CubaNews / October 2010
By Larry Luxner
Championship 18-hole golf courses. World-class marinas. Luxury resorts and timeshare villas for the most discerning traveler. Direct flights to Havana from a dozen U.S. cities — and overnight ferry service from South Florida for those with a little more time and baggage on their hands.
This is the Cuba of the future, and it’s no longer just the dreams of optimistic hotel and airline executives.
The Castro regime has finally recognized that Marxism no longer functions, and optimism prevails even though lawmakers in Washington, — where pressure is mounting to end the travel ban — have yet to signficantly change that decades-old policy (see story, page 7).
In fact, Cuba-watchers haven’t had this much to talk about in years.
Considering the slow pace of change in this laid-back tropical island stuck in the 1950s, the last few months have seen a dizzying flurry of announcements from President Raúl Castro, and rather surprising comments from 84-year-old Fidel revealing his frustration with the socialist revolution he led half a century ago.
In late August, the regime quietly approved a law allowing foreign investors 99-year property leases. Then it passed a measure letting Cubans grow and sell fruits, vegetables and other farm products out of their homes, subject to taxes.
Finally, on Sep. 13 — a few days after Fidel Castro confided to journalist Jeffrey Goldberg that “the Cuban model doesn’t even work for us anymore” — his younger brother dropped a bombshell: Over the next six months, 500,000 redundant workers will be laid off, while previously forbidden areas of Cuba’s state-controlled economy are to open to the private sector.
According to the latest decree, self-employment will be allowed in 178 activities and the regime may even consider financial credits for Cuba’s new entrepreneurs.
And in November, following midterm elections in the United States, observers think President Obama — unencumbered by South Florida politics — will almost certainly follow the State Department’s advice and expand Cuba travel opportunities for certain categories of Americans, including academics and members of nonprofit groups.
The new policy would be similar to the Clinton administration’s “people-to-people” policy towards Cuba that prevailed before George W. Bush was elected president.
Phil Peters, vice-president of the Lexington Institute in Arlington, Va., said this lucky combination of factors on both sides of the Florida Straits could be just what’s needed to spark an influx of Americans bringing dollars.
“Thousands of Cubans already make their living in the tourism industry renting rooms and driving taxis. About 5,000 people now rent rooms to tourists,” Peters told CubaNews.
“Many government employees already have businesses on the side. Given the right conditions, Cuba’s private sector can expand very dramatically and very quickly, because there’s already a huge private sector in the black market.”
The new policy also allows private restaurants known as paladares to expand to 20 seats, up from the current 12. Yet many popular paladares were already thumbing their noses at the 12-seat limit.
It also significantly loosens rules on Cubans who want to rent their homes out to tourists, saying they no longer have to live there themselves and — for the first time — can hire people other than their relatives. An Associated Press correspondent in Havana mused that “this creates the possibility of posh bed-and-breakfasts, instead of the threadbare boarding houses that exist now.”
Antonio Zamora is a prominent Cuban-American attorney in Miami and an expert on Cuba’s real-estate laws. Following a week-long trip to Cuba in late September, he told us there’s a buzz in the air he’s never felt on any of his previous visits to the island.
“Everybody’s excited about this,” said the exile, a Bay of Pigs veteran who’s also founder of the US-Cuba Legal Forum. “People are delighted that there will be economic opportunities, and that more professions and activities will be approved.”
The development of marinas and golf courses is key to Cuba’s new, stepped-up strategy for attracting foreign investment and tourism revenues.
Under the latest decree, Zamora said, “the land belongs to the Cuban government, but Cuban companies have a right to use that land in perpetuity. The 99-year lease is for individual end users. My European clients say they wanted as many years as possible because this makes their condos more valuable.”
So far, despite years of hype and promises, Cuba has only one world-class marina and two golf courses to speak of. And it has yet to approve construction of any new ones on the massive scale of Casa de Campo or Cap Cana in the nearby Dominican Republic.
“This law was passed specifically to allow the development of golf courses and marinas, and the sale of residential units,” Zamora told us. “This is what developers were asking for. It’s been a battle for the last six years, but now it’s approved. Now there will be rules, and everybody’s lining up to go forward. This was not the case two years ago, or even last year.”
At the moment, said the Miami attorney, 12 megaprojects are in the pipeline, worth a combined $10 billion in potential investment.
One of the biggest is La Altura, a planned resort located at Bahia Honda, 96 km west of Havana — about one and a half hours along the Autopista Nacional — and 40 km east of Pinar del Río, capital of the province with the same name.
According to a 33-page document drafted by Panama’s Planning Group SA, the resort will be developed by a Spanish-British consortium under the direction of London-based Foster & Partners — a leading architectural firm that’s designed office buildings, hotels and resorts in dozens of countries from Kazakhstan to San Marino.
La Altura will cover 1,066 hectares, of which some 400 hectares will be preserved as mangroves. The property, which stretches seven kms along Cuba’s north coast, will boast a 260-slip marina and three 18-hole golf courses — two covering 55 hectares each, and a smaller 35-hectare course.
Envisioned are 2,022 apartment or timeshare units, in clusters of 964 units near the golf courses, 450 near the marina, another 308 adjacent to a lake and another 300 next to a planned golf academy. In addition, 293 single-family homes are planned on parcels of 1,500 to 2,000 square meters each.
There will also be two five-star hotels — a 300-room oceanfront tower and a 120-room property near the golf courses. To top it all off, the resort will have its own airstrip, which currently measures 800 meters.
That runway will be extended to between 1,800 and 2,000 meters, large enough to ac-commodate Boeing 737 or Airbus 320 jets capable of delivering 150-200 passengers each.
In 2004, when it was first proposed as a joint venture with Cuban state tourism entity Palmares SA, its backers estimated the project would involve between $450 million and $500 million in investment; since then, costs have risen by 10% to 15%.
Another project slated for the eastern province of Holguín envisions two golf courses and investment of close to $1 billion. Mark Entwistle, Canada’s former ambassador to Cuba, is advising the developers of that project, though little is known about it.
Bacunayagua, yet another resort, could soon rise just west of Varadero as a partnership between Spanish investors and state-run Cubanacan SA. It’s one of the few projects that does not involve Palmares SA.
In Matanzas province east of Havana, the British group Esencia Hotels & Resorts is planning the $400 million Carbonera Country Club. This resort will have a marina, an 18-hole golf course and 730 residential units.
“It’s exceedingly good news,” said Esencia’s CEO, Andrew Macdonald, of Cuba’s new foreign investment law. “It’s been a long road. Having said that, it’s very important for the country that they get each step right, and this is a very big step for them.”
Still another marina will form part of a resort located at Jibacoa, 80 km east of Havana, that will contain three golf courses and is being developed by Leisure Canada Inc.
For years, the Vancouver-based company has also talked about building an 737-room business hotel in Havana’s Monte Barreto district, as well as a 30-hectare resort on the island of Cayo Largo that would involve construction of a $55 million, 380-room luxury property to be managed by Spanish hotelier Sol Meliá, which already runs two dozen hotels throughout the island.
Leisure Canada’s president and CEO, Robin Conners, says the new law is a historic landmark that will spur development of Cuba’s tourism infrastructure, helping to drive more visits and more foreign dollars into the economy.
“It will serve to make Cuba much more competitive relative to Latin American tourism and help to attract thousands of new consumers to the island,” said Conners, explaining that Cuba can now offer the benefits of 99 years of ownership which facilitates bank financing, inspiring foreign buyers and investors alike.
“We see this important and reasoned decision as a progressive step that will have an important positive impact on Cuba’s economy and standard of living.”
Adds Zamora: “I believe the government will select the projects to go forward based on the financials of the proposed developers. They’ll have to show they have the capability to do what they say they’re going to do. That will happen between now and the end of this year. After Jan. 1, they’ll start assigning joint ventures.”
But when asked about Leisure Canada, Zamora expressed some reservations.
“It’s a public company and their shares sell for pennies. They have one big project in Jibacoa, relatively close to Bacunayagua, but they haven’t gotten any approvals from the Cuban government, and secondly they haven’t been able to get the investment.”
At the moment, Canadians far outnumber all other foreign visitors to Cuba, with one million expected to visit this year.
During the first seven months of 2010, more than 650,000 of them arrived on the island, compared to 380,000 for all European visitors during the same time period (see charts, page 2).
Yet the big resorts now underway are clearly not planned for the hordes of sun-deprived Canadians that descend upon Varadero each year, arriving on cheap charter flights from Toronto and Montreal. Cuba’s eye is on the ultimate prize: the United States.
In fact, long before the travel ban is lifted, some of these resorts could lure older Cuban-Americans seeking to retire in the island of their birth — and Zamora suggests it’s totally legal, even today.
“I have a theory that Cuban-Americans will be able to buy. They’re already allowed to stay in Cuba as long as they want to, and send as much money as they want,” he said. “So if I’m a Cuban-American and I want to stay in Cuba for 10 years, why must I stay in a hotel or live with my relatives? Why can’t I get one of these condos?”
Zamora concedes that U.S. citizens — including Cuban exiles — may not spend more than $179 a day on the island, under current restrictions imposed by the Treasury Department’s Office of Foreign Assets Control (OFAC).
“But that can be worked out in some fashion,” he said. “I could move to Cuba, go into a lease agreement and tell my daughter to send me money. That is happening now.”
Even under current U.S. law, there’s plenty of wiggle room for exemptions and loopholes.
Last year, with the stroke of a pen, President Obama did away with most of the restrictive laws that since 2004 had prevented Cuban-Americans from freely visiting their families.
Under the Bush administration, exiles could travel to Cuba only once every three years, stay for a maximum of 14 days and visit only immediate family members — not aunts, uncles or cousins.
Since those rules were trashed, eight charter airlines now fly just over 22,000 passengers a month to Cuba from the three U.S. “gateway” cities authorized to offer such flights for licensed passengers. About 70% fly from Miami, another 20% from New York’s JFK and the remaining 10% from Los Angeles.
Miami attorney Tim Ashby, who works extensively on Cuba issues, says that if the Obama administration expands authorized categories of travelers to include academics, researchers and so-called “people-to-people” travel — as it’s widely expected to do after November — then an additional 15,000 passengers would fly from the United States to Cuba each month.
What if the travel ban were lifted altogether? Ashby says traffic would then jump to 100,000 passengers a month, and airlines would scramble to offer direct flights — not only to Havana but to other destinations like Varadero, Camagüey and Santiago de Cuba.
“Regardless of what the critics say, the Cubans genuinely want the travel ban lifted. There’s no doubt about it,” he said. “I’ve had so many conversations with senior Cuban officials. I don’t see it any other way.”
Adds Peters: “Obviously, there’s a very large pent-up demand, and a huge curiosity factor. One can easily imagine half a million or more visitors in the first year. They would expand just as they did in the early 1990s. Cuba now has probably five times the hotel capacity it did in 1990. There would certainly be growing pains, but they would expand — with help from foreign partners.”
Wayne Smith, former chief of the U.S. Interests Section in Havana — and today an outspoken critic of his country’s anti-Cuba policy — told us “it is absolutely unacceptable today that Americans cannot travel to Cuba when they can travel to Vietnam, China and any other country in the world. If Americans could travel there, it would help the Cuban economy and lots of families would be willing to provide capital to small businesses that would cater to the tourist trade.”
Vivian Mannerud is president of Airline Brokers Co. Inc., which until 2000 was also known as ABC Charters. Like Smith, the savvy airline executive — who’s been doing business with Cuba since 1982 — is pushing hard for a relaxation of current U.S. travel rules to the island.
“If the president fulfills his intentions regarding travel to Cuba, it would be great. The charter companies would then have to charter more aircraft for U.S. carriers, and the airports will receive more revenues through passenger taxes,” she said.
“Unfortunately, I think this administration is falling into the same trap as other administrations. They’re being fed misleading information by a small group in Miami.”
Economically, she said, Florida has more to gain than any other state from direct air service to Cuba.
“I, for one, am hoping to see Fort Lauderdale-Hollywood International Airport be opened for flights to Cuba. This will reduce costs for travelers, especially those who connect in South Florida, because it’s much cheaper to operate out of Fort Lauderdale [than Miami]. We hope to be able to pass on these savings to our customers.”
Mannerud said OFAC — not the FAA — needs to approve such requests. Interestingly, restrictions on airport gateways to Cuba were imposed by President Reagan after the 1980 Mariel boatlift.
At that time, Fort Lauderdale was the only official port of entry to and from Cuba; all flights out of Miami required a waiver until the late 1990s, when Miami was made the official port of entry and exit.
Mannerud said that in addition to FLL, she’d also like to see Boston, Houston and Dallas-Fort Worth become gateway cities to Cuba, noting that “if approved, these airports would significantly reduce costs to the consumer and boost jobs in those cities.”
Gregory Meyer, public information officer for the Broward County Aviation Department, confirmed that his office has twice asked OFAC for permission to offer direct service between FLL and Havana.
Likewise, Tampa, Fla., and San Juan, Puerto Rico, seek the same thing — and both have the backing of their respective representatives in Congress.
Currently, several charter companies operate flights from Miami to Cuba, but none from the Tampa Bay area, which has one of the largest concentrations of Cuban-Americans in the United States.
Also last year, Los Angeles-based Cuba Travel Services Inc. asked OFAC for permission to let San Juan’s Luís Muñoz Marín International Airport offer direct flights to the eastern city of Santiago de Cuba, since many Cubans living in Puerto Rico are originally from Oriente and not Havana.