Feature-Hugo Cancio: Cuba's American business connection?

Fuego Enterprises

20/02/2015 12:00

By David Adams 
    MIAMI/HAVANA, Feb 20 (Reuters) - Hugo Cancio believes he's 
the new face of American-style entrepreneurship in Cuba.  
    The Cuban-born Miami resident made his mark in music, 
promoting Cuban and other Latino acts. His company's stock is 
public and a handful of investors say they're betting on him. 
    Cancio, 50, also publishes magazines in Havana. Telecom 
companies are partnering with him. U.S. cable networks, private 
equity funds and law firms ask for Cancio's take on the thaw in 
relations between the United States and Cuba announced by 
President Obama in December. 
    He even got to hang out recently with American TV comedian 
and talk show host Conan O'Brien, who was in Havana taping an 
upcoming show. 
    Antonio Zamora, a Miami lawyer aiming to do business in 
Cuba, said Cancio "is way ahead of the game" in terms of Havana 
connections. 
    But there are risks. His company, Fuego Enterprises Inc 
 FUGI.PK  may trade through over-the-counter pink sheets, but it 
hasn't reported results for six years. The last time: in early 
2009 it reported a loss and sharply declining revenues.  
    He's also been in and out with the Cuban authorities and had 
a legal scrum with the music company founded by the Beatles.  
    "Hugo is the best Cuba play we have and also the most 
speculative," said Cancio's largest investor, Thomas Herzfeld, 
the Miami Beach founder of the Herzfeld Caribbean Basin Fund, a 
Cuba-focused mutual fund.  ID:nL1N0U12AK  "It's not one I could 
recommend. The financials aren't there. But it is one I want to 
own."  
    That some investors are willing to bet on Cancio, despite 
past problems reflects how few American businessmen have lines 
into Cuba government entities. Cancio's credibility with the 
Cubans, associates said, stems in part from his outspoken 
opposition to the U.S. embargo imposed since 1962, as well as 
his deep Cuban roots. 
    Cancio's level of access to Cuban is impressive for an 
American, his advocates said, in Havana and Cuba's diplomatic 
missions in Washington and New York. 
    "He stuck his head neck out in Miami and that's why Cubans 
respect him," said Ralph Patino, 57, a Cuban-American lawyer and 
Obama fund-raiser.  
    Cuba does not typically comment on business ventures in its 
country, but officials privately acknowledged that Cancio enjoys 
a high level of trust. 
     
    MUSIC MAN  
    Cancio was born into the music business. 
    His father, Miguel, was founder of Los Zafiros, a popular 
1960s group in Cuba, though it's American-influenced Doo-wop 
sound was censored.  
    Cancio was expelled from school for telling a joke about 
Fidel Castro. His single mother, fearing that young Hugo's 
future wasn't rosy as a result, fled to Miami with the family  
in the 1980 Mariel boatlift, an exodus of 120,000 people. 
    In Miami he worked in a car dealership as a high school 
student to help the family. In the early 1990s he heard Cuba was 
opening up to exile family visits and launched a travel 
business. 
   He finally made his first trip back to Havana in 1994.  
There, he met Fidel Castro at a function for exiles. Cancio used 
the opportunity to, among other things, get in the music 
business, producing a movie about his father's band.  
     
    LOVE AND HATE 
    Passionate about his homeland, Cancio has had a rocky 
relationship with the Cuban government and other exiles in 
Miami. In the 90s', as he emerged as an important figure in the 
Cuban-American community, Cancio was a advocate for ending the 
U.S. embargo against Cuba and was accused of being a communist 
as a result.  
    But Cancio was hard to pigeon-hole. In 2003, he was banned 
from Cuba for a year after denouncing a crackdown on political 
dissidents.  
    Cancio stayed away for five years. During that time, he 
formed Fuego in an attempt to cash in on a U.S. boom in Hispanic 
music. 
     
    FINANCIAL STRUGGLES 
    His business struggled. The last time Fuego officially 
reported financial results it disclosed that in the nine months 
ended Feb. 2009, its revenues were just $17,477, down 93 percent 
from the year-earlier period. It lost $113,917.  
    In the previous year ended May 2008, the company's auditor, 
Moore & Associates, said there was "substantial doubt" about 
Fuego's ability to survive. The year before there had been a 
similar comment from auditor, Braverman International.  
    Fuego said in the 2008 annual filing that it had a deficit 
in working capital, it was delinquent filing tax returns and was 
past due on the majority of its accounts payable. 
    Cancio said Fuego was a young company hit hard by the 
recession. "We switched gears and decided to move away from the 
music business and focus instead on quietly positioning 
ourselves in Cuba," he said. 
    Canncio, who is identified as the company's president, 
treasurer, secretary and director, was also sued by Apple Corps 
Ltd in 2008 after he acquired recordings of the Beatles. Apple's 
lawyers charged that the 1962 live tracks were recorded without 
the band's permission; the case was settled out of court. 
     
    THE THAW     
    After Obama was elected in 2008, and launched a new opening 
with Cuba, Cancio gave his homeland another try. 
    He was welcomed back, in large part due to his opposition to 
the embargo and his efforts at reconciliation between Havana and 
Miami. He promoted a U.S. tour for Cuban singer Silvio 
Rodriguez, including a sold-out show at Carnegie Hall in 2010. A 
concert with another Cuban star, Pablo Milanes, went off without 
a hitch in Miami despite protests. 
    "I realized at the time," said Cancio, "the time was right 
for both sides." 
    In 2012, sensing a shift in policy, he launched two glossy 
lifestyle publications in Havana called OnCuba and ArtCuba and a 
website. A third publication, focusing on the emerging real 
estate market, is due out in April.  
    His business Fuego has evolved in other ways. It owns 
MAScell a Miami prepaid phone card firm that operates in Cuba - 
and has exclusivity deals with two other telecoms looking to do 
business in Cuba. Blackstone another Miami prepaid phone card 
firm with around $500 million in annual revenues, is one of 
those seeking Cancio's help.  
    "It's hard to know what opportunities are available or what 
Cuba wants," said Blackstone CEO, Luis Arias. "But Hugo is on 
the ground and he knows who's who." 
              
    THE FUTURE 
    In 2011, Fuego reported in a press release unaudited 
revenues of $2 million largely due to the concert successes. It 
did not say if it was profitable. There have been no updates 
since, though Cancio said he expects the company to return to 
profitability this year. 
    Fuego's shares are very thinly traded but they did sharply 
rise on the news of the U.S.-Havana deal, climbing to a high of 
$1.13 from just 10 cents within a couple of days. They have 
since dropped back to 93 cents at the close on Feb. 18. 
    Fuego said last December it planned to become, in the next 
several weeks, fully compliant with SEC reporting requirements. 
It has yet to do so. 
    Meanwhile, Cancio is taking the long view about the US-Cuba 
relationship. He believes it will take years before Cuban 
officials and the U.S. work out the kinks to make investing safe 
for business.  
    "It's going to be gradual, he said, "and Cuba will probably 
pick and choose who they do business with." 
 
 (Reporting by David Adams. Editors: Hank Gilman and Martin 
Howell) 
 ((david.c.adams@thomsonreuters.com; +1)(305-810-2690; cell: 
305-3368452; Reuters Messaging: 
david.c.adams.thomsonreuters.com@reuters.net)(martin.howell@thom 
sonreuters.com)) 
 
Keywords: USA CUBA/CANCIO