Cuba and the Hormuz of America

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

This week, Castro’s grandson attempted to deliver a personal letter directly to Trump, but CBP intercepted his courier at Miami, confiscated the letter, and denied him entry. The message was delivered, though: Cuba matters, and Cuba is open to negotiations. That’s why we wanted to talk about Cuba again, but through a different scope, one stripped of all the ideological and sentimental speech. In the end, geography matters.

We still don’t know whether we will see a “Cuba Libre” in the full scope of what that means, but the diaspora can rest assured: Cuba will never cease to matter. Regardless of ideology, it is geography that will always make it relevant to America, and there you can find the refuge of hope to know that the U.S. will never rest until Cuba is as close to a U.S. ally as it could be.

In this issue, you will find:

• Cuba Could Be an Iran for the Gulf of America

• Latin America, the Ideological Stronghold for the West

• The Stabilization Laboratory: Venezuela Between Yield and Risk

As always, please feel free to share GCaM with your friends and colleagues. We all, at the GCaM team, wish you a good weekend.

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Cuba sits in the heart of a long-forgotten Cold War-era debate. What matters most, geography or human agency? And the island supposes, in the style of Robert Kaplan, the Revenge of Geography.

In perspective. Strip Cuba from the ideological debate for a moment. Forget the Cold War reflex, the anti-communist narrative, and even the weight of the exile community in U.S. domestic politics. What remains is geography. And geography, in this case, is decisive. Although its proximity prompted one of the most dramatic and existential chapters of the Cold War, and it will always remain a military threat to the mainland, today is a bigger threat to U.S. trade than it is to the territory.

• Cuba sits at the entrance of the Gulf of America—former Gulf of Mexico—and that position gives it a latent capacity to disrupt one of the most critical energy corridors in the Western Hemisphere.

• As it stands, Cuba could be to the Gulf of America what Iran is to the Strait of Hormuz, and now we know how critical that is.

Why it matters. The Gulf of America is the core of U.S. energy production and export infrastructure. Roughly 15–17% of total U.S. crude oil production comes from federal offshore fields in the Gulf, and a much larger share of refining capacity—over 45% of total U.S. refining throughput—is concentrated along the Gulf Coast. On top of that, the region has become a global hub for energy exports.

• The United States now exports well over 4M barrels per day of crude oil and over 10B cubic feet per day of LNG, much of it departing from terminals in Texas and Louisiana.

• All of that depends on uninterrupted maritime access. Tankers move in and out of the Gulf through a relatively narrow set of sea lanes, particularly the Straits of Florida and the Yucatán Channel.

• Cuba sits along these routes in a way that gives it proximity to traffic flows that are essential not just for U.S. domestic supply chains, but for global energy markets.

The overlooked risk. In a world of intercontinental ballistic missiles, the idea of Cuba as a military threat in the traditional sense has diminished. The logic of the Cuban Missile Crisis no longer defines the island’s strategic value. But that does not mean the risk has disappeared. The relevant question today is not whether Cuba can threaten the U.S. mainland directly, but whether it can contribute to disrupting the economic systems that sustain it. In that sense, the analogy is now maritime chokepoints.

• On its own, Cuba lacks the capacity to impose a sustained disruption. Its military capabilities are limited, and any direct attempt to block maritime traffic would be met with overwhelming force.

• But the risk does not lie in unilateral action. It lies in alignment. A Cuba willing to cooperate with external actors—state or non-state—that have the capability to project force or disrupt shipping could become a platform for asymmetric pressure.

• Even a temporary disruption would have outsized effects. Energy markets are highly sensitive to uncertainty. Insurance premiums, routes, and supply chains would all be disrupted. The economic impact would not require a full blockade to seriously harm the United States.

Between the lines. This is where the discussion about regime change often loses focus. It is frequently framed in terms of democracy versus authoritarianism, freedom versus repression, or capitalism versus communism. Those factors matter, of course, but they are not the only ones. There is a harder, less comfortable layer to the argument—one that is rooted in geography and risk management.

• From a purely strategic standpoint, the United States has an interest in ensuring that no adversarial alignment takes hold in a location that can affect its primary energy corridor. That interest does not depend on the internal character of the Cuban regime. It depends on its external behavior and its potential partnerships.

• This is also why Cuba, despite its economic weakness, never fully disappears from Washington’s radar. It is not because of what it is today, but because of where it is—and what it could become under different alignments.

• Cuba knows this, too, and what a diplomatic advantage it gives to the regime. That’s why, despite decades of rivalry, Fidel Castro’s grandson is trying to negotiate on his own, directly with Trump, the future of the island.

Yes, but. Any attempt by Cuba to interfere with maritime traffic would be interpreted as a direct threat to U.S. national security. The response would be swift and decisive. In that sense, the deterrent is clear. But deterrence does not eliminate risk completely.

• The real concern is not a deliberate, full-scale confrontation initiated by Havana, but the possibility of a scenario where Cuba becomes entangled in a broader geopolitical conflict—whether through cooperation with a major power or as part of a wider escalation dynamic.

• In such a case, the United States could find itself facing pressure in a domain it cannot ignore, forcing a response it would prefer to avoid.

The bottom line. Cuba matters not because of ideology, but because of geography. The main argument for Robert Kaplan’s “The Revenge of Geography” remains relevant to this day: human agency matters, but geography is king. As long as the Gulf of America remains central to U.S. energy production and exports, any actor with proximity to its access points carries strategic weight. That reality does not guarantee conflict, but it ensures that the island will never be irrelevant.

• For Washington, the objective is both to prevent hostility and to reduce uncertainty.

• A non-adversarial Cuba limits the number of variables in a region that is too important to leave exposed. Geography sets the stakes, and policy has to respond to them.

Geopolitics is, as its name says, geography and politics, but religion is also a fundamental variable to analyze.

In perspective. The map reveals something that often gets overlooked. While Europe continues its steady move toward secularization, Latin America remains overwhelmingly Christian. That’s not just a religious detail. Christianity—particularly Catholicism—helped shape the foundations of Western institutions: human dignity, limits on political power, the moral basis of law.

• Seen from that angle, Latin America is one of the last large-scale reservoirs of those underlying values.

Why it matters. Europe, once the core of Western civilization, is going through a deeper kind of erosion. The decline in religious life is paired with demographic aging and a growing sense of fragmentation. The map reflects that shift clearly: much of Europe has weakened its connection to the very tradition that once anchored it. What remains is heritage—cathedrals, art, intellectual legacy—but less of the cultural cohesion that once sustained its institutions. Europe still exists as a reference point, but it no longer drives the West forward. It is a museum of the beauty of its Catholic civilization-building heritage.

• Latin America, despite persistent structural problems—low productivity, institutional weakness, and violence—it maintains a level of cultural continuity that Europe has gradually lost.

• A large majority of the population still identifies within a Christian framework. That doesn’t translate automatically into stability or prosperity, but it does mean that the cultural soil that supports Western-style institutions is still there.

• At the same time, the region is young. Demographically, it has not entered the stagnation phase seen in Europe. That matters. A younger population, combined with a shared value system, creates potential—even if that potential remains underdeveloped.

Between the lines. Geography reinforces this dynamic. Latin America sits firmly within the sphere of influence of the United States. That proximity is civilizational. If Europe becomes increasingly inward-looking and less capable of sustaining its traditional role, the question becomes where those Western principles continue to live in practice.

• Latin America is not a replacement for Europe, but it can function as a stabilizing extension of the Western world.

• Not because of ideology or alignment in every policy decision, but because of deeper cultural compatibility.

The underlying point. Discussions about the West tend to focus on GDP growth, military power, or electoral outcomes. This map points to something more foundational. Institutions do not exist in a vacuum. They rely on a cultural framework that gives them legitimacy and durability. When that framework weakens, institutions eventually follow, which is precisely what we are seeing in Europe.

• Latin America, for all its economic shortcomings, has not undergone that same level of cultural rupture.

• And in a moment where the West appears increasingly uncertain about itself, that continuity could end up mattering more than current indicators suggest.

Venezuela is witnessing a significant rally in its sovereign and PDVSA bonds, driven by a pivot in international sentiment following the IMF’s decision to resume technical conversations with the administration. This shift marks a preliminary step toward reintegrating the nation into the global financial architecture and addressing a decade of default and isolation. Yet, this newfound optimism must be tempered by a rigorous assessment of the structural decay and political volatility that remain embedded in the Venezuelan economy.

• These underlying risks are essential to determine if the current market momentum is backed by institutional prospects of stabilization or remains vulnerable to the country’s chronic systemic fragility.

In perspective. The current pivot toward the International Monetary Fund (IMF) represents a structural break from nearly a decade of institutional isolation and a sovereign default that dates back to 2017. The IMF’s decision to resume technical conversations—the first formal contact in seven years—serves as the indispensable green light for the international financial community to begin the grueling process of debt restructuring. However, this re-engagement occurs against a backdrop of historic economic contraction, where the absence of a credible fiscal baseline makes any long-term sustainability projection highly speculative for private and bilateral creditors alike.

• Total external liabilities are estimated to exceed USD 150B, a complex mix of USD 60B in defaulted bonds, bilateral debt to China and Russia, and billions in outstanding arbitration awards. Notably, accrued interest on many bond series now nearly matches the original principal.

• While the Central Bank (BCV) has resumed dollar auctions to banks in an attempt to stabilize the exchange rate, the bolivar’s fragility persists. March 2026 inflation peaked at 649% annually, placing the economy on the verge of a new hyperinflationary cycle.

• The April 2026 suspension of personal sanctions on acting President Delcy Rodríguez, coupled with Chevron’s landmark asset swap—increasing its Petroindependencia stake to 49%—signals a transition from frozen liabilities to active capital recovery.

Technical risks. The recent bond rally in secondary markets, which saw prices for sovereign and PDVSA debt surge from roughly 10 cents to the 35–40 cent range by early 2026, is driven by aggressive speculation on a fast-tracked debt restructuring. This optimism is fueled by the IMF’s technical re-engagement and the dramatic shift in Caracas’s political leadership, which investors interpret as the liquidity floor needed for eventual repayment. However, this remains a high-stakes environment where capital gains are predicated on the State’s ability to resume oil exports at scale—a process still hampered by years of underinvestment and the fragility of a transition government.

• Investors face significant reputational and compliance risks, as the transition remains under intense scrutiny; while primary sanctions have eased, the ethical stigma of holding debt from a period of previous crisis prevents many Tier-1 institutional funds from re-entering.

• A critical friction point persists in New York courts, where the US Executive Order 14373 protects Venezuelan so-called Foreign Government Deposit Funds from judicial attachment. This creates a risk scenario where creditors hold valid judgments but are legally barred from seizing the oil revenues intended to back the bonds.

• JP Morgan Chase serves as the definitive example of institutional caution. Despite the rally, the firm has maintained the exclusion of Venezuelan debt from its flagship Emerging Markets Bond Index (EMBI), citing the lack of consistent pricing and the ongoing technical default status as barriers to benchmark eligibility.

Between the lines. The path toward a formalized IMF relationship hinges on the activation of an Article IV consultation, a rigorous diagnostic process that has not been conducted in Venezuela since 2004. This institutional analysis will oblige the interim administration to open the black box of its national accounts, revealing the true extent of off-budget spending, PDVSA’s opaque debt structures, and the actual level of usable international reserves. While markets currently price in the possibility of a deal, the eventual publication of this data—likely exposing a fiscal deficit and monetary misalignment far worse than speculative models suggest—threatens to trigger a market correction, dampening the initial euphoria of the bond rally.

• The Article IV report will provide the first credible pricing floor in decades, but it will also codify the nation’s insolvency. The revelation of deep structural gaps in financial regulation and the exchange rate mechanism may lead to a volatile event as the scale of required austerity becomes clear.

• Reaching the 2M bpd target requires more than sanction relief. It demands an estimated USD 12B to 15B in annual capex to rehabilitate decaying infrastructure and old, inefficient wells that have suffered from years of mechanical neglect and lack of specialized labor.

• Despite the diplomatic thaw, production increases are bottlenecked not only by operational problems but also by compliance dilemmas required by international investors and US law to engage in significant liquidity injections for substantial oil production increases.

In conclusion. Venezuela currently functions as a high-stakes laboratory for economic stabilization, where the dismantling of a decade of isolation meets systemic insolvency. While geoeconomic energy readjustments and a pivot in global supply chains provide a significant tailwind for expansion, the investment environment remains fraught with technical risks across legal, financial, and pricing frameworks.

• As the country approaches a critical election cycle and the IMF begins to pull back the curtain on previously opaque national accounts, investors must move beyond speculative optimism to conduct rigorous risk assessments based on the hard data and institutional transparency that are only now beginning to emerge.