Dangers in economy run by Cuba’s revolutionary in a business suit
Paul Webster Hare
Both leaders wore business suits at the Panama summit last month. Raúl
Castro, the one-time guerrilla from the Sierra Maestra, shook hands with
Barack Obama, the former law professor from Chicago. Are Cuba and the US
back in business?
In its “normalisation” of relations, the US is finally catching up with
more than 100 other countries with embassies in Havana. Americans will
now experience the Cuban way of doing business. Existing links can be
built on: Cubans want more of the cheap food, such as chicken and rice,
that has been sold by US companies in the past decade. They also want
fully open US tourism: the prospect of their young people mixing with
American peers on their traditional “spring break” is no longer feared
by the Castros. Havana wants to maintain billions of dollars in family
remittances from the US. But even when the 55-year-old embargo is
dismantled, a new business relationship will take time to emerge.
Cuba in 2015 is not a country confidently set in a new direction. Mr
Castro can see its past more clearly than its future. He remembers when
US companies dominated the economy, and when he and Fidel nationalised
them in 1960. Cuba later became dependent on other nations: first the
Soviet Union and then Venezuela — which is now looking increasingly
wobbly, an important reason to mend relations with America.
So what awaits US companies flying to Cuba? The welcome will be lavish.
They will visit revolutionary showpieces such as the Latin American
School of Medicine. The mojitos and cigars will taste better. Even the
home-run distance at the Havana baseball stadium is marked in feet not
Yet Cuba is still a foreign land for international business. Features of
the revolution endure to this day; rudimentary use of the internet is
only the most visible. Statistics are produced by the state and there is
no independent verification. Foreign exchange reserves are never
published. Military-controlled companies retain almost all the hard
currency Cuba earns. State employees — estimated at more than 70 per
cent of working-age Cubans — receive an average of less than $30 a month
in currency worthless anywhere else. “They pretend to pay us and we
pretend to work” is a joke almost as old as Havana’s Cadillac Eldorados.
Foreign investors and embassies, forbidden by law to select their own
employees, pay well above state rates, producing absurd results: at the
British embassy, I had a PhD in microbiology working as a nightwatchman.
Education matters little when you cannot pay your bills. Apathy is
prevalent: I remember the Havana fun fair manager who closed for lunch
with a queue of 50 customers; and the biotech marketing managers who
visited the UK but returned with no leads.
US companies bidding for foreign investment projects will face
competitors from countries including China, Brazil, Venezuela and the
EU. Political considerations will weigh heavily; and if things go wrong
the business climate is unfamiliar. The courts have never ruled for a
foreign business against the government. And, though Havana badly wants
to buy US imports on credit, its record on payment is poor.
Mr Castro will want to put in place a framework for new relations with
the US before he steps down in 2018. But he has not yet signalled he
wants Cubans to grow rich in private business. Few countries can match
the investment potential of his nation. Cuba currently has only two golf
courses; the Dominican Republic has more than 30. Some projects will
succeed; yet the recent jailing of British investors in Havana’s luxury
Saratoga Hotel — after a trial that took place behind closed doors, of
which few details have been released — serves as a warning.
The Castro brothers in the Sierra Maestra proceeded cautiously, building
their campaign of revolution. American businesses should recognise that
they are dealing with the same strategists.
The writer was British ambassador to Cuba from 2001 to 2004, and is now
a lecturer at Boston University
Source: Dangers in economy run by Cuba’s revolutionary in a business
suit – FT.com –