Why is the Dominican Republic worried about improving ties between the U.S. and Cuba? Just watch the movie “Godfather II.”

The scenes of mafia don Michael Corleone driving through the streets of Havana on the eve of the Cuban revolution were shot in the Dominican capital, Santo Domingo. The cigars that made the Caribbean country the world’s top exporter often carry a label saying they were grown from “Cuban seed.”

With President Barack Obama easing a five-decade-old embargo on Cuba, no nation in the Caribbean has more at risk than the Dominican Republic, the region’s biggest economy. Every U.S. tourist that visits a Cuban beach undermines the country’s position as the region’s top destination. Each time a Major League Baseball franchise holds out to sign a Cuban prospect means less cash for Dominican players, the largest single contingent of foreign-born players in the big leagues.

“The Cubans produce the same things that we produce,” said Arturo Martinez Moya, a former economist at the central bank who authored “Dominican Economic Growth: 1844-1950.” “Their development will be based on the same sectors as ours because we live on two identical islands.”

The island of Hispaniola, home to both the Dominican Republic and Haiti, is just 80 kilometers (50 miles) off the east coast of Cuba, separated by the Windward Passage. The former Spanish colonies both have populations of about 11 million people and a topography marked by mountain ranges, fertile lowlands and white-sand beaches.

Tourism Record

With only the U.S. restricting travel, 3 million foreigners arrived in Cuba last year, according to the government. That made it the second-most visited island in the Caribbean after the Dominican Republic, which attracted more than 5 million visitors. That record helped the $61 billion Dominican economy expand 7.1 percent last year, the best performance in Latin America. Cuba’s economy was poised to expand 0.8 percent last year, Moody’s Investors Service said.

The opening of Cuba will probably take a bite out of the Dominican’s domination as Americans flock to Cuba to see a country made famous by its 1950s-era automobiles and historic downtown, recalling a Caribbean of a bygone era.

“It’s a destination that people have heard about but still carries some mystery,” said Jorge Salazar-Carrillo, a professor of economics who studies Cuba at Florida International University in Miami.

Hollywood Films

Since the “Godfather II” days, Santo Domingo has been a reliable stand-in for Havana. Director Sydney Pollack’s 1990 film “Habana,” and the 2005 film “The Lost City,” starring Andy Garcia, featured the streets of Santo Domingo in lieu of the Cuban capital.

When contacted by Bloomberg, officials at the Dominican Tourism Ministry cited comments by Minister Francisco Javier Garcia in December, when he said that competition from Cuba is “nothing new” since the country has competed against its neighbor for tourists from Europe and Canada for decades.

Bond investors have also shrugged off the detente. Dominican dollar bonds have returned 13 percent since the Obama- Castro announcement Dec. 17, compared to a 6 percent gain for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.

The biggest threat from better U.S.-Cuba ties may be to Dominican cigars, a $500 million export industry. Cuban cigars have long been a valued commodity among aficionados. Before he signed legislation authorizing the embargo, President John F. Kennedy asked Press Secretary Pierre Salinger to buy as many Cuban cigars as possible. He received 1,200 Petit Upmanns on Feb. 6, 1962, Salinger recounted.

‘More Competition’

Today, the Dominican Republic is the world’s No. 1 producer of cigars, according to the country’s Export and Investment Center.

“We are going to see more competition for things like our cigars,” said Pavel Isa-Contreras, an economics researcher at the Technological Institute of Santo Domingo. “We could lose market share because the United States is the biggest importer of our cigars.”

Officials at the Association of Dominican Cigar Manufacturers didn’t respond to messages left by Bloomberg News.

To be sure, the embargo isn’t going away yet. As part of improving ties between the countries, Obama and Cuban President Raul Castro last month said they would work first to restore diplomatic relations. No break-through occurred last week when Assistant Secretary of State Roberta Jacobson visited the island.

Foreign Tourists

Only Congress, where opposition to the Castro regime remains fierce, can end the embargo. Obama did use his executive authority to ease some trade and travel restrictions, including allowing tourists to use U.S. credit cards on the island. Most Americans can’t fly to Havana from the U.S. on their own, but the tour companies that arrange such travel can do so more easily now.

While the embargo won’t disappear overnight, Dominican baseball prospects have already felt the pinch of increased competition. On opening day last year, 83 of the 224 foreign- born players to appear on MLB rosters were Dominican, with Venezuela ranking second with 59 players. Yet Cuba, which had 19 players on rosters when the season began, is one of the most sought-after markets for scouts. Most Cuban players join MLB after defecting.

“There’s no question that it has already changed the market,” said Ulises J. Cabrera, who runs the Dominican Prospect League, which showcases Dominican players for scouts. “There has already been an overwhelmingly negative impact on the Dominican players.”

Signing Bonuses

Cabrera said teams, limited in how much they can spend on international signing bonuses, are holding out for more- experienced Cuban players, leaving less money for Dominican prospects. That could hurt the search for a future Albert Pujols, the Dominican first baseman who won the National League’s Most Valuable Player award in 2005, 2008 and 2009.

The rules “severely limit the marketplace,” said Cabrera, whose players will receive around $30 million this year in signing bonuses.

Yet on the country’s baseball fields, not everyone is worried.

Between hitting line drives to a training partner 100 feet away in a park in Santo Domingo in January, 17-year-old Gabriel Martinez paused to contemplate competing against Cuban prospects.

“They say the Cubans are good, that they get money to train,” he said. “But just look at the major leagues. The best players are Dominicans.”

This article was written by Ezra Fieser from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: Beach near Santo Domingo, Dominican Republic. ckramer / Flickr