The Cuba Factor
The Cuba Factor: A first person account
On the one hand, hints and glimpses of economic possibility. On the other, the reality of communist rule and the legacies of 50 years as a political football.
I landed in Cuba just before 11 a.m. on a Tuesday, on a plane from Tampa owned by JetBlue but flown by ABC Charters of Miami. On our long taxi across the tarmac at Jose Marti International, we passed a modern terminal built by Canadians, stopping finally at the older building at which passengers from the U.S. must disembark.
Inside, the reception wasn’t hostile, but it wasn’t exactly lifted from the customer service manual at Disney University. We were told to empty our pockets, take off our belts and step through a metal detector, repeating the same process we’d gone through to get on the plane in Tampa. Security guards, the female officers dressed in short skirts with fishnet stockings, some with cocker spaniels apparently trained to sniff out contraband, watched over us in a drab hall where the only advertisements were a pair of Lucky Strike cigarette sandwich boards atop each of the two baggage carousels.
And so it is these days in Cuba, where the welcome mat is out for Americans even as the countries struggle to get the door fully open.
Throughout my four-day trip to Cuba I found warm welcomes and easy laughter from virtually every Cuban I met and flashes of hope and optimism about the island’s economic future. But in Cuba, you’re never far from reminders of the ill will between the island’s Communist regime and the American government that’s tried to drive it out of business for 50 years.
I learned quickly, for example, that the bitter animosity I’ve heard from some Cuban exiles in south Florida isn’t all one-sided. My first meal on the island was lunch at El Aljibe, an open-air, government-run restaurant that served a traditional Cuban meal of roast chicken and black beans and rice as stray cats rubbed against my legs underneath the table. There, hanging prominently at the entrance, a memorial honors the “Cuban Five” — men arrested in September 1998 in Miami and convicted of spying for Cuba.
The display praised the men for “fighting against terrorism in the city of Miami, the hub of most aggressions against Cuba.” Their convictions, it said, were a sham, the result of a “manipulated trial in Miami, a completely hostile city where no fair and impartial trial was possible.” Three members of the Cuban Five were still in American prisons in December 2014, when they were returned to Cuba as part of President Barack Obama’s announcement that the two countries would begin working to restore diplomatic and commercial ties.
Politics was on the menu again when I had breakfast with Ariel Ricardo Amores, a former Cuban diplomat. The U.S. embargo, Amores says, is “not an embargo. It’s a blockade” — an act of war that attempts to isolate Cuba completely from the outside world by threatening sanctions against others that do business with Cuba. A few days later, Cuba’s official state newspaper Granma —which calls itself the “official voice of the Communist Party of Cuba” — published an article with the headline El Bloqueo es un Crimen (The Blockade is a Crime).
Whether you believe the root of Cuba’s problems are the blockade or the Cuban government’s inefficiency, Cuba’s economy and standard of living remain shriveled. After four days, the memory that remains most vivid to me is the housing conditions. In east Havana, separated from tourist-filled Old Havana by a tunnel under the harbor, thousands live in cramped, sagging apartment buildings with rusting tin roofs and crumbling concrete facades.
Old Havana, the city center, is a peculiar mix of ruined buildings side-by-side with modern hotels, monuments and embassies. Basic infrastructure is spotty, even in the Hotel Nacional de Cuba, the famous, Breakers-like resort that has hosted everyone from Frank Sina-tra to Paris Hilton, who had a suite in the top floor while I was in Cuba. At the hotel, the tap water isn’t potable and in some rooms the toilets successfully flush only once every four tries.
In most respects, however, people appear to live routine lives. Each evening in Havana, hundreds of Cubans — young couples, families with children, groups of friends — gather along the Malecon, the broad seawall that runs along the waterfront for five miles.
Cuba’s socialist government provides every citizen with free health care and free education, including at the university level. The literacy rate is 99.8%. A Cuban’s life expectancy is 78.22 years, according to the CIA. That’s just a little over a year less than life expectancy in the U. S. (79.56) and well ahead of some other Caribbean countries, such as Jamaica (73.48), the Bahamas (71. 93) and Haiti (63.18).
Food, electricity and other basic needs are subsidized. A representative of Cuba’s Ministry of For eign Relations — Minrex, for short — told me that the government has between 20 and 30 schools in remote parts of the country that serve just one student.
Even in the poorest neighborhoods I saw — places outside Havana with dirt side roads and scrawny cows tied to fence posts — people wore clean clothes and the streets were largely free of litter. Every student had a uniform. And I felt safe everywhere I went, even though I was carrying hundreds of dollars in my wallet because it still wasn’t possible to use an American credit card on the island.
I saw only one person sleeping in the streets of Havana, and I was never approached by a beggar, although one young man offered to sell me a bootlegged DVD of 50 Shades of Grey.
The average salary here is about $20 per month, according to the Cuban government. But John Price, a managing director and Latin American expert for Americas Market Intelligence in Miami, estimates that the actual per capita purchasing power in Cuba is closer to $4,000 or $5,000 per year because of everything the government pays for.
Also helping that purchasing power is the more than $3 billion in “remittances” that flow into the country each year — money sent by Cuban-Americans to relatives on the island. Additional hard-currency income comes from bonuses paid under the table to some who work for foreign firms, along with tips that Cubans in the island’s growing tourist industry use to supplement their salaries.
The ability to earn hard currency attracts skilled workers: My tour guide, a ruddy-faced man named Edelso Alvarez Acedo who spoke five languages fluently, told me he had been an English professor at the University of Havana before becoming a tour guide — in part so he could receive tips. At another restaurant, one of our waitresses had an engineering degree. The desire for hard currency has attracted some women — so-called jineteras — into prostitution, which remains illegal in Cuba.
Some Cubans I spoke with said their prospects had been improving even before President Obama’s move to ease relations. “Cuba has in the last five years been changing so much,” said Alexander Perez Cartaya, a 39-year-old who is part of a nascent generation of Cuban entrepreneurs.
In late 2011, after 11 years at Alimport, the Cuban government’s foreign trade agency, Cartaya left to start a business with a partner, making hand-crafted humidors. He said he brought a CFO’s perspective to what had until then been a money-losing artistic endeavor, imposing an accounting system and inventory controls. Today, Humidores Habana exports to more than 70 countries (including, occasionally, to the United States, through a trade exemption for art). It also has a contract to make humidors for Habanos S.A., Cuba’s staterun tobacco company.
The company has more than two dozen employees — although the business is structured more like a co-op, with each artist employing up to five people, to comply with still-evolving Cuban laws. “It’s thought-provoking. It’s passionate,” he said of his company’s humidors.
Cartaya said there are many others like himself who have gone into one of more than 200 occupations now permitted in the private sector, from barbers and taxi drivers to plumbers and electricians. He said the government has been downsizing ministries and giving lower-level bureaucrats more freedom. New laws also allow Cubans to visit the country’s hotels and to leave the country for longer periods without fear of losing their belongings.
Cartaya told me that the government even chose to hire some private- sector contractors to perform a restoration of the Great Theatre of Havana. “I’m telling you, it is changing dramatically!”
“Dramatically” is in the eye of the beholder, of course. Modern amenities like wireless service are far from world-class: In Cuba, a country of 11.3 million, there are now approximately 2.5 million mobile phones, and only about 500,000 of those phones have email service. During one taxi ride, my driver was unable to complete a phone call because the signal kept dropping. He explained that cells rarely work when in a moving car.
Freedom House, a U.S.-based watchdog organization, calls Cuba “one of the world’s most repressive environments for information and communication technologies,” citing high prices, slow connections and government regulation that includes censorship of certain websites, including some bloggers critical of the government.
And though security isn’t always obvious, Cuba still has the feel of a police state. There are regular reports — from outside the country — of the Cuban government jailing dissidents or temporarily blocking their cell phones. Two days before I arrived in Havana, according to the Associated Press, opposition groups reported that more than 100 antigovernment activists had been arrested. People crack jokes about suspecting friends of being spies.
Cuba has also jailed executives and seized the assets of foreign investors on questionable claims of corruption. Earlier this year, the government suddenly freed a Canadian transportation company executive who had been arrested in 2011 on bribery charges and sentenced to 15 years in prison, a move that had been criticized by the Canadian government.
I had one relatively benign run- in with Cuban security. I wanted to see the Port of Mariel, which has been rebuilt and expanded with the help of nearly $1 billion in Brazilian financing. My Cuban tour guide — an employee of the government- run Havanatur — told me that his superiors would not allow him to take me. But I was able to find a private taxi driver willing to take me on the 45-minute trip west to the port for about $60.
Like any American seaport, the Port of Mariel is a secure, fenced facility. The driver got us close, parking in the lot of what was apparently a Cuban customs building. I got out with a camera and began taking photos, including shots of four enormous, modern container cranes that dominate the harbor front and a new railroad track that runs directly into the port. That’s when the shouting began.
I looked up to see two security guards walking toward me from separate directions. The first to arrive told me that I was not allowed to take pictures. She instructed me to delete them, though she made no move to touch the camera herself. I did as she asked, showing her the display screen. I started to walk away, but she stopped me. The second guard arrived, accompanied by a dog walking unleashed at his side. The two talked things over and then asked me for my passport. They wrote down my name and my passport number. Then they handed it back and told me I could go. I wondered if I would be hauled out of line at the airport at the end of my trip, but that was the last I heard of it.
Like many Americans who have never been to Cuba, I had imagined the country as a time capsule, a place closed off from the outside world since Fidel Castro took power in 1959. The name “Havana” conjured images of 1950s Chevys, Fords and Oldsmobiles.
There are indeed many classic American cars on the road, though many seem to be taxis for foreign tourists. But there are far more modern cars: Hyundais and Kias from South Korea, Peugeots from France, Volkswagens from Germany and Nissans from Japan. Many vehicles have new license plates that begin with the letter “P,” an indication that they are privately owned.
Western brands are commonplace, from M&M’s candies to Lee jeans. One government-run store in Havana had shelves lined with Hamilton Beach food processors, RCA ceiling fans and Revlon hair curlers. The boxes said the products were made in China and distributed from Mexico.
Some of the world’s leading multinational companies are already well-established in Cuba. Belgium-based Anheuser-Busch InBev brews domestic beers such as Cristal and Bucanero and imports Beck’s. Canada’s Sherritt International mines for nickel and drills for oil. Melia Hotels of Spain runs more than a dozen resorts around the island. (All operate through joint ventures with the Cuban government.) Cuba now buys most of its buses from Yutong, a Chinese manufacturer.
And there are pockets of new investment in many places. In the midst of Old Havana, for instance the Manzana de Gomez straddles an entire a city block. The 105-yearold landmark was one of the first shopping malls in Cuba, a fivestory, European-style shopping arcade with two pedestrian avenues intersecting within.
The building had decayed to little more than a husk, but today is surrounded by scaffolding. Construction crews, working on behalf of a joint venture between the Cuban government and Bouygues Batiment International, a French contractor, are restoring the mall and remaking it as a luxury hotel. Kempinski Hotels, a Swiss chain, has signed on to operate the hotel, which is expected to open next year.
Meanwhile, two hours to the east, in the beach resort area of Varadero, four cranes tower over an oceanfront construction site with several buildings halfway out of the ground. I happened across the site in the midst of a shift change at 4 p.m. on a Thursday; hundreds of Cuban workers, in neon vests and hard hats, filed out of the muddy site and crowded around the entrances to school buses and trucks waiting to carry them to temporary dormitories. Hundreds more stepped off of the buses and toward the construction. A worker said the project was a hotel being built by a French company.
It is impossible to say for sure how much foreign investment Cuba currently attracts because the government refuses to provide figures (the government claims it will not disclose details that the U.S. could use to harass its trading partners). The United Nations estimated Cuba attracted just $110 million in foreign direct investment in 2011, a far lower figure than its neighboring Caribbean countries. Some other experts say the U.N. estimate significantly understates matters.
Regardless, two factors are aligning that could lead to faster development on the island.
First is the United States’ decision to seek more normalized relations with Cuba. That means more Americans traveling to Cuba, which means more people on the island with disposable income. Ricardo Ferccacidez Yero, who works at a government-run cigar and rum shop that is popular with foreigners, told me that since the U.S. eased travel restrictions, nearly 30% of his business has been from Americans — triple what it had been, he said. Meanwhile, in 2014, Cuba says it drew approximately 3.2 million tourists, the first time the country has topped 3 million visitors.
Perhaps more significantly, the move to normalize relations by the U. S. may mean the country is less likely to pursue sanctions against banks that lend in Cuba, freeing up foreign capital.
For instance, last year the French bank BNP Paribas paid a $9-billion fine to the American government for violating U.S. sanctions against lending in terrorist countries — including Cuba. The announcement sent a shudder through the industry and badly hampered efforts to raise capital for projects in Cuba, Guy Chartier, an executive with Canadian developer Dundee, told me in a phone interview before I departed for Cuba. (This is why Cuban negotiators have been pressing their U.S. counterparts so hard to have Cuba delisted as a state sponsor of terror.)
“To a certain extent, the U.S. has been very successful in blocking all kinds of financing,” said Chartier, who is the president of Dundee’s Cuba division. The company is developing a 716-room hotel in Havana and a golf and marina resort in Jibacoa, an area about half way between Havana and Varadero. Since President Obama’s announcement that the U.S. would work to restore diplomatic relations, Chartier said interest in Cuba has spiked. “There’s a rush right now. The calls I’m getting are from Germany, from South America, from Italy, from France, who now see this light at the end of the tunnel, this potential relaxing of the relationship between the U.S. and Cuba and ultimately see U.S. investors coming to Cuba,” Chartier told me. “The rush is to get there before they do.”
The second factor is Cuba itself, which is more aggressively courting outside capital. Last year, the government passed a package of laws meant to stimulate foreign investment. The changes included lower taxes, longer land leases and a new trade zone around the Port of Mariel. In a move widely interpreted at courting more Chinese investment, Cuba even made it possible for outside companies to bring in some of their own workers — previously, all hiring had to be done through a Cuban government agency.
Granma referred to the changes in several articles in the issue that came out while I was there. Cuba, the newspaper told its readers, has embarked on an “updating of its economic model in order to build a prosperous and sustainable socialism.”
The changes, of course, haven’t yet unleashed a surge of investment. Ariel Ricardo Amores, the former Minrex official I met over breakfast at the Hotel Nacional, said it is too early to know what impact Cuba’s new laws will have in terms of attracting investment and spurring economic growth. But Amores, who has retired from Minrex and now describes himself as a “consultant” to American businesses interested in the Cuban market, confidently predicted that the new, more open economic philosophy taking root in his country is here to stay.
“I am thoroughly convinced it will not go back to the way of the early days,” Amores told me. He broke off the conversation momentarily to take a call on his black iPhone.
“You can change the laws,” he added, after apologizing for the interruption. “But changing the minds of people is different. It takes time.”
Hotel Nacional de Cuba
Built in the late 1920s on a bluff overlooking Havana’s Malecon seawall and the Straits of Florida, the Hotel Nacional is one of the country’s most iconic landmarks. The resort, designed in the same style as Palm Beach County’s famed Breakers hotel, has hosted everyone from Winston Churchill and Jimmy Carter to Mickey Mantle and Ava Gardner. During Florida Trend’s recent visit, the guest list included former Spanish Prime Minister Jose Luis Rodriguez Zapatero and celebrity heiress Paris Hilton. The hotel is still grand but conditions aren’t exactly five-star: Signs warn guests not to drink the tap water, and the toilets in some rooms flush only once in every four tries. Rates range from around $125 a night for a single room to $1,000 for the presidential suite.
Some are taking a stab at entrepreneurship in the private-sector occupations the communist regime now allows.
Jose Javier Sanchez spent 11 years as head waiter at the Hotel Nacional de Cuba, a highly sought-after job in Cuba because of the ability to earn tips. Four years ago, however, Javier gave up that job and the tips to start his own paladar.
Paladares are private restaurants, usually operated out of the owner’s home, and were among the earliest private business in post-revolutionary Cuba. The Cuban government approved the first ones in the early 1990s as it struggled to keep the economy afloat following the collapse of the Soviet Union — a difficult time marked by shortages of everything from electricity to toilet paper in what is called “the Special Period.” The word paladar comes from the name of a restaurant chain owned by a character in a Brazilian soap opera that was popular in Cuba at the time.
Today, paladares are everywhere in central Havana. Javier told me new ones open every day — and others close. As in the American restaurant industry, competition is brutal. Because most Cubans cannot afford to eat out, paladares compete against each other — and governmentrun restaurants — for tourists.
Javier, 42, opened his paladar on the bottom floor of a home that used to belong to his grandparents. Named “Habitania” after a Southern Living-style magazine published in Spain, the restaurant is hidden in a residential area in the Nuevo Vedado section of Havana. It’s not very close to the ocean or to any major hotels; in the evenings, it appears to be the only place lit up on the entire block.
Inside, it is immaculate. Javier scatters fresh flower petals on his tables and serves guests “welcome cocktails” — in my case, a frozen daiquiri with the colors arranged to resemble the Cuban flag. The menu includes octopus carpaccio and fresh lobster that Javier says he selects himself.
A jovial man who punctuates his sentences in English with a quick “OK?” Javier is as shrewd as any good businessman. While most paladares battle for tourists looking for dinner while staying in Havana, Javier told me that he focuses on lunches. He has many taxi-driving friends from his time at the Hotel Nacional who take travelers staying in other parts of Cuba on day trips to Havana. When the day-trippers ask about paladares, Javier’s friends always recommend Habitania.
As a result, Javier said he will serve between 40 and 80 people a day at lunch, more than enough to offset a slower dinner period of between five and 20 a night. Javier told me there were six paladares in the immediate area when he opened his; today, Habitania is the only one.
“There, I lived for tips,” Javier says of his first career as a hotel waiter. “Here, I live for my job.”
Thinking About Going?
President Obama has only loosened travel restrictions that applied to the 12 categories of people who were already allowed to travel to Cuba — including family members of Cubans, professional researchers, humanitarian workers, educators, journalists, clergy, artists and entertainers. The changes do not formally allow for regular tourism, but essentially open the door to anyone who’s prepared to include himself among one of the categories to justify the travel after the fact. The changes also mean visitors in those 12 categories can travel through any travel agent with a “general license” — some categories had required prior approval from the U.S. government.
It Won’t Be Cheap
Round-trip tickets run $400 to $500. The Cuban government takes the equivalent of $148 per ticket as a landing fee and another $46 per passenger for mandatory health insurance while visiting the island. (The Cuba government separately charges a $25 departure tax to leave.) The U.S. charges another $63 per ticket in its own charges. Much of the charters’ profit is in luggage fees. Cuban-Americans travel laden with goods for their extended families in Cuba and can pay $2 per pound after a $20 checked bag fee and $3 per pound for boxes and irregular packages.
Milestones in Cuban-U.S. Relations
Fidel Castro begins armed struggle against dictator Fulgencio Batista with a failed attack on the Moncada Barracks on July 26, launching the 26th of July movement. Castro makes his “history will absolve me” speech at trial. Batista grants him amnesty in 1955.
Castro returns to Cuba from exile in Mexico and launches a guerrilla war from the mountains.
After rebel victories, Batista flees to the Dominican Republic on New Year’s Day.
A mass exodus of 250,000 Cubans begins. Cuba seizes U. S. businesses without compensation. United States starts a partial economic embargo.
Washington breaks diplomatic relations. Castro declares Cuba communist and allies with the Soviet Union. The Bay of Pigs invasion fails.
President Kennedy proclaims a full embargo. The U.S. confronts Russia over missiles it places on Cuban soil.
Cuban-Americans and specially licensed U.S. travelers are allowed to visit Cuba.
Mariel boatlift brings 125,000 Cubans to the U.S.
Cuba’s “Special Period” of deprivation begins as the regime can’t cope with the loss of financial support from the faltering Soviet Union and Eastern bloc.
Soviet troops withdraw from Cuba.
Shortage of food rations produces illness and civil unrest. Crisis brings 30,000 Cubans to the U.S. Castro advances limited economic reform, including allowing the use of U.S. dollars and agrees to allow 20,000 Cubans a year to legally emigrate to the U.S. Castro also allows exiles to send money to family in Cuba. Remittances grow to the largest sector of the economy.
After Cuba shoots down two private exile aircraft that fly the Florida Straits to help rafters, President Clinton signs the Cuban Liberty and Democratic Solidarity Act, commonly known as the Helms-Burton Act. It codified the embargo, previously just a presidential proclamation dating to Kennedy, into law and set restrictions on how it can be lifted.
Pope John Paul II visits Cuba. U. S. eases some restrictions on remittances.
The Elian Gonzalez affair begins. The boy’s mother dies en route escaping Cuba. His father wants him back in Cuba.
U. S. allows firms to sell food and medicine to Cuba. The trade is limited to cash only, one way.
President Obama loosens some restrictions on trade and travel; announces negotiations to resume full diplomatic relations.