A Note on the Cuban Cigar Industry

Even for the uneducated cigar smoker, Cuban cigars are known as the upper echelon of style and class. They have a distinct taste and feel and are considered by some as containing the world’s best tobacco. Cuba’s land is possibly the ideal place to grow the most tempting cigar tobacco in the world. Though other countries are making very similar cigars, Cuba’s mystique still has a strong hold over cigar aficionados worldwide. Given the current popularity of cigar smoking in the United States, and the fact that Americans like the ‘finer things’ in life, it would only make sense that the Cuban cigar industry would be a good entity to devote your investing money in. However, an important aspect that must be considered is the fact that the importation of the Cuban cigar to the United States is illegal. Due to the trade embargo imposed on Cuba over forty years ago, the fine specimens that are Cuban cigars are still barred from reaching our borders even today.

John Hernandez is prospecting for good investment opportunities within the next month to make use of a one million dollar inheritance. He is an avid cigar smoker, and is excited about the possibility of the trade embargo with Cuba being lifted. With this just being speculation, the real issue is whether he should go forward in investing in the Cuban cigar market.

The most prominent problem facing external investment opportunities today for the Cuban cigar industry would be the forty plus years of a trade embargo with the United States. With the United States being the largest cigar market in the world, Cuba (and the individual investor) is missing out on a potential revenue goldmine. Obviously the potential slackening of the trade barrier would be an investor’s dream within this industry, but the reality of the situation is still very unpredictable. With presidential elections looming in the United States, there is no way of knowing whether a candidate will stick with the current political policies concerning Cuba, or whether they will eradicate the embargo once they are elected to office (flip-flopping on issues is almost as assured of as death and taxes).

John has an interesting investing dilemma. There are many solutions to what he could do with his inheritance; however there are three obvious solutions: he could invest all of his money into the Cuban cigar market, he could partially invest his money in the market, or he could invest nothing in the market, and research other means of enhancing the returns on his money.

The best case scenario would be that John invests his entire inheritance into the Cuban cigar industry and the embargo with the United States would be lifted. The reputation of the Cuban cigar would lift it to stardom with its new found audience in the United States, and John, along with other early investors, would be far richer than their wildest dreams. However, the reality is that even if the embargo with the United States was eliminated, it could be argued that some of the charisma and charm of the Cuban cigar comes from the inability to get them in the United States. If the cigars were as easily obtainable, would the popularity be very long lived? Americans are a fickle bunch, and even now, the popularity of cigar smoking is decreasing. It is possible that the legalization of the Cuban cigar within the United States could turn this trend around, but it just as possible that it would not be long lived.

Another alternative for John is to