Global business community keeping a hopeful eye on Cuba
Raul Castro acts to bolster the economy, including tourism
By Michael Martinez | Tribune correspondent
December 6, 2007
CIENFUEGOS, Cuba - When Cuban officials peer into the historic Hotel
Palacio Azul, they see a piece of Cuba's future. In their view, it's an
economy infused with foreign cash.
As the elegant seven-room lodge was renovated to become part of a new
government hotel chain promoting the island's heritage, it served as an
appropriate example of the small steps interim leader Raul Castro has
taken to bolster Cuba's developing economy, but possibly his grander
ambitions too.
Ever since Raul Castro announced last summer that he was broadly seeking
more foreign investment, the international business community has been
keenly watching to see the extent of the opening he may make in the
tightly centralized economy, including the hotel sector, a tried and
true booster for the island's communist government.
So far, the government has been short on specifics, but discussions in
mass organizations such as trade unions and a few early measures by
Castro are buoying optimism, especially among business executives
participating in last month's Havana International Trade Fair, which
promotes foreign companies selling goods to Cuba.
But analysts don't expect dramatic measures.
"He may be in favor of a practical reform but within the socialist
framework," said Paolo Spadoni, a Cuba expert and visiting assistant
professor in political science at Rollins College in Winter Park, Fla.
"It will be gradual and rather limited. It won't be spectacular change."
Raul Castro, who has a reputation for using limited free-market models
for reforms, is considered the pragmatic counterpart to his brother
Fidel, Cuba's leader since 1959. Fidel Castro, 81, handed provisional
control over to his 76-year-old brother after undergoing emergency
intestinal surgery in July 2006.
Since then, Raul Castro has changed some government practices and rules
that some view as inching toward remedying the island's significant
economic problems, including low wages, food shortages and an inadequate
infrastructure. Oil exploration, nickel mining, transportation, housing
and water treatment are some areas where Castro may seek foreign
investment, analysts said.
'Political ducks in a row'
"I believe there is a consensus within the party that they need to get
the economy right, and if they don't, they're threatening the long-term
survival of socialism," said analyst Philip Peters of the Lexington
Institute in Arlington, Va. "This period is not only to analyze policy
options but it's also one to get their political ducks in a row."
Just as tourism helped bail Cuba out of a wartime-like austerity in the
1990s, officials are again turning to this cash-generating engine,
saying it tops the list of industries in which Cuba needs more foreign
partners.
In 2006, tourism dropped 3.6 percent, partly because visitors complained
about Cuba's revalued currency, luggage theft, poor service and a
failure to attend to complaints. Cuban officials have blamed rising air
fares, shifting exchange rates and hurricanes. The government had hoped
the sector would grow 8 percent last year, to 2.5 million travelers.
Instead, 2.2 million visited, according to Bohemia magazine.
Among other measures initiated under Castro, the government last month
announced that some aircraft can be privately owned by "individuals or
legal entities." In other moves, Castro has lowered landing fees and
refueling charges for airlines and allowed Cubans to receive video
equipment and spare car parts from relatives abroad, analysts said.
But Castro's vision has left business executives wanting details. During
last month's trade fair, Cuban officials weren't offering much
information. The event was attended by 1,398 companies from 53
countries, including U.S. food producers allowed to sell comestibles for
cash to Cuba under a recent exception to the American embargo.
"I ask [government officials] about Fidel and Raul and general long-term
and short-term objectives for Cubans, and no one wants to talk about
it," said Boris Makowecki, executive vice president of Hyduke Energy
Services Inc. of Alberta, Canada, which sells oil rigs to Cuba.
The number of foreign partnerships in Cuba has fallen to 237 in 2006
from 403 in 2002, but Spadoni said most of that decline represented
small- and medium-size ventures that apparently didn't contribute much
to the economy.
Some big investors
Five major ventures continue to account for 80 percent to 90 percent of
all Cuban exports, Spadoni said. Big investors include Canadians in
oil-exploration, Italians in telecommunications companies, the French in
rum businesses and the Spanish in hotel companies, he said. Most
partnerships are 50-50 ownership, though sometimes the Cuban government
holds a majority stake, he added.
"The market is big, but the funds are limited," said Geoffrey Geng of
Shanghai-based Forever Bicycles.
At the Hotel Palacio Azul, Lerida Torres, 49, a clerk, explained how the
hotel was converted from a mansion built around 1920. The building had
most recently housed offices, but the government spent $70,000 in 2002
to create a hotel for 15 guests.
The two-story Blue Palace, as it translates in English, was renovated
again in the past year. In September, officials inaugurated it as a
flagship for their new Hotel Encanto chain that highlights cultural and
architectural landmarks. The hotel is sometimes called the Encanto
Palacio Azul, and another restored Cienfuegos hotel, La Union, was also
inducted into the chain.
Built on Cienfuegos' upscale Punta Gorda shore, the Blue Palace was
designed with neoclassical and Art Deco motifs by Rome-born architect
Alfredo Fontana Giugni, who also built Cienfuegos' roads, aqueduct and
sewer lines, Torres said.
At the inauguration, Tourism Minister Manuel Marrero Cruz said the group
of 50 proposed hotels, 10 of which are under construction, aims to tap
into "an unsatisfied demand" among tourists.
"Every one of these buildings is like a book. They are full of history,"
he said, according to the government newspaper.
One Blue Palace guest, Hans Jung, 64, who runs a 77-room hotel in
Nunspeet, Netherlands, declared the new lodging "very good."
"You don't expect this because it's a communist country," Jung said.
"They're doing a hell of a job."
http://www.chicagotribune.com/news/nationworld/chi-cuba_martinez1dec06,1,3005899.story?ctrack=1&cset=true
