LONDON, April 23 (Reuters) - "Practically everyone who follows Latin American events agrees that Castro's end is near." Thus one Laurence W Tuller, writing in 1994 in his manual on high-risk, high-reward investing. Defaulted Cuban government bonds had jumped on hopes of a settlement to allow the country back into the international capital markets.
Today, former leader Fidel Castro's end is 15 years nearer, but he's still there, albeit in semi-retirement, and holders of these pre-Castro bonds with a face value of around $200 billion are still waiting. Castro's regime kept good records, but have paid no interest, and ignored redemption dates since his revolution half a century ago.
Few Americans can remember why their administration has been so beastly to Cuba for so long.
Those who can mostly live in Florida, a key swing state, and many risked everything to get out of Cuba. They do not want to see their investment devalued by hordes of their former compatriots simply walking off the Delta Airlines flight from Havana.
Last week U.S. President Barack Obama eased the squeeze somewhat. Americans can now visit Cuba, but only if they have relatives there.
This gesture has re-ignited the bondholders' old hopes. Past settlements of defaulted sovereign bonds have tended to pay about half the total of accrued interest plus principal, so the buyers see plenty of upside.
Exotix, a specialist trader in "frontier markets", says its price for a typical Cuban bond instrument has risen from around 9 cents on the dollar at the start of this month to 14 cents on April 23.
Mind you, the spread is wide, the market thin and as events crowd in on the President, he might feel there are more pressing problems than to risk upsetting those key-voting Floridian Cubans.

A look at a list of the foreign policy problems facing U.S. President Barack Obama could send the sunniest optimist into depression.

The Arab-Israeli conflict: no solution in sight. Afghanistan/Pakistan: the outlook is bleak. Iran and its nuclear plans: tricky. No easy wins here. Iraq: the war is not over.

But in the foreign policy landscape, there is one low-hanging fruit ripe for the picking — Cuba - and the picking has just been made easier by a report commissioned by the ranking Republican on the Senate Foreign Relations Committee, Richard Lugar, and released this week.

Among its key points: the 47-year-old U.S. trade embargo against Cuba, the only Cold War policy still in force, has been counter-productive; U.S. policies are harming national security interests by impeding cooperation on such key issues as narcotics traffic; and the U.S. image in Latin America has been tarnished by Washington’s insistence that the region share hostility towards Cuba’s communist government.

That government, first under Fidel Castro and now under his brother Raul, survived the hostility of 10 American presidents preceding Obama. It has normal relations with most of the world. Washington’s lonely stand on Cuba becomes embarrassingly apparent once a year when the U.N. General Assembly votes on lifting the embargo. The last count was 185 in favour, three against - The U.S., Israel and Palau.

In much of Latin America, Cuba has become a romanticized symbol of a small country that has stood up to the American giant. That image is exploited to the full in the anti-American rhetoric of such leaders as Hugo Chavez of Venezuela and Evo Morales of Bolivia, whose appeal rests in part on painting Uncle Sam as an Imperialist bully.

“Latin Americans would view U.S. engagement with Cuba as a demonstration that the United States understands their perspectives on the history of U.S. policy in the region and no longer insists that all of Latin America must share U.S. hostility to a 50-year-old regime,” the Foreign Relations Committee staff report said. “The resulting improvement to the United States’ image in the region would facilitate the advancement of U.S. interests.”

Portraying normal relations with Cuba as something that serves U.S. national interests strengthens the case of a growing number of lawmakers and business groups who think it is time to remove the last vestige of the Cold War in the Western Hemisphere. It would also provide backing for Obama if he were inclined to go beyond his campaign promises on Cuba — easing restrictions on Cuban Americans traveling to Cuba and sending money to relatives there.

CHANGE EASY, OVERDUE

In the words of Steve Clemons, a Latin America expert at the New America Foundation, a Washington think tank, Cuba is “the lowest hanging ripe fruit on America’s tree of foreign policy options. Change is easy there — and overdue.”

There are two main reasons why Cuba policy has remained stuck in the Cold War, 18 years after it ended. For one, a succession of U.S. presidents expected that economic pressure on Cuba would topple the government and bring democracy to the island.

As importantly, Cuba has been as much a domestic issue as a foreign policy issue. For decades, the most determined opposition to changing policy on Cuba has come from the Cuban American community in Florida, a state which has often been decisive in presidential elections. No candidate has been willing to risk his campaign by offending the Cuban exiles, estimated at around 650,000.

But polls show that anti-Castro feeling is easing and the old guard of exiles is being replaced by a younger generation not as burdened as their elders by memories of fleeing the bearded revolutionaries who took power in 1959.

Obama won Florida last November, after a campaign during which he promised to ease restrictions on travel and cash remittances while saying the time was not ripe for an end to the embargo. His Secretary of State, Hillary Clinton, has described the embargo as “an important source of leverage for further change on the island”.

The thinking behind this phrase: Cuba must make concessions on human rights, freedom of expression and freedom of travel in exchange for the U.S. lifting the embargo. If not regime change in Cuba, then at least behavior change. Why this policy should work now when it has failed in the past is anyone’s guess.

And the argument is particularly difficult to make for Clinton after a February trip to China, a worse human rights violator than Cuba. She said disagreement with Beijing over human rights should not interfere with cooperation on broader issues. There’s no lack of broader issues in relations between the United States and Cuba.

– You can contact the author at Debusmann@Reuters.com. –

By Bernd Debusmann

WASHINGTON (Reuters) - If votes in the United Nations serve as a gauge of global opinion, 98.9 percent of the world opposes the U.S. trade embargo on Cuba, a measure imposed 46 years ago to isolate the communist-ruled island and bring down its leaders.

It failed on both counts. As far as international opinion is concerned, the country that is isolated is the United States, not Cuba. In the latest of 17 successive U.N. General Assembly resolutions on lifting the embargo, Washington mustered only two allies — Israel and Palau, a Pacific island nation difficult to find on a map. It has a population of 21,000.

The Marshall Islands (pop. 63,000), which had voted with the United States from 2000 to 2007, unexpectedly and without public explanation broke ranks this year and abstained in the vote, a non-binding resolution taken a week before the U.S. presidential election.

The count — 185 countries in favor of lifting the embargo, three against — speaks volumes about a bankrupt policy stuck in the Cold War era.

Will that kind of America versus the world line-up change under Barack Obama? Not necessarily. The man who made history on Nov. 4 by becoming the first black to be elected president of the United States has promised to “ease” sanctions if Cuba took “significant steps toward democracy, beginning with freeing all political prisoners”.

He has not said what it would take for the United States to end the embargo, kept in place by 10 successive U.S. presidents, both Democrats and Republicans.

During the Cold War, when Cuba was a heavily-armed outpost of the Soviet empire just 90 miles (145 km) from Florida, a majority of Americans agreed with a hard line on a Communist government that violates human rights and holds political prisoners. That attitude has been changing since the 1991 collapse of the Soviet Union.

According to a Zogby poll taken a week before the election, 60 percent of Americans believe that Washington should revise its policies towards Cuba. In particular, 68 percent thought Americans should be allowed to travel to the island and 62 percent said U.S. companies should be allowed to trade with it.

If that happens, it won’t be soon.

Latin America in general and Cuba in particular are not likely to figure high on the agenda of a new president who is inheriting two wars and the worst economic crisis since the 1930s. American presidents tend to promise greater attention to southern neighbors but usually do not follow through.

“I’m not so idealistic as to think that the embargo will be lifted immediately,” Cuban dissident and writer Jorge Olivera told Reuters Havana correspondent Jeff Franks.

“But I expect better times as much for the United States as for Cuba. I don’t want to die without seeing an end to this conflict that began when I was born.”

Worth noting: Under a 1996 law, the president needs congressional approval to lift the embargo or to recognize any government that includes Fidel Castro, who officially stepped down in February, or his brother Raul, who took over from him.

STATIC AND COUNTER-PRODUCTIVE

In the past, the most fervent opposition to ending the embargo — the effects of which have punished the population for the actions of a leadership it did not elect — has come from the Cuban-American community in South Florida. But even this is changing.

“U.S. policy towards Cuba is at best static and at worst counter-productive, a source of increasing frustration to many Cuban Americans,” Jorge Mas Santos, chairman of the Cuban American National Foundation (CANF), wrote late in October in a Washington Post opinion column that endorsed Obama.

CANF was set up in 1981 by Mas’s father, Jorge Mas Canosa, with the express aim of overthrowing the government of Fidel Castro. For years, the group exerted enormous influence on Washington policy makers — as well as on presidential candidates keenly aware that winning the White House without winning Florida is a very difficult undertaking. Obama won the state comfortably.

Cuban exiles, numbering around 650,000, account for just over a quarter of the total population of the greater Miami area. In the past, the Republican Party took the loyalty of most of them for granted — Cuban Americans have traditionally voted four to one for Republicans.

The three Miami-based Cuban American Republicans who serve in the House of Representatives — all supporters of the embargo — were re-elected. Their votes against changes Obama might propose once he takes office on Jan. 20 can be taken for granted.

Some of the most pointed criticism of the embargo has come not from Democrats but from conservative businessmen who resent the fact that American business has been kept out of Cuba while most of the world is engaged there.

In the words of Tom Donohue, CEO of the U.S. Chamber of Commerce: “All you have to do is go over to Cuba and watch how the Spanish, the French, the Latin Americans and everybody else on the globe are building resorts or trying to invest, and we are sitting here with a 50-year-old policy that doesn’t work.”

The prime beneficiaries from an end to the embargo would be American agricultural exporters. “But just about every industry could benefit,” according to Donohue, “for the simple reason that there is such pent-up demand. Look at the cars they are running — Jack Kennedy was in office when half of them were sent down there.”

(You can contact the author at Debusmann@Reuters.com)

(Pictured above: Cubans in Havana watch Barack Obama on the news on November 4, 2008.  REUTERS/Enrique de la Osa)