South Florida developers want at Cuba, but is there enough land to support their ambitions?

The promise of stronger relations with Cuba has South Florida developers salivating, but a misunderstanding of the country’s government and economic traditions may have investors excited over nothing.

In an interview with Bloomberg News, Edgardo Defortuna, CEO of Miami-based International Realty, expressed his own interest in extending business to the island, which sits a mere 90 miles from Florida’s southern tip.

“There is a long way to real estate development by U.S. companies,” he said. “However, the natural beauty of the area, the great climate, the Latin flavor and the fact that there has not been any significant real estate development in the area for over 50 years make a case for starting to study the possible scenarios.”

A number of factors stand between an underdeveloped Cuba and a veritable horde of eager entrepreneurs, including: the U.S. embargo; weak diplomatic relations; an unstable banking infrastructure; and a lackluster system of title insurance and greater transparency about real estate laws. According to Gregory Rumpel, a Miami-based managing director at Jones Lang LaSalle Inc.’s hotel group who spoke with Bloomberg, unless laws, infrastructure and insurance is handled, U.S. investors won’t be attracted to Cuba.

A True Pearl

Ignoring the obvious resistors to business, Cuba, as one of the world’s largest commercial markets, offers a unique opportunity for investors.

Tourism is already a powerful revenue stream for the country, with tourist arrivals rising nearly 12 percent year-over-year in October, the Cuban National Statistics Office reported.

In 2000, the U.S. established trade with Cuba through the Trade Sanctions Reform and Export Enhancement Act, which allowed companies to sell unprocessed agricultural products and raw forestry materials to Cuba. From 2004 to 2008, the value of U.S. agricultural exports to Cuba rose from $392 million to $700 million, according to a 2009 report from the U.S. International Trade Commission.

Canadians and Europeans, both of whom have openly criticized the U.S. embargo, currently dominate investment on the island. Considering South Florida’s proximity to the market, as well as Texas’, where hungry developers also lie in wait, southern companies are positioned well to stake a claim in the largely untapped market.

Still, the embargo stands and maneuvering the political labyrinth of the last standing cold war stronghold is an obstacle that will long outlast shaky relations.

“There’s a sense, especially in the United States, that there’s some gold rush bonanza is about to happen,” said Mark Entwistle, Canada’s ambassador to Cuba from 1993 to 1997. “This is largely informed by a tremendous lack of information and understanding of Cuba itself, and where the Cubans have come from, and who they are and where they’re going.”