By Jane Sutton MIAMI, Oct 30 (Reuters) - Bowing to political reality, a Florida brokerage house is about to pull the plug on an investment fund created in 1994 in anticipation that Cuba would soon open to capitalism.
Joel Marks, vDcompany's November board meeting.
JW Charles acquired 91 percent of the fund in a tender offer on Sept. 22 and was one of the original underwriters when the independent fund made its initial public offering in 1994.
Marks described the fund as "a man without a mission".
Its goal was to create a pool of U.S. capital to invest in Cuban enterprises "when it opened up," Marks said in an interview.
When the fund was created, the Soviet Union had recently collapsed, Germany had reunited and Eastern Europe was rushing to embrace democracy and capitalism.
"There was a strong sentiment in this community three years ago ... that it wouldn't be long before Cuba toppled. That was probably not unreasonable three or four years ago to believe that was going to happen," Marks said.
But in February 1996, Cuban fighter jets shot down two U.S.
civilian planes, killing four Miami men flying with the Brothers to the Rescue operation.
The United States said the pilots, who were searching for Cuban migrants at sea, were in international waters. In retaliation, the United States adopted the Helms-Burton law, which tightened the U.S. economic embargo against Cuba and sought to discourage foreign investment on the island.
"That kind of made it (U.S. investment in Cuba) something that was never going to happen in the time span contemplated by the fund," Marks said. "The fund began to really founder. It drifted down basically just through lack of interest over time."
Although the fund was mainly in cash, it began to trade at steeper and steeper discounts. Its value, $5 million at the initial offering, is currently about $4.2 million, or about $3.50 for each of its 1.2 million shares.
Marks said it was likely JW Charles would buy the remaining 9 percent of the fund that it does not already own, merge it into the parent company and use the money to make investments in Latin America and the Caribbean.
"Once we were to acquire it as a sole shareholder, we could pretty much do as we chose," he said.
The fund did make a small but unprofitable investment in a U.S. publishing company whose sole book was "Business Opportunities in a Free Cuba."
Since the collapse in 1991 of the Soviet Union, Cuba's main economic and political supporter, the Communist-ruled island has opened up its economy to limited free enterprise by its citizens and has wooed foreign investment. But U.S. law still prohibits U.S. companies from investing in Cuba.
At the Party Congress in early October, President Fidel Castro stressed that Cuba was sticking with socialism. The Congress approved a cautious economic strategy that shied away from further openings to the private sector.
REUTERS
19:31 10-30-97