Before diving into the topic of how to invest in Cuba, as well as why, there are a few interesting facts you should know about Cuba regarding its economic potential. First, let’s rewind the clock. The following three statements pertained to Cuba in 1958:

Its workers had the 8th highest wages in the world;

More Americans lived in Cuba than Cubans lived in America;

Its per-capita income was higher than those of Austria and Japan.

Those are interesting facts, but the key word above is ‘potential.’ There are definitely some headwinds to growth, which we’ll get to. After all the information about Cuba’s growth potential is covered, it’ll be up to you to decide whether or not to invest, and if so, how to invest.

Change of Heart

If you keep seeing headlines about Cuba, but you don’t know what’s going on, President Obama has eased (not eliminated) the U.S. trade embargo with Cuba. This could lead to the trade embargo being eliminated in the future. If that happened, we would have a new emerging market on our hands. (For more, see: Sanctions Between Countries Pack a Bigger Punch than You Think .)

Prior to Fidel Castro coming to power, Cuba was a popular tourist destination for Americans. The original goal of the trade embargo was to get rid of Fidel Castro, but that didn’t happen. Instead, Cuba implemented socialist policies, and today, 80%-85% of the economy is controlled by the government.

According to Peterson Institute of International Economics. U.S. exports to Cuba totaled $360 million last year. If the trade embargo were to be eliminated, that number could increase to as high as $4.3 billion. However, as stated above, there are headwinds. (For more, see: Socialist Economies: How China, Cuba and North Korea Work .)

Some Complications

Venezuela provides 61% of Cuba’s oil. With the recent slide in oil, and Venezuela finding itself in a desperate situation, that cheap oil supply could be cut off from Cuba, which would make matters worse, not better.

Another factor is demographics. There’s a reason why China and the United States are the strongest economies in the world: They have the most consumers. It goes deeper than that, of course, but population is a big factor. To put things in perspective, when it comes to emerging markets, China has a population of 1.36 billion; Cuba has just 11.27 million people, and it would be safe to say that there’s a dearth of disposable income. Therefore, it’s important not to get too carried away with investment excitement. At the same time, if Cuba becomes what it was in the 1950s, then you could have an opportunity to get in on the ground floor.

A third factor is Senator Marco Rubio, who made the following comment to CNBC: “I don’t believe they have voted to lift the embargo ; I think they’re going to struggle to get the votes to fund an embassy.” He later referred to President Obama as the worst negotiator in presidential history.

Rubio believes that the embargo gives the United States leverage in an effort to attain a goal of freedom and democracy in Cuba. Make of that what you will. A lot will depend on your political viewpoints. The objective point being made here is that not everyone is on board with the easing of the trade embargo, which could hinder investment potential. However, on Wall Street, perception and hope often carry investments further than facts and end results. With that in mind, let’s take a look at a few ways to play the potential economic rebirth of Cuba. (For more, see: Countries with the Highest Ratio of Government Spending to GDP .)

Investing in Cuba

What you have likely read about most is the Herzfeld Caribbean Basin Fund (CUBA ), which is comprised of 60 securities. It’s a closed-end fund. Therefore, there’s a fixed number of shares. This limited supply can lead to parabolic price-per-share moves when demand increases. You might have missed a big move when news broke of normalizing relations between the U.S. and Cuba, but that doesn’t mean CUBA will soon head back in the other direction.

CUBA has appreciated 49% since its 1994 inception. That’s not overly impressive, but with the current policy change, there might be more upside potential than downside risk. That’s for you to decide, but you need more information prior to making that decision. The largest holdings for Herzfeld Caribbean Basin Fund:

Copa Holdings (CPA ): 7.242% of assets

Coca-Cola Femsa (KOF ): 6.577%

Seaboard Corp. (SEB ): 5.646%

MasTec Inc. (MTZ ): 5.470%

Lennar Corp. (LEN ): 5.021%

Royal Caribbean Cruises Ltd. (RCL ): 4.926%

Copa Holdings is the leading carrier in Latin America, with 280 daily flights from Panama City. It also delivered a 17.5% profit margin its most recent quarter.

Coca-Cola Femsa is a franchisor bottler that produces, markets, and sells Coca-Cola trademarked beverages.

Seaboard is a conglomerate in the agribusiness and transportation business.

All of the above companies stand to benefit from the elimination of the trade embargo, whether due to increased tourism, consumer consumption, agriculture, or construction. Of course, you can invest in these companies all in one place by using Herzfeld Caribbean Basin Fund, but you can also invest on a pick-and-choose basis. If the latter is the case, then let’s look at some key metrics.