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An update from our investment manager, Sebastiaan Berger

1 April 2021

 Sebastiaan Berger, Investment Manager, CEIBA Investments Limited

We are just past the 31st of March 2021, but 2020 already feels like a year ago…. 

After four years of Donald Trump, a global pandemic that has profoundly impacted world-wide tourism markets, a struggling Cuban economy, and conflicting views regarding the best way forward, it is impossible to deny the serious challenges ahead for Cuba. However, I do believe that better times lie ahead of us.  2021 will likely be an extremely important year for Cuba. Economic recovery will in no small measure depend on the world’s ability to control the Covid-19 pandemic, the restart of international travel and the reopening of Cuba for tourism, but may also be boosted by recently-adopted measures aimed at the overhaul of Cuba’s monetary system, the stimulation of national production and import substitution and the invigoration of the nascent private sector.  On the political front, a historic moment is to take place during the 8th Congress of Cuba’s Communist Party that is scheduled to be held in Havana between 16 and 19 April 2021 when Raul Castro (age 89 years) is expected to resign as First Secretary of the Party. 

For the Company, 2021 has got off to an encouraging start.  On 31 March 2021 the Company announced that the issue of its €25 million 10% unsecured convertible bond was oversubscribed and that the proceeds of the issue will be used to provide finance that allows for the completion of the Meliá Trinidad Península a 400 room, beachfront hotel, in Trinidad, Cuba, and potentially  also for carrying out its investment in the logistics warehouse development project of Grupo B.M. Interinvest Technologies Mariel S.L., for general corporate purposes, and for other commercial opportunities when they arise.  

On the operational side, the Miramar Trade Centre continues to operate with high occupancy rates and minimal impact from the Covid-19 pandemic. By contrast the hotel investments continue to be impacted and are awaiting the reopening of worldwide travel and tourism, that is presently having a severe impact on Cuba’s tourist industry.  However, the first rays of light can be seen at the end of the Covid-19 tunnel. In addition to more positive medical data that supports  measured steps to open up economies and daily life, an article published in The Times on 31 March 2021 mentions Cuba as one of the few (code green) travel destinations  where U.K tourists will be able to travel  without restrictions.  

Successful €25 million 10% unsecured Convertible Bonds Issue

As stated before, on 31 March 2021, the Company announced the successful completion of a €25,000,000, 10%, senior unsecured convertible bond issue due for repayment on 31 March 2026 (the “Bonds”). The Bonds were issued on 31 March 2021 and will be admitted to The International Stock Exchange (TISE), Guernsey. The ISIN number of the Bonds is GG00BMV37C27. As a direct result of the issue, the pace of construction of the Meliá Trinidad Península Hotel is expected to be increased substantially as from May 2021 with a view of opening the hotel  by the end of the third quarter of 2022, ahead of the start of the peak season for Cuban tourism.

The Bonds are not expected to be used to support any operating costs of the Company due to the strong earnings performance that we have seen from the Company’s largest investment, the Miramar Trade Centre office complex. The issue was increased from €20 million to €25 million due to strong investor demand and remained oversubscribed by existing and new investors. It is the first major international fundraise into Cuba since the announcement of Cuba’s monetary reforms in December 2020. 

Neither the Company nor any of its subsidiaries have any other third-party debt financing apart from the Bonds. This is probably the first issue of a listed corporate bond instrument earmarked for making a direct investment in Cuba in decades. The total cost of the issue was less than 1.30% including broker, legal, registration and any other fees payable by the Company.

Monetary Reform

In  mid-December 2020 the Cuban government announced the implementation of the long-awaited Monetary Reform. The announcement  stated that the Reform would also be directly applicable, and be beneficial to foreign investment vehicles operating in the country, so we were forewarned of the big changes that were going to be implemented as from  1 January 2021 and understood that these would include: 

(i) the unification of the two Cuban currencies through the elimination of the Convertible Peso (CUC) and the continuation of the Cuban Peso (CUP), 
(ii) the fixing  of the exchange rates at 1 United States Dollar (USD) : 24 CUP, and 
(iii) the reduction or removal of subsidies in the Cuban economy, and price and labour (salary, pension and social security) reforms aimed at correcting price levels.

As a result, as per 1 January 2021, our joint ventures converted their operational accounts to CUP and all transactions are now being carried out  in CUP. The amounts in USD that Cuban joint venture companies previously held in continue to be held in USD accounts in Cuba. The salaries that all our workers receive (in CUP) have been increased substantially whilst the total salary cost (in USD) has decreased as a result of the new  exchange rates. Other major savings that we expect to benefit from include energy cost, (internal) transportation cost and construction cost.

Like with any major reform the implementation of this Monetary Reform and the ordering of hard currency flows (Tarea Ordenamiento) that is directly related thereto is not without growing pains, errors, changes and amendments, but we have confidence that during the course of the year the implementation will start to get into a good, workable shape. 

Biden and the US Cuban Embargo 

Notwithstanding numerous statements made by President Biden during the campaign last year with respect to the US Cuban embargo, and in particular his intention to “… promptly reverse the failed Trump policies regarding Cuba...”, by now it would appear that improving the relationship with Cuba is not amongst Biden’s chief foreign policy priorities. 

Although the restoration of international cooperation seems to be high on his government’s agenda, it seems apparent that no immediate need is felt to immediately ease the Cuba restrictions that are currently in place.  However, following a formal review, I do expect the Biden administration to cancel the designation of Cuba as a “state sponsor of terrorism”, and subsequently to adopt measures aimed at increasing remittances to Cuba, the easing of travel restrictions and the restoration of services and staffing at the U.S. embassy in Havana. 

One may disagree with President Biden’s careful pace, but gathering bipartisan support for a more substantial overhaul of US Cuba policy may prove to be more sustainable in the long term.


Most of the executive managers of the Company have been connected to the Company for more than 15 years and Sebastiaan Berger, Cameron Young and Christian Pittard for more than 20 years. Over that time, the Company has built up an investment portfolio of high quality assets. This year, CEIBA Investments Limited (the “Company”) will celebrate the 25th anniversary of its Cuban investments and operations. In 2018, the Company was the first Cuba dedicated investment trust to be listed on the Specialist Fund Segment of the London Stock Exchange (LSE). And the Company is now also the first in issuing a Convertible Bond to be listed on The International Stock Exchange (TISE).

Sebastiaan A.C. Berger
Fund Manager 


Special Investor Warnings
The U.S. Cuban embargo legislation presently in force prohibits U.S. Persons from investing in, owning or otherwise holding Ordinary Shares in CEIBA Investments Limited. U.S. banks, custodians, depositories and other intermediaries may reject or block payments, the transfer of securities, and the distribution of dividends. Shareholders should ensure that they do not directly or indirectly use U.S. banks, custodians, depositories or other intermediaries, in any capacity, to hold Ordinary Shares in the Company or to receive dividend distributions or other payments.

Key Risks
General: The value of investments and the income from them can go down as well as up and investors may get back less than the amount invested. Past performance is not a guide to future results./Country: Cuba remains subject to a very high degree of control over economic matters by the Cuban government (extensive regulations that impact business and the ownership and operation of assets and properties, such as the hotel and office properties in which the Company is invested). Any changes in government policy may adversely affect the Company or its investments in Cuba./Joint Ventures: All of the Company’s investments in Cuban real estate assets are made through Cuban joint venture companies in which Cuban government entities hold an equity interest. Due to present Cuban government policy, the Company is not able to obtain majority control over these Cuban joint venture companies and therefore does not exercise control over the joint ventures or the underlying assets./Currency: Currency exchange rate fluctuations may have a positive or negative impact on the value of your investment (the Company is exposed to risk associated with currency fluctuations, particularly between Pounds Sterling, Euros, the U.S. Dollar, and potentially the Cuban Convertible Peso (CUC) or the Cuban Peso (CUP))./ Liquidity of investments: All direct investments in Cuban joint venture companies and other foreign investment vehicles are generally illiquid investments./Dependence on tourism: The Company holds significant interests in Cuban joint venture companies that own hotel properties, which are highly dependent on tourism in Cuba (operations and properties are subject to operating risks inherent to the tourism industry)./U.S. Cuban Embargo: U.S. government restrictions relating to Cuba have a negative impact on the Cuban economy and, as a result, also have a negative impact on the business of the Company, as well as its access to capital and finance and limiting the extent to which third parties will deal or transact with the Company./Property investments in Cuba: U.S law penalizes foreign persons allegedly “trafficking” in property formerly owned by U.S. citizens but confiscated by Cuba after the Cuban revolution. Although, due diligence has been carried out and no notice of alleged “trafficking” has been received by the Company, given the broad definitions and terms of the law, there is no certain way for the Company to diligently verify whether any future litigation may arise in respect of a particular property./Projections & Estimations: All projections, estimations, target returns, indicative terms and the like in this document are illustrative and involve significant elements of judgement and analysis using certain assumptions described herein, which assumptions, judgements and analyses may or may not prove to be correct./Discount: Ordinary Shares of the Company may trade at a discount, the market price of the Ordinary Shares may rise or fall rapidly - general movement in local and international stock markets, prevailing and anticipated economic conditions and interest rates in, and investor sentiment towards, Cuba and general economic conditions may all affect the market price of the ZDPs and Shares. To optimise returns, holders of Ordinary Shares may need to hold the shares for the long term./Advice: Investors in the Company are expected to be institutional investors, professional investors, high net worth investors and professionally advised and knowledgeable investors who understand the risks involved in investing in the Company and/or who have received advice from their fund manager or broker regarding investment in the Company.

For limited Professional Use Only
The views expressed in this document should not be construed as advice on how to construct a portfolio or whether to buy, retain or sell a particular investment. The information is being given only to persons who have received this document directly from Aberdeen Standard Fund Managers Limited (ASFML) and must not be acted or relied upon by persons receiving a copy of this document other than directly from ASFML.

No part of this material may be copied or duplicated in any form or by any means or redistributed without the written consent of ASFML. Issued by Aberdeen Asset Investments Limited, a company authorised and regulated by the Financial Conduct Authority in the United Kingdom. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. CEIBA Investments Limited is listed on the Specialist Fund Segment of the Main Market of the London Stock Exchange. The Company is a registered closed-ended collective investment scheme pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Schemes Rules 2015 as issued by the Commission. The AIFM: Under the terms of the Management Agreement, the Company has appointed Aberdeen Standard Fund Managers Limited, with effect from Initial Admission, as the Company’s alternative investment fund manager for the purposes of the AIFM Rules. The AIFM has delegated portfolio management to Aberdeen Asset Investments Limited as Investment Manager.

Risk Warning
Risk warning
The value of investments and the income from them can go down as well as up and you may get back less than the amount invested. Please refer to the relevant Key Information Document (KID) prior to making an investment decision. Please be aware of scams that can affect investors.