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The Biz Roundup April 18 & 19

You heard it hear first: Cuba spells opportunity . . . maybe.

Cruise lines will likely benefit first, some experts said, because it can take years to build up resort-style hotels on shore. Even so, capacity questions remain.

“If you have a 2,000-passenger cruise vessel at the port of Havana, at some point they’re going to want to have lunch,” Kavulich said.

“There are three restaurants — how are you going to feed 2,000 people at one time?”

(“Cuba on horizon but U.S. travel industry cautious,” Reuters, April 15) As an entrepreneur and businessperson, I have always regarded the U.S.’s continued Cuba embargo as one of the most solidly irrational, unsupportable political policies of the last three to four decades (it made sense in 1959, even 1964, but after 1970?). The simple fact is this: the Cuba embargo has denied literally thousands to tens of thousands of businesses and entrepreneurs in the U.S. the access to profits and business success. The presence of American tourists on Cuban soil would move that country exponentially faster towards democratic and free market practices than any sanctions. If Obama unfreezes this dinosaur just a bit more, look for immense opportunities for U.S. entrepreneurs providing exactly the infrastructure that’s lacking on the island for the massive influx of tourists. Here’s hoping good old honest Yankee business sense overwhelms misguided, uninformed, and immovable ideology.

And in the “I already knew that except the numbers” department

Venture-backed companies raised $3.9 billion in the first quarter of this year down from $7.78 billion in the first period of 2008, according to VentureSource, an industry tracker owned by VentureWire publisher Dow Jones & Co. It was the lowest quarterly investment since 1998. The total fell significantly below the $5.95 billion invested in the fourth quarter of last year when the collapse of Lehman Brothers Holdings Inc. and other economic shocks took their toll on the venture business.

The number of deals also fell sharply to a level not seen since 1996. Only 477 venture-backed companies closed equity financings in the first quarter compared with 706 a year ago and 601 in the fourth quarter of 2008.

(“Venture Capital Investing Hits 11-Year Low,” Wall Street Journal, April 19) There is a truism among VC’s (I’ve dealt with more than my share) that the most convincing pitches convince them that the start-up will succeed even without VC funding. The reality of the straitened VC market is this: you should plan on launching your business with next to nothing and succeeding. VC funding comes when you’ve proven yourself (which, by the way, puts you in a much, much better position when negotiating the value of your business).

Oooo! Michelle Bachmann’s head is going to explode when she hears this one . . .

Premier Wen Jiabao said on Saturday that the economic polices of countries which issue global reserve currencies require closer supervision as part of building a diversified international monetary system. . . .

Wen has expressed concern in recent months about the safety of Chinese investments in US dollar assets.

“We should strengthen the supervision of the economic policies of the main reserve currency economies and push forward the establishment of a diversified international monetary system,” he said . . .

Premier Wen said China would look at expanding its currency swap agreements that are seen as a step toward eventually making the yuan more of a global reserve asset.

(“China: key currency countries need watching,” China Daily, April 19) Since I’ve already done it before, I’m not going to go into the arcana of reserve currencies and SDR’s (which, personally, I think deserve a serious look as a widely used alternative reserve currency). It was inevitable that major exporters would either (a) move to diversify reserve currencies or (b) establish IMF Special Drawing Rights (SDR’s) as the dominant reserve “currency” (a financially undiscovered country that needs must give us pause) or c.) call for tighter international regulation of reserve currency economies (the U.S. dollar accounts for around 2/3 of reserve currencies, the euro for another 1/4, and the Japanese yen for about 1/8). One of these three alternatives will come to pass over the next five to ten years and, if bets were being taken in Vegas, I’d put all my chips down on (a). Simply put, (a) is the alternative that nations, such as China, can pursue without getting everyone else to agree. Diversifying reserve currencies will introduce greater volatility into world trade, but its advocates argue that it will insulate global trade from major shocks such as the current downturn. More swings, but less severe.

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