The re-emer­gence of Ha­vana

Business Traveller (India) - - CONTENTS -

Iam sit­ting in the back of a vin­tage Chevro­let, rumba play­ing on the ra­dio. A policeman has stopped cars from mov­ing in any di­rec­tion and, as the min­utes tick won­der what the de­lay is. I try to down­load a data pack­age for my iPhone while I wait, but there’s no 3G in the coun­try. Look­ing up, I see a black car cruise past with four men in army fa­tigues in­side, then a van with the slid­ing door open. Right there, in full view, is Fidel Cas­tro. A gaunt fig­ure in a white jacket and snowy beard, the 90-year-old rev­o­lu­tion­ary is un­mis­tak­able. “Fidel!”my driver ex­claims. And then he is gone.


In March 2016, Barack Obama be­came the first US president since 1928 to visit Cuba, lo­cated only 150km across the sea from Florida. He was wel­comed by Fidel’s younger brother, Raul, who took power in 2008. After years of hos­til­ity be­tween the seat of global cap­i­tal­ism and one of the last ves­tiges of Marx­ist-Lenin­ist so­cial­ism, Obama promised the ini­tial eas­ing – fol­lowed by the whole­sale lift­ing – of its trade em­bargo on the Caribbean is­land, in place since 1960. Un­til re­cently, peo­ple from the US – in­clud­ing Cuban mi­grants – were un­able to travel to the is­land. While tourism is still pro­hib­ited, there are now 12 cat­e­gories for au­tho­rised travel in­clud­ing “fam­ily vis­its”and “pro­fes­sional re­search and meet­ings”. In Au­gust last year, US air­lines were given ap­proval to start fly­ing to Ha­vana. Amer­i­can Air­lines, Delta, Jet Blue and United are among those who have launched routes to here. Up un­til Novem­ber 9, 2016, when Don­ald Trump was elected as US president, the fu­ture was look­ing much rosier for the two coun­tries. Progress was com­ing. Now things are a lit­tle more uncertain. Shortly after the votes were counted, Cuba’s Rev­o­lu­tion­ary Armed Forces be­gan five days of drills to com­bat“a range of en­emy ac­tions”. Weeks be­fore the elec­tion Trump had de­clared that he would re­verse the con­ces­sions Obama had granted “un­less the Cas­tro regime meets our de­mands”. Mon­ica Lopez, who worked for the British em­bassy for 18 years and is now head of prac­tice at Cuban busi­ness re­la­tions con­sul­tancy Cog­ni­cion, of­fers some re­as­sur­ance: “I am not par­tic­u­larly con­cerned by the elec­tion of Don­ald Trump when it comes to em­bargo regulations. Many of the changes are prac­ti­cally ir­re­versible and I trust that he is, above all, a busi­ness­man who can see the po­ten­tial of Cuba and take into ac­count the in­creased in­ter­est of US com­pa­nies.” China is by some mar­gin the coun­try’s big­gest global trad­ing part­ner, with ex­ports from Cuba val­ued at US$311 mil­lion and im­ports from China worth US$1.05 bil­lion in 2014, ac­cord­ing to the Ob­ser­va­tory of Eco­nomic

Com­plex­ity (OEC). The Nether­lands, Spain and Canada are also ma­jor ex­port des­ti­na­tions and im­port sources, while the UK ranks 11th as a global trad­ing part­ner, with ex­ports from the UK equat­ing to £22 mil­lion (US$27 mil­lion) in 2013, and from Cuba to the UK £105 mil­lion (US$130 mil­lion). While Bri­tain never broke away from the is­land en­tirely after the rev­o­lu­tion, how much it has been able to achieve has been stymied by the US em­bargo.

Antony Stokes, ap­pointed the new UK am­bas­sador to Cuba last year, says, “We want to find ways to re­as­sure busi­nesses and banks to make trade and in­vest­ment as smooth as pos­si­ble. It’s a chal­leng­ing place; you do need pa­tience, but there are big op­por­tu­ni­ties here.”


Ha­vana is po­si­tioned on the north coast of the 1,10,000 sq km is­land, great waves crash­ing into the Male­con prom­e­nade that faces the Straits of Florida. Although it has its own har­bour, a new deep-water mega-port is be­ing built in Mariel, 45km west of the city. A spe­cial eco­nomic zone has been set up here, with the first in­ter­na­tional com­pa­nies mov­ing in at the start of 2016. It is fore­cast to cre­ate 70,000 jobs.

With a pop­u­la­tion of 11.2 mil­lion (two mil­lion in Ha­vana), the an­nual GDP of Cuba was US$77 bil­lion in 2013. Eco­nomic growth was four per cent in 2015.

The Econ­o­mist warns: “GDP growth will slow sharply in 2016-17 ow­ing to re­duced ex­port in­come and aid from Venezuela, but bet­ter ties with the US will fa­cil­i­tate a grad­ual pick up in 2018-21.”

Cuba’s main ex­port earn­ings come from health­car–e, biotech­nol­ogy, phar­ma­ceu­ti­cals, nickel and to­bacco in 2014 the coun­try ex­ported 91 mil­lion cigars, but pro­duc­tion could rise by 20 per cent an­nu­ally if the US em­bargo is lifted. Re­new­able en­ergy is a grow­ing sec­tor – in 2013, a US$174 mil­lion deal be­tween UK Ha­vana En­ergy and Cuban Azcuba will see five biomass power sta­tions built. How­ever, UK Trade and In­vest­ment warns in­vestors that pay­ments and de­ci­sion-mak­ing can be “very slow”, with most im­por­tant busi­ness mat­ters be­ing re­ferred to “high­level gov­ern­ment”.

Be­ing a cash so­ci­ety, there are few places you can use credit or debit cards. My Amex didn’t work when I vis­ited in Oc­to­ber 2016. Other chal­lenges in­cluded hav­ing to wait four hours to pick up my rental car, and only hav­ing wifi in the big ho­tels. Pub­lic hotspots, for which you can buy a voucher in the street, can be slow (wifi is il­le­gal in homes, and only 0.05 per cent of peo­ple have a fixed broad­band con­nec­tion).

DUAL ECON­OMY It’s strange to come to a place that has been held back for so long, es­pe­cially when, in its hey­day, it was dubbed the Las Ve­gas of the Caribbean. Wealthy hol­i­day­mak­ers would jet over on Pan Am for wild par­ties in Ha­vana, ca­vort­ing at Club Trop­i­cana and gam­bling in mob-run casino ho­tels such as the Na­cional and the Riviera (both still op­er­at­ing to­day). All of this went on with the sup­port of dic­ta­tor Ful­gen­cio Batista un­til his over­throw in 1959.

Out­side of Ha­vana, the most com­mon mode of trans­port is horse and cart. There are cer­tainly more cars on the roads in the cap­i­tal these days, but traf­fic is still on a par with 1940s Bri­tain. After im­port re­stric­tions were lifted in 2013, Kias from South Korea and Geelys from China be­came a more com­mon sight – but at least 50 per cent of ve­hi­cles are still Amer­i­can relics from the 1950s, mixed in with a few Soviet-era Ladas and Moskvichs.

Along with North Korea, Cuba is the only coun­try in the world where Coca-Cola – an es­sen­tial in­gre­di­ent in the Cuba Li­bre cock­tail – cannot of­fi­cially be sold. While I spot­ted a cou­ple of cans be­hind ho­tel bars, prob­a­bly im­ported from Mex­ico, the sub­sti­tute served is Ciego Mon­tero Tukola. With the“nor­mal­is­ing”of re­la­tions, though, the“real thing” could soon make a come­back.

“If you’re 85, you may think, boy, there’s been a lot of change in the past ten years in Cuba. But if you’re 25, it’s way too slow,”says Richard Fein­berg, the US au­thor of Open for Busi­ness: Build­ing the New Cuban Econ­omy. It was only six years ago that the gov­ern­ment al­lowed ci­ti­zens to buy and sell prop­erty and to set up their own small busi­nesses or co­op­er­a­tives. There are now 201 self-em­ploy­ment

cat­e­gories re­lat­ing to food, ser­vices, trans­port and house rental.

These are the green shoots of cap­i­tal­ism; the rise of the cuen­tapropista. If you have a car, you will likely pop a yel­low“taxi”sign in the front; if you have a spare bed­room, you might list it on home­s­ Walk the di­lap­i­dated streets of Ha­vana and ev­ery­where are an­chor sym­bols advertising casa par­tic­u­lares (B&Bs). In April 2016, Airbnb an­nounced it would al­low Cubans to list ac­com­mo­da­tion on its plat­form. The coun­try is now Airbnb’s fastest-grow­ing mar­ket ever; with hosts earn­ing an aver­age of US$250 per book­ing, it prom­ises a life-chang­ing source of in­come.

Whereas be­fore, the ubiq­ui­tous dish of rice, red beans and pork, or a grilled cheese sand­wich, were served only in state-run restau­rants, now you can find pri­vate pal­adares serv­ing fish tacos and hand­made ravi­oli. More than 5,00,000 peo­ple now work in the pri­vate sec­tor, up from 1,50,000 in 2010.

Be­ing a cuen­tapropista is far from easy.“There is not an en­tre­pre­neur spirit – it is a sur­vival spirit,” says Yanoidis Me­jias Mendoza, consultant for en­trepreneur­ship ini­tia­tive Startup Cuba. An ar­ti­cle on ha­va­na­ reads:“The self-em­ployed do not have a whole­sale mar­ket where they can pur­chase sup­plies at fair prices. As their cus­tomers are mostly im­pov­er­ished Cubans, the self-em­ployed are forced to turn to the black mar­ket, where prod­ucts are stolen from state work­places.”


With no bank­ing sys­tem to pro­vide loans or mort­gages, in­vest­ment for pri­vate enterprise com­monly comes from re­mit­tances sent by rel­a­tives in the US. Mi­ami-based Ha­vana Con­sult­ing Group es­ti­mated US$3.3 bil­lion was trans­ferred in cash and goods in 2015.

The aver­age state salary in this Com­mu­nist na­tion is the equiv­a­lent of US$25 a month, paid in Cuban pe­sos (CUP). But a sec­ond cur­rency, the CUC con­vert­ible peso, is also widely used and de­sired – this is what you will be is­sued as a for­eigner, and it has con­se­quently cre­ated a sec­ond econ­omy. One CUC is pegged at an ex­change rate of one US dol­lar and is equal to 25 CUP, but prices are not al­ways rel­a­tive to wages, mean­ing com­modi­ties are ex­pen­sive if all you re­ceive are Cuban pe­sos. (A bot­tle of beer is 1CUC/25CUP.)

Martin, the owner of an eight-room casa par­tic­u­lar in Ha­vana Cen­tro, tells me:“I'm an econ­o­mist with two mas­ter's de­grees and three lan­guages and I earn the equiv­a­lent of 30CUC a month. I work six days a week but have never left Ha­vana as rent­ing a car for five days would be a year's salary. The prices are not rel­a­tive to our salary be­cause of the‘block­ade'– we have to im­port bananas, pineap­ples, TVs, ev­ery­thing.”

Tour guide Nel­son Al­bu­querque tells me why he gave up his job as a lec­turer at the Univer­sity of Ha­vana.“A peanut ven­dor or taxi driver could make more money than a pro­fes­sor be­cause you can earn tips. I quit the univer­sity be­cause I could only earn 1,000 pe­sos [US$40] a month. In the '80s it was some­thing like 300 or 400 pe­sos, which was enough, but the prices have gone up faster than salaries. It's very de­mo­ti­vat­ing.”

He adds:“Things are chang­ing for the bet­ter, though. They are try­ing to raise the salaries of pro­fes­sion­als and for­eign com­pa­nies are com­ing in.” What the gov­ern­ment does pro­vide are food ra­tions, a home, free ed­u­ca­tion and health­care – med­i­cal ex­per­tise is one of the coun­try's big­gest ex­ports, gen­er­at­ing US$8 bil­lion a year.


Tourism ac­counts for 10 per cent of Cuba's GDP, with 3.7 mil­lion peo­ple es­ti­mated to have vis­ited in 2016. Many are from Canada (1.2 mil­lion in 2015), but US trav­ellers surged by 77 per cent in 2015 to 1,61,000, and travel from the UK was up 26 per cent.

The prob­lem is a short­age of ho­tels. Thanks to the 2014 For­eign In­vest­ment Law, there are plans for an ex­tra 1,00,000 rooms by 2030, on top of the 65,000 presently. How­ever, un­til 2014, 100 per cent for­eign in­vest­ment wasn't al­lowed, so there has been lit­tle pres­ence from in­ter­na­tional brands apart from Spain's Melia and Iberostar.

Still, Kempin­ski has taken over the five-star Man­zana ho­tel in Ha­vana, while Ac­corHo­tels plans to open the Sof­i­tel So La Ha­bana in the Unesco-pro­tected old town in 2018. In March 2016, Star­wood be­came the first US ho­tel group in 60 years to forge a man­age­ment deal in Cuba. The Quinta Avenida in Mi­ra­mar was re­branded un­der its Four Points by Sher­a­ton brand in June, while the 19th-cen­tury Ho­tel Santa Is­abel and the el­e­gant Ho­tel Inglaterra will be­come part of the Lux­ury Col­lec­tion when re­vamped. (All of these will be joint ven­tures.)

In the com­mer­cial dis­trict of Vedado is La Fabrica de Arte Cubano (FAC), an old red-brick cook­ing oil fac­tory con­verted by lo­cal mu­si­cian X Al­fonso in 2014. Now a trendy en­ter­tain­ment venue, it has art gal­leries, bars and per­for­mance halls for live jazz, while next door is the El Cocinero restau­rant and rooftop bar.

Ha­vana's more priv­i­leged youth hangs out here – on Hal­loween week­end, I watch one man sip a mo­jito with a straw through the gap in his Anony­mous mask. These are the new one per cent. Change may not come as a tidal wave, and peo­ple may lament the in­evitable ar­rival of Star­bucks and Mc­Don­ald's, but cap­i­tal­ism is breathing new life into Ha­vana. In 2018, Raul will step down, bring­ing an end to the Cas­tro era, and mak­ing room for fur­ther free mar­ket re­forms.

Soft power from the West has al­ready come in the guise of the Rolling Stones, who gave a free con­cert in Ha­vana last March. And two months later, Karl Lager­feld staged a Chanel fash­ion show on Paseo del Prado boule­vard. Flown in were 700 mod­els, PRs, reporters, stylists, make-up artists and celebri­ties (in­clud­ing Kim and Kanye), while 170 vin­tage con­vert­ibles took part in a VIP pa­rade, honk­ing their horns as they drove. What must Fidel have thought?

Clock­wise from top left: Street food in Calle­jon de Hamel; ren­o­vated houses in Old Ha­vana; evening on Male­con prom­e­nade; and a lineup of clas­sic Amer­i­can cars

Pic­tured: Vin­tage Amer­i­can cars pop­u­late Ha­vana’s streets

Above: Time-warp street scenes are a ma­jor draw for vis­i­tors

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