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Cancellation of Silares contract leaves future of Cuba's cruise-ship industry in doubt
Travel Markets Insider / October 2005

By Larry Luxner

Most Caribbean islands will bend over backwards to get cruise ships to call on their islands.

Not so Cuba. In August, the Castro government announced it was cancelling a contract with the company that since October 1998 had administered its cruise-ship terminals.

On Aug. 2, the Council of State issued a resolution ending the seven-year relationship between state-run Cubanco S.A. and Italy's Silares Terminales del Caribe. That followed remarks by Fidel Castro that cruise ships were no longer welcome in Cuba because their passengers "leave their trash for a few miserable cents."

Ideology aside, cruise-ship passengers generate more than a few miserable cents.

According to Cuba's own Tourism Ministry, the average cruise passenger spends $158 a day while in Cuba, 60% of it on land. The average crew member spends $72 per day — a significant amount of money for a country which is perenially short of cash.

In 2003, Cuba received around 60,000 cruise-ship visitors, up from 45,000 the year before.

Gianluca Suprani, managing director of Silares, had predicted in early 2004 that Cuba would receive 94,000 cruise passengers last year on 123 ship visits, with vessels calling on the ports of Havana, Santiago de Cuba and Playa Punta Francés, in Isla de la Juventud. In 2005, some 100,000 cruise passengers were expected.

To cope with the expected increased demand, Silares embarked on a project to expand Havana's Sierra Maestra cruise-ship terminal to allow up to six ships to berth there simultaneously. In fact, the city's master plan had called for all cargo ships to eventually be diverted from Havana to the port of Mariel, so that only cruise ships would sail into Old Havana.

But those plans are all up in the air now.

As a result, Silares — which had worked with 14 cruise-ship lines from France, Great Britain and Germany — will no longer administer docking operations, and ownership of all equipment and infrastructure will revert back to the Cuban government.

The cancellation of the Silares contract is a turnaround from Castro's earlier policy of promoting cruise ships as part of a growing tourism industy that generated $2 billion in hard currency for Cuba last year.

Neither Suprani nor any other officials of Silares could be reached for comment, though a top U.S. cruise industry executive told Travel Markets Insider he's not surprised.

"It's unfortunate for those guys at Silares, and sort of a strange policy for a government to take," said the executive, who asked us not to identify him or his company because of the sensitivity of the Cuba issue. "To me, it appears that it's just another example of Fidel Castro doing exactly the opposite of what one would think he should do. He's saying, 'let's prevent people from coming in and spending money in our country.' It's a very puzzling place for this reason."

Phil Peters, a Cuba expert with the Virginia-based Lexington Institute, agrees.

"The cancellation of this contract is just one more action the Cubans are taking to eliminate some of the smaller joint ventures," he said. "I don't think it makes economic sense. Tourism officials have always been proud of the fact that they're attracting cruise ships. For Cuba or any Caribbean island, it's not just the revenue but the promotional value, because you hope cruise-ship passengers will come back and spend some time on the island."

Yet even if Cuba had reached its target of 100,000 cruise-ship passengers this year, it's still a drop in the bucket compared to Nassau, Grand Cayman, St. Thomas, St. Maarten and Cozumel — each of which receives two million or more passengers annually.

Havana would easily attract that number or more, simply because it's so close to Florida. Studies show that if Washington lifts its travel ban against Cuba, the island would receive one million tourists and $500 million in revenues during the first year alone.

"On the other hand, they have no infrastructure for anything," said the executive. "Cruise ships are getting bigger, but their harbors are not. All three have huge logistical problems that would require massive technical work in order to accommodate current ships. There's a lot to be done, starting with the U.S. government allowing us to travel there. So many pieces on the board have to move in order for all this to happen."

But cruise-ship companies are getting tired of waiting, he added. Nobody in the industry seriously expects the travel ban to be lifted — at least as long as George W. Bush is in the White House and Fidel Castro remains in power.

"Cuba has been on the back burner for so long," he said. "Anybody who's been holding his breath has died a long time ago."

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