June 30, 2014

With Cash And Fat Fryers, Americans Feed Cuba's Growing Free Market

by Greg Allen

Every day, you can see signs of a subtle change in relations between Cuba and the U.S. at Miami International Airport.
More Cubans than ever before are coming to the U.S. to visit, and the number of Cuban-Americans traveling back to the island is also at record levels. With all the visitors, money and goods are now traveling to the island from the United States.
It's a legal loophole in the 50-year-old trade embargo — one that's having a real impact on Cuba's economy, and allowing Cuban-Americans to become investors in Cuba's emerging private sector.
'A Big Deal'
Shortly after taking office, President Obama made it possible for more Americans than ever before to travel to Cuba. He began by lifting restrictions on Cuban-Americans. Before the change, they could travel to Cuba only once every three years.
Last year, Cuba's government made an even more unexpected move: It began allowing its citizens to visit the U.S., with few restrictions.

Now, eight or nine regularly scheduled charter flights leave Miami daily for Havana and other Cuban cities. At the airport, nearly everyone waiting in line is carrying packages and large suitcases, even flat-screen TVs and other appliances.
Ana Dilla was waiting in line recently with her two in-laws, who were returning home to Cuba after a short visit. Their bags were full of goods they purchased to take home.
"Hair items, clothing, shoes, hygiene items, makeup," Dilla says — all items that are hard to get in Cuba.
Traveling from the U.S. to Cuba is still a hassle. There are restrictions on the type of goods you can bring and how much. Over a certain limit, and travelers pay a penalty. Cuba also assesses customs duties on some goods.
But Dilla says the new freedom to travel has made a big difference to her in-laws and others in Cuba.
"It was a big deal for them, absolutely," she says. "It was much easier than in the past, so it's a good thing. Things are getting a little bit better."
Because of the changes in regulations in both countries, travel between the U.S. and Cuba is at record levels — and growing. That includes so-called people-to-people travel, trips that are organized by groups for education or cultural exchange.
But by far, most of the travel to Cuba is by Cuban-Americans, and it's having an important economic impact on the island.
"The presence of the Cuban-Americans is just undeniable," says Joe Scarpaci, who heads the Center for the Study of Cuban Culture and the Economy and has co-authored a book on Cuba's emerging consumer culture.
Perhaps even more important than their travel are the unrestricted remittances Cuban-Americans can now send back to family on the island. Scarpaci estimates that goods and cash sent by Cuban-Americans now is in the range of $5 billion a year, making it the nation's second-largest source of income.
Using a Cuban slang term, he calls it, "Gusanos carrying gusanos."
"Gusano is the derogatory term that the folks of the island refer to when the Cubans left the revolution — they crawled away from the glories of the revolution. Now they're bringing back these duffel bags that are long and shaped like worms, or gusanos," Scarpaci says.
The goods carried in those duffels aren't just clothing and cologne. Deep-fat fryers, power saws, electric drills and soldering irons are in great demand in Cuba. Scarpaci says he knows of many small businesses there that have started up with goods and cash supplied by Cuban-Americans.
"From small restaurants to home body repairs to plastic-mold makers for use of children's toys. In every one of those instances, the capital for that has come from family members abroad," he says.
Free Market Activity
Nearly 600,000 U.S. travelers — mostly Cuban-Americans — visited Cuba last year. Polls show a majority of Cuban-Americans now support unrestricted travel to Cuba. A majority also believe Americans should be allowed to invest in Cuban businesses.
There are some, though, who believe unrestricted family travel has led to abuses. Mauricio Claver-Carone is the director of the U.S.-Cuba Democracy PAC, a lobbying group in Washington that takes a hard line against any move to weaken sanctions on Cuba. While he believes that taking a trip back to Cuba once a year to see family qualifies as humanitarian travel, he says others are gaming the system.
"People that are going back to Cuba more than once a year is not humanitarian. They're essentially residing in Cuba. They have some type of business practice that they've established by taking goods back and forth. They're called mulas," he says.
The Miami-to-Cuba "mules" carry goods and cash, and, at least for some Cuban-Americans, it's a legal end-run around the trade embargo.
"And essentially, they charge per pound or they charge per package, things that they take to Cuba, so they've established a business practice ... traveling to the island back and forth," Claver-Carone says. "That is not the purpose of the regulations. That's a business practice. And that should be illegal."
There are others, though, who say this is the kind of thing unrestricted travel and remittances were intended to accomplish. By traveling frequently to the island and helping — maybe even investing in — businesses run by family members, Cuban-Americans are helping spur the kind of free market activity long sought by the U.S.

Those who favor engagement between the U.S. and Cuba say the next steps should include lifting all restrictions on travel to the island and allowing U.S. visitors to use credit cards there.

June 26, 2014

Tourism Money Flows Into Cuba, Bringing Economic Hopes And Fears

Every morning, Manuel Landin Rodriguez walks past the luxurious state-owned Xanadu Mansion hotel and crosses its neatly trimmed golf course all the way to its edge. He camps out on the cliff overlooking the turquoise Caribbean waters that make the resort town of Varadero on Cuba's northern coast so famous.
Landin, a retired physical education teacher, comes to the spot to fish. When we meet him on the cliffs, he's trying to catch mojarras — small silver fish that hang out in the shallow waters to avoid sharks — which he will use to feed his family of five.
"I was born in 1947, under capitalism," Landin says. "(Cuba) used to be a pot of crickets. It was the saddest place on earth."
He wants to be sure we understand how Cuba was before the revolution.
"Have you been to Haiti? That's what Cuba used to look like. A few people were rich, and everyone else was starving."

In fact we're talking to Landin on the grounds of what once was a symbol of that opulence - this used to be the Xanadu mansion, which belonged to U.S. businessman Irenee du Pont.
Later, as we cool down with some fresh mango juice at hotel clubhouse, the waitress tells us proudly that the mansion was nationalized shortly after the revolution. She tells us she's thrilled to work here. At Xanadu Mansion, she can make as much as $15 a day in tips. Compare that to the $30 or so some Cuban doctors make on average in a month.
Tourism is essential to the Cuban economy, accounting for nearly 10 percent of the country's GDP in 2013, according to the World Travel and Tourism Council. More than 2 million foreign tourists visit every year, and the Cuban Ministry of Tourism says the 2014 high season that just ended was the biggest on record — a 5 percent increase from the previous year.
The government is also hoping a possible lifting of the American embargo, which has economically squeezed the island for more than 50 years, would add to that growing revenue. Travel writer Christopher Barker says there is speculation that 1 million new American tourists would flood the country in the first year following the end of the embargo, and 2 to 3 million annually after that. Varadero, slightly more than 100 miles from Key West, Fla., is perfectly poised to absorb some of those tourist dollars.
But many wonder if the disparity between the pay for workers in the tourism industry — and the salaries for other professions on the island — might signal the return of the huge gap between the haves and have-nots that Landin, the former teacher, remembers with such displeasure.
To find out, we drive over to Cardenas, a dusty little town where many of the bartenders, maids and waiters at the fancy Varadero resorts live.

Cardenas is famous on the island for three things: lots of Cuban flags, bicycles and horse carts. We hop on one of those legendary buggies for a quick tour. This is a typical, quiet Caribbean small town: not much to see, rundown monuments, one or two nice new restaurants.
Yuyo Nandes, our horse cart driver, breaks down the Cardenas economy for us. People who work in nearby resorts at Varadero are bringing in some good cash, he says. According to him, that $15 in tips our waitress at Xanadu Mansion makes on a good night will get you "breakfast, lunch, dinner, pay the electricity, and buy a pair of shoes."
For Nandes, the booming business of tourism in Cuba is a sign of good things to come for everyone.
"You know I'm going to tell you one thing. We live off tourism. If there's no tourism, there's no life," he says. "Just look at the grocery stores here: They're empty because people have gone to other provinces."
He says the money generated by tourism will trickle back down: People working at the resorts will take his horse cart to get around town, he says.

Our next stop is a sugar cane town called Madruga, which literally means "wake up early." Inland Cuba is starkly different from the coastal towns: The luscious greenery often seems about to overtake the narrow roads, and there's no respite from the suffocating heat. Gone are the colorful oceanfront houses, the cute paladares, or restaurants.
We walk into a family's front yard to ask for a glass of water, or a place where we can get one. With customary Cuban warmth, the Cruz family invites us into their house for coffee.
Juanito Cruz tells us he's worked at the sugar mill for 31 years. In fact, the house was given to him by the mill. He's on a break now, since the mill doesn't operate this time of year. But he'll be back grinding the sugar in November, a job that lasts six or seven months, and requires about twelve hours of intensive labor every day.
Cruz makes about $40 a month. He shows us his government rations booklet, and tells us his sugar mill income, combined with his monthly rations of rice, beans, coffee and other staple foods, let him live comfortably in this three-bedroom house with his wife and five children.

It's not an easy living, though: He points to his new fridge and says he'd been saving for a very long time to buy it, since appliances are incredibly expensive in Cuba. Cruz is a sugar mill man, but he knows there's more money to be made in the tourism industry.
"You can make 10 or 15 (Cuban pesos, or roughly $10-$15) a night, and at the end of the month that adds up into a really nice income," he says.
One quick explanation. He said CUC, which is the Cuban convertible peso, one of two currencies in Cuba, and the one that was meant to replace U.S. dollars in the economy. They're exchanged at a near one-to-one ratio. It's all very confusing.
Looking around at the Cruz family's modest house, one can't help but think about the sprawling Xanadu Mansion, and the employees who have access to tourist tips. But Cruz says he doesn't resent those who make so much more than he does. He says he's actually excited about that money being reinvested in the economy, and he'll be benefiting from it soon enough. Plus, he adds, a Canadian company is investing in his sugar mill, and updating its technology, so he doesn't fear being left behind.
Cruz proudly shows us his backyard. It overlooks a sugarcane field and is home to a mango tree, which his son and daughter are climbing. As we finish our coffee, they hand us a bag — about 10 pounds of mangoes, a generous gift. We joke that under the embargo we can't take back any souvenirs, but they won't take no for an answer.