’s. The Trump administration has recently echoed reports that Cubans have aided the Russian invasion of Ukraine. Is this cause enough for an invasion? Many would ask, what about North Korea where the government has actively supported the Russian invasion of Ukraine?

The risk is that US military ‘excursions’ that involve ‘boots on the ground’ in Cuba may actually increase criticism of the US from many allies and trading partners. Given the shift in popular sentiment that has been building over the last year, this could lead to some market disruptions. Odds are that the Trump administration is hoping that any ‘excursion’ in Cuba would last days or a few weeks at most. A quick change in leadership resulting in a US friendly government would lead the US to remove economic embargoes on Cuba and help boost the Cuban economy and raise the standard of living for Cubans. A good thing all around. The risk is that Cubans, under US sanctions of one sort or another for over 60 years, would not really welcome a government that would let US commercial interests return to the Batista days.

What about a European response? The head of the UK Parliamentary Group on Cuba raised some concerns in January about this. If the European response is limited to hand wringing about respecting the international rule of law etc., this won’t deter the US. If Europe takes the view that if they don’t respond with a bit more vigour then Greenland may be next, this would be a potential game changer for investors.

At the moment, the Trump administration comments about ‘Cuba is next’ are being ignored by investors. This is probably the only possible action given the information that we have. If the US does actually invade Cuba though, there should be some raised concerns that markets may be in for some increased volatility if the view is taken that some pushback on US interests will be seen.

Our blog probably raises more questions than it answers!

Some points to ponder… What Secretary of State Rubio thinks on how to proceed may be important. On a timing issue, does Trump need to deal with Iran first, or is Cuba a way he could distract everyone from that? Could Trump support another Bay of Pigs type approach - using Cubans or Cuban-Americans to do most of the actual ‘boots on the ground’ effort?  How would the world react if there were lots of casualties and lots of resistance?  From a market point of view, would it just be a sideshow since oil prices or other key commodities will not be affected? What about the reaction in Mexico and other LATAM countries, or even Canada? Would China and Russia finally say ‘enough is enough’ and escalate matters?

For further information on our research insights and our ‘Ask a Buddy’ CIO service please contact us at info@tricio-advisors.com 

Gerry Celaya,

Chief Strategist