CubaTrade-April2017-FLIPBOOK

cubatrade

THE PUERTO RICO CONNECTION: BEST BRIDGE TO CUBA?

The Magazine for Trade & Investment in Cuba

April 2017

RISE OF

THE YOUNG

PROGRAMMERS

Cuba’s private high tech

sector begins to emerge

DEAL MAKING, HAVANA STYLE

An exclusive ex-pat interview

FUTURE CASH FLOWS

Will the remittance bubble burst?

CUBANS OPEN THEIR DOORS

The Private B-and-B Building Boom

PENNSYLVANIA’S RUM RUN

State officials challenge the embargo

Jono Matusky of the Innovadores Foundation in front of the

El Capitolio or National Capitol Building in Havana

URBAN ORGANICS

Inside Cuba’s urban farms


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content 04/2017

UP FRONT

10 IDEAS + INNOVATION

For U.S. companies exploring opportunities

in Cuba, look to biotechnology

and energy

28 MINING

Rose Petroleum hopes for an exclusive

deal in Cuba to mine gypsum, an ‘essential

input’ for construction supplies.

LIFESTYLE

WE GROW TRADE ®

12 OPINION

Even in the new trade environment

being championed by President Donald

Trump, U.S. companies will need

offshore capabilities

14 INDEX

Cuba has shown the international

community that it’s willing to repay

its foreign debt. Will its current recession

put that ability at risk?

30 ENTREPRENEURS

How a California-Cuban couple

started a café in Havana

86 CUBAN ART

The latest exhibition of post-revolution

Cuban art on display at

Houston’s Museum of Fine Arts is a

testimony to time and displacement

CELEBRATING 10 YEARS OF TAKING THE BEST OF ARKANSAS TO THE WORLD

32 TRADE

Pennsylvania legislators flew to Havana

with a simple idea for getting

around the 55-year-old embargo

against Cuba: Trade agricultural

products for rum

18 PANORAMA

Deals, events and transactions of note

for trade and investment

in Cuba

DEPARTMENTS

22 WASHINGTON REPORT

Can ‘dealmaker’ Trump resolve the

decades-old Cuba claim problem?

36 INTERVIEW

An Interview with Argelia Balboa

Monzón from Cuba’s Ministry of

Energy and Mines

40 SPORTS

Cubans are embracing soccer, despite

the country’s fondness for baseball—

and its unusual political history with

the beautiful game

90 REPORTERS NOTEBOOK

A veteran Cuba watcher revisits the

city and province of Holguín after a

20-year absence to discover that much

has changed

94 BOOK REVIEW

Mark Kurlansky’s Havana:

A Subtropical Delirum offers an intimate

look into what makes Havana a

city like no other

FINAL WORD

24 TRANSPORTATION

American Airlines opens the first ticket

office in Havana for any regularly

scheduled U.S. airline

96 IN CLOSING

Want to make America first? Then lift

the embargo

26 CUBA BRAND

Cuba’s iconic cigars see a rise in

worldwide sales as U.S. market grows

44 AGRICULTURE

In suburban Havana, Cuba’s organic

farming sector thrives

RICE

TIMBER

POULTRY

SOY

6 CUBATRADE APRIL 2017

“WE GROW TRADE” is a registered trademark of the World Trade Centers Association.


features

48 RISE OF THE PROGRAMMERS

Cuba's skilled programmers have sought overseas

opportunities for decades. Now, some young entrepreneurs

are choosing to stay and develop onshore

startups.

56 CUBA OPENS ITS DOORS

Entrepreneurs are taking the reins on hospitality,

and it’s paying off.

48

64 BACK TO THE FUTURE

When it comes to servicing the cars of yesteryear, few

Cuban enterprises can beat Nostalgicar.

68 A NEW ERA FOR REMITTANCES?

Despite setting a new record in 2016, remittances to

Cuba may be slowing down in the wake of the U.S.

decision to end the wet-foot, dry-foot policy.

74 GETTING THE DEAL DONE

These are the insights of a veteran who has guided

multinationals through the maze of the island’s

intricate business culture for 25 years. His most

important advice: Don’t wait.

78 THE PUERTO RICO-CUBA CONNECTION

When it comes to doing business with Cuba, Puerto

Rico offers powerful advantages.

ON THE COVER

Jono Matusky of the

Innovadores Foundation in

front of El Capitolio

in Havana.

56

CONGRATULATIONS

CUBA TRADE

MAGAZINE

Your vision will serve you well

Our Cuba Task Force attorneys are uniquely

positioned to assist clients with the legal

and business opportunities following the

changes in U.S. public policy toward Cuba.

Established in 1910, Shutts & Bowen has witnessed

and participated in almost every major event in

Cuba’s history since the beginning of the 20th century.

No other law firm in South Florida has this experience.

Photo by Jon Braeley

64

as you continue to forge ahead

in this worthwhile endeavor.

“U.S. business owners need to understand

the process and meet the requirements of

U.S. and Cuban laws. We are happy to help

them navigate through these new waters.”

—Aliette DelPozo Rodz, Cuba Task Force Chair

Editor’s Note: In our Jan-Feb issue we ran a story by art critic Ariana H.

Requant entitled “Miami in Havana’s Rear View: Cubans take the stage

at Art Basel.” In that story, the editors inserted a paragraph on the fact that

the Cuban graffiti artist known as El Sexto was unable to attend Miami

Art Week due to his arrest in Cuba. It was not the intention of the author to

include this information, nor did she authorize it.

8 CUBATRADE APRIL 2017

68

Shutts & Bowen LLP

200 South Biscayne Boulevard | Suite 4100

Miami, Florida 33131

305.358.6300

www.shutts.com

FORT LAUDERDALE | MIAMI | ORLANDO | SARASOTA | TALLAHASSEE | TAMPA | WEST PALM BEACH


editors note

Building Business

from the Opening

Anyone who says that U.S. engagement

since 2014 has not benefitted the people of

Cuba need only take a trip to the island

One of our tasks at Cuba Trade is to track the daily media reports

from around the country about Cuba. By and large, they tend

to favor engagement; most are about the positive feedback from

educational, cultural or business missions to the island; many are

about the benefits of opening Cuban markets to U.S. products;

others describe the experiences of ordinary citizens visiting Cuba

from cities across the U.S.

There remains, however, a strident minority of publications

and journalists who believe that we should not engage with

Cuba. Among their assertions is that the opening, as such, has

only served to put more money into government coffers, and

that the average Cuban has not benefitted in any way from the

rapprochement with America.

The authors of these stories have clearly not traveled to

Cuba. If they had done so, they would have seen the phenomenon

of an emerging world of small, private businesses. These

include the half million licensed cuentapropistas who can create

their own businesses in everything from a barber shop to a bakery

to a computer repair outlet.

If you visit Havana and other cities in Cuba, you can witness

the emergence of this fledgling entrepreneurial class. Shopkeepers.

Tour guides. Software companies. Bed-and-breakfasts. And if

you inquire as to where these small businesses go for funding, you

will find that many are being financed by Cuban Americans who

can now send or bring cash to their friends and relatives, thanks

to the openings.

Many of the stories in this issue reflect this new reality. In a

story by economist Emilio Morales, you can see how President

Obama’s relaxation on limits for remittances of cash and goods

has resulted in record influxes, cash and goods being used to build

private businesses.

Also in our feature well, we take a look at several types of

emerging small businesses. The first is about how private programmers

are starting to blossom. Next, we have a feature about

how ordinary citizens are turning their homes into accommodations

for visitors, many of them Americans,

When I started to edit this publication, a veteran Cuba

watcher told me that the reason anti-engagement Congressmen

opposed regular flights to Cuba was because then people would

see what the reality was all about. At the time, I thought that was

absurd. Now I think differently. H

J.P. Faber. Editor-in-Chief

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Pillsbury.

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A leader in cross-border project development and finance. Advised on

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Learn more at pillsburylaw.com/latin-america.

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Editor-in-Chief

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Executive Publisher

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Art Director

Jon Braeley

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Associate Editor

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Writers

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Emilio Morales

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Brian O'Neill

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Photographers

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10 CUBATRADE APRIL 2017

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IDEAS + INNOVATION

WHERE THE

OPPORTUNITIES LIE

For U.S. companies exploring opportunities

in Cuba, look to biotechnology and energy

By Anya Landau French

Photo supplied by Akin Gump

How do we move food

from Hastings to Havana?

Break down barriers.

Recently, Akin Gump had the pleasure of

hosting Cuba’s Ambassador to the United

States, Dr. José Ramón Cabañas Rodríguez,

at our Washington offices to discuss

bilateral trade and investment opportunities

in Cuba with our clients and partners.

I asked Ambassador Cabañas: Are there a

couple of high-potential sectors in Cuba

that U.S. investors haven’t yet tapped into?

Yes, he said, energy and biotechnology.

His response was consistent with priorities

that Cuba has reiterated throughout

its increasing engagement with the United

States over several years now. Cuba’s

well-funded biopharmaceutical sector has

generated interest—and business—around

the globe, including in the United States,

for over two decades now. Cuban scientists

developed the world’s first meningitis B

vaccine, an important cattle tick vaccine,

a highly anticipated cancer vaccine, and

a promising therapy to treat and close

diabetic foot ulcers, to name a few.

Until just last year, U.S. regulatory

barriers deterred all but a handful of

intrepid Americans from pursuing such

unique opportunities in Cuba. While the

Cuban biotechnology industry long welcomed

U.S. scientists and companies, those

companies couldn’t move forward without

approval from U.S. regulators who, more

than once, approved the R&D without the

crucial approval for commercialization that

would make any such venture viable.

But in October 2016, the Treasury

Department issued a general license to

allow U.S. research and investment in

Cuba’s biopharmaceutical sector. And with

"With new rules facilitating professional research travel, it’s a now

easier for U.S. companies to travel to see the research ongoing in

Cuban biopharmaceutical centers"

new rules facilitating professional research

travel, it’s a now easier for U.S. companies

to travel to see the research ongoing in

Cuban biopharmaceutical centers, discuss

opportunities with dozens of companies

under the BioCubaFarma umbrella, and

proceed with negotiations to ink new

deals in this sector.

In the case of energy, a range of opportunities

are available. One hundred and

ten energy-related investment projects are

listed in the Cuban government’s foreign

investment portfolio for 2017. With a

population of 11 million and nearly 4 million

visitors in 2016, Cuba needs energy,

and lots of it. The outdated electrical grid

is still powered by heavy crude oil extracted

from onshore wells in a joint venture

with Canada’s Sherritt International. The

entire grid needs to be updated.

While Cuba’s own crude oil is used

for about half of Cuba’s electricity generation,

to meet the rest of its energy needs

Cuba had been importing up to 100,000

barrels of oil a day from Venezuela,

exchanged for Cuban doctors deployed to

underserved Venezuelan communities. As

the price of oil has fallen and Venezuela

has become less economically stable, Cuba

has begun to look elsewhere for its oil imports,

such as Angola or Algeria. Wherever

Cuba goes for oil, it won’t find as good a

deal as it had with Venezuela. Cuba might

find good prices much closer to home, but

with no U.S. license explicitly allowing oil

exports to Cuba, a U.S. oil company with

good prospects to make sales to Cuba will

need to blaze a trail and make the case to

U.S. regulators for how this business will

advance U.S. interests.

Other energy sector opportunities

to explore include renewables, such as

wind, hydro, biomass, and solar power. The

Cuban government plans to spend $3.5

billion over the next decade developing renewable

energy, with the hope of obtaining

nearly a quarter of Cuba’s energy from

renewable sources by 2030. Right now the

figure stands at less than 5 percent. To get

all the way there, Cuba is going to need

investment partnerships.

With no established path for U.S.

regulators to follow in licensing for U.S. participation

in such innovative projects, there

is a potential premium on the table for U.S.

companies that recognize business opportunities

in Cuba’s energy sector to get down to

Havana to start the conversation. H

Anya Landau French is a Senior Policy

Advisor with Akin Gump’s firmwide Cuba

practice.

When America farmers are able to freely

export their crops to other countries, it

nourishes the people who need them

most. Opening new markets for US

agriculture boosts food production, spurs

job creation and puts food on more tables

across the globe. That’s why we champion

open trade flows – to raise incomes for

all and build local economies that thrive.

Learn more at cargill.com/food-security.

12 CUBATRADE APRIL 2017

Cargill is committed to helping the world thrive.

© 2016 Cargill, Incorporated


OPINION

Can Cuba

Become

the New

China?

Even in the new trade

environment being championed

by President Donald

Trump, U.S. companies will

need offshore capabilities

By Melvin Torres

Can Cuba become the new China if trade

is normalized with the U.S.?

With trade policy changes being

discussed by Congress and the President,

the sourcing of materials needed to manufacture

products in the U.S. has become a

topic of great interest.

U.S. companies, including those in

my home state of Arkansas, must import

essential components for manufacturing

that are nearly impossible to produce in

the U.S. without driving up the cost of the

final manufactured goods.

The challenge is that Congress is

proposing import duties to make up for

anticipated tax cuts to corporations that

could reduce their rates from 39 percent to

20 percent. The proposed Border Adjustment

Tax of 20 percent, for example,

would apply to imports from any country.

Another proposal the President is

contemplating is a Border Tax of 35 percent

on any imported products from companies

that move their factories outside

the United States. Finally, a 20 percent

“Wall Tax” on imports from Mexico is

being proposed to pay for the border wall.

Although it is unclear whether all

three taxes will be combined—or if any

14 CUBATRADE APRIL 2017

will be passed by Congress—the potential

increases range from 20 percent to 55 percent

on all imports. In the case of goods

imported from Mexico, the additional 20

percent Wall Tax would effectively push

the total tax to at least 40 percent and as

high as 75 percent.

Could this dramatic tax revamp

reposition Cuba as a new China? When

the embargo is finally lifted, Cuba may

very well become the preferred country

from which to import goods too costly to

produce in the United States.

With an average monthly wage of

$28 per month, depending on the industry,

Cuba has one of the lowest labor wage

rates in the world—the average monthly

salary in China, by comparison, is $327,

and in Mexico $322. Cuba’s monthly wages

meanwhile translate to $0.93 per day

or $0.11 per hour for an eight-hour work

day. Furthermore, Cuban labor is one of

the most efficient globally.

In addition to low cost, high-quality

labor, the shipping advantages of Cuba

are dramatic—sea shipping times of 11

hours or less compared to a few days by

land from Mexico and up to 28 days from

China. Located 93 miles from the United

States and 130 from Mexico, the island is

also strategically positioned to send and

receive shipments through its new deep

sea Port of Mariel to the rest of the world.

Once labor and production efficiencies,

proximity to the U.S, current infrastructure

improvements, and the special

economic development zone of Mariel are

all factored in, Cuba looks highly attractive

to U.S. companies that want to invest

there. In addition to the sourcing of manufacturing

components, the U.S. would

also benefit from off-season imports of

products such as tropical fruits and vegetables

that are all organically grown in Cuba

by necessity due to the lack of pesticides

and chemical fertilizers.

For companies looking to navigate

the newly proposed import taxes, Cuba

could be the answer to keeping U.S.

manufacturers competitive and their doors

open for business. H

Melvin Torres is the Director of Latin American

Trade for the World Trade Center Arkansas.

Angela Marshall Hofmann of World Strategies,

LLC and Sam Cushman of the WTC Arkansas

contributed to this article.


INDEX

Cuba’s

Foreign Debt

Annual supply of oil by Venezuela to

Cuba and the average price on the

international market 2014-2016

Cuba has shown the international community

that it’s willing to repay its foreign debt. Will its

current recession put that ability at risk?

By Emilio Morales

CUBA'S MAIN CREDITORS

Forgiven and pending debt

(billions of dollars)

For the past several years, Cuba has been

negotiating debt payment and forgiveness

deals with its global creditors. In December

2015, for example, Cuba signed an

agreement with 14 Paris Club member

countries to forgive $8.5 billion of its

$11.1 billion in outstanding debt. The remaining

$2.6 billion was structured to be

paid over 18 years, and the first payment

of about $40 million was made in October

2016. The deal also allowed Paris Club

members to establish bilateral restructuring

agreements with Cuba to set money

aside for development projects.

Besides government-to-government

debt, the Cuba also spent four years successfully

restructuring its commercial debt

with creditors from Japan, Mexico, China,

and Uruguay. The result was forgiveness of

81.6 percent of the $42 billion face value

of that debt, leaving the country with outstanding

obligations of about $9.5 billion.

It is important to note that these

agreements didn’t include debt with

private creditors, which in 2010 was

estimated at $11.3 billion for Venezuela

and $350 million for Brazil. The Brazilian

debt also does not include nearly $700

million that Brazil lent for infrastructure

work in the Mariel Special Economic

Development Zone.

The restructuring deals were intended

Source: The Havana Consulting Group

and Tech based on international press

reports and financial institutions.

Source: The Havana Consulting Group and Tech from

information from various sources

to send signals that Cuba is committed to

paying its debts, which could pave the way

for work with international financial institutions.

Now, Cuba faces the challenge of

fulfilling its payment commitments—an

uphill battle considering the country is

facing economic recession.

The Cuban GDP fell 0.9 percent in

2016 despite increases in tourism revenues

(12.3 percent) and remittances (2.7 percent).

Although some government officials

say upcoming economic reforms will boost

the country’s GDP, most experts agree the

economic situation will worsen in 2017.

The main factor triggering this recession

was a drop in Venezuela’s oil supply

and plummeting global oil prices. In

2013, the price of crude oil on the world

market averaged $108.60 per barrel. By

2016 it fell to $42.62 per barrel—causing

Cuba an income loss of about $4.18 billion

that year. Decreased nickel and sugar

exports also worsened the economic situation,

as did a drop in the production of

domestic crude oil and gas––which forced

Cuba to buy from countries besides Venezuela,

and at world market prices without

subsidies.

Cuba’s deposits in international banks

(international reserves) have also fallen in

recent years. Since the Cuban government

does not issue official information on the

reserves held by the Central Bank, it is

difficult to know its true value. However,

information published by the Bank for

International Settlements in Basel makes

it possible to estimate the value of Cuba’s

international reserves.

The value of these reserves fell sharply

from about $4.1 billion in December

2011, to about $2.7 billion in December

2012, to about $2.2 billion in September

Oil refinery located near to Havana

2013—a nearly 48 percent drop over the

entire period.

Cuba’s international reserves fell

partly because they were used to repay

debts with some of its most important

creditors. They were also used to purchase

food, which was necessary given a rise in

global food prices and the country’s failure

to boost domestic production.

The combination of these challenges

will make it difficult for Cuba to fulfill

its debt commitments. The most practical

strategy for Cuba is to open its economy

to the free market, release its productive

forces, and deepen the opening with the

U.S. regardless of how the Trump administration

steers policy towards the island.H

Emilio Morales is the CEO of the Havana

Consulting Group

16 CUBATRADE APRIL 2017 Source: The Havana Consulting Group and Tech based on international press reports and financial institutions.

APRIL 2017 CUBATRADE

17


Arkansas: Outfront on Cuba Trade

Arkansas is leading the U.S. in economic and agricultural collaboration with Cuba. And because

Arkansas is the nation’s number one producer of rice as well as a national leader in poultry, we’re

a natural for sprinting to the front of the pack when it comes to food-source trade with Cuba.

In Arkansas, we’re proud to help our neighbors to the south by sharing our resources and our

expertise — which in the end will help both economies to grow and prosper.

ARKANSAS

AGRICULTURE

DEPARTMENT

aad.arkansas.gov


panorama

Deals, events

and transactions

of note for trade

and investment

in Cuba

Cigar sales soar

Legendary cigar manufacturer Habanos

SA opened its annual festival by announcing

that Cuban cigar sales rose by

5 percent in 2016. Sales were worth $445

million last year, bucking sluggish luxury

goods sales in the global market. Habanos

makes cigars for iconic brands such as

Cohiba, Monte Cristo, Romeo y Julieta,

among others. While American travelers

are allowed to bring an unlimited supply

of cigars in-hand back home, U.S. sales

are still banned under embargo rules.

Keeping drugs in check

The U.S. State Department concluded in

its annual narcotics report that Cuba is

not a major consumer, producer, or transit

point for illegal narcotics, the Miami

Herald reported. The report also said that

drug consumption in Cuba is relatively

low. In recent years, Cuba and the U.S.

have deepened their cooperative efforts to

combat drug trafficking.

A push to end the embargo

Sen. Jerry Moran (R-Kansas) introduced

the Cuba Trade Act of 2017 to

the Senate in late February. The bill aims

to end the trade embargo on Cuba. The

bill is supported by several agriculture

groups hoping to sell products to Cuba.

“At a time when we need more markets

as badly as ever, lifting the embargo and

opening up Cuba for American agricultural

commodities would help increase

exports, create new jobs and boost the

U.S. economy,” Moran said in a press

release.

Lettuce bikinis and vegan advocacy

Animal advocacy group PETA sent a

group of women dressed in lettuce-leaf bikinis

to Cuba to promote vegan diets. The

ladies spent several days delivering veterinary

supplies, handing out vegan food kits,

and feeding stray dogs. The trip drew some

criticism from those who pointed out that

fresh vegetables are generally scarce and

expensive in Cuba.

An exchange of ideas

A collection of Cuban tech entrepreneurs

visited accelerators in places such as Silicon

Valley and Boulder, Colo. thanks to a

competition they won that aims to showcase

Cuban startups to the world. The

10x10kCuba competition introduced the

entrepreneurs to experts who collaborated

with them to improve their businesses.

The Cuban entrepreneurs also shared their

expertise with their American peers on

how to be innovative in the face of limited

internet access.

Bolivian leader goes to Cuba for treatment

Bolivian President Evo Morales traveled

to Cuba to treat a nodule on his vocal

cords. He was visited by President Raúl

Castro and Foreign Minister Bruno Rodriguez

during his stay in a Havana hospital.

Morales was set to return to Cuba in

early April for a small surgical operation.

Ballplayer smuggling trial ends with

guilty verdict

Sports agent Bart Hernandez and trainer

Julio Estrada were found guilty by a

Miami jury of illegally smuggling Cuban

baseball players into the U.S. and helping

them sign giant contracts with MLB

teams. The jury found that the duo used

falsified documents to smuggle the players

to the U.S. One of the most striking

moments of the trial came when Chicago

White Sox player Jose Abreu testified to

eating a page of his own fake passport

during a flight to Haiti.

Castro disses slew of Trump policies

Cuban President Raúl Castro blasted U.S.

President Donald Trump’s immigration

and trade policies, among others, in front

of a summit of leftist leaders in Venezuela.

According to a Reuters report, he

called Trump’s trade policies “egotistical”

and his plan for a southern border wall

“irrational.” The Trump administration

did not respond to Castro’s comments,

but previously promised a full-review of

U.S. policy towards Cuba.

Cheaper calls

Cuban telecommunications monopoly

ETECSA has launched a promotion that

will slash telephone call prices. According

to 14yMedio, the Plan Amigos service will

lower the rate of phone calls from 0.35

CUC per minute to 0.20 CUC per minute

for up to three registered cellphones or

fixed lines. Those prices do not include

activation and monthly maintenance fees.

Crashing out at the World Baseball Classic

Cuba had a disappointing exit at the

2017 World Baseball Classic after going

winless in the second round. The team was

eliminated after they were defeated by the

Netherlands 14-1 in seven innings.

Poll: Cubans want better relations

with US

A Cuban public opinion poll shows that

55 percent of Cubans support normalized

relations with the U.S., the Associated

Press reported. The poll also showed that a

large majority of Cubans support expanded

tourism and private sector business

ownership. The poll of 840 people was

conducted late last year by the independent

research group NORC at the

University of Chicago.

Frontier, Silver Airways suspend Cuba

flights

Following cutbacks from other airlines,

Silver Airways and Frontier announced

they will cancel routes to Cuba. Fort

Lauderdale’s Silver Airways will drop its

service on April 22 because it says, “other

airlines continue to service this market

with too many flights and oversized

aircraft.” Denver-based Frontier will end

its Miami-Havana route on June 4. The

airline said the route was more expensive

than anticipated and that there is more

capacity than demand.

Five proposals approved for Mariel

Cuba said it approved five businesses to set

up shop in the Mariel Special Economic

Development Zone. According to Reuters,

the approved businesses include a Portuguese

firm that will offer engineering and

construction services, and a Cuban-Spanish

tourism services joint venture. Reuters

also reported in early March that Nestlé

was close to reaching a deal to build a $50

million to $60 million factory in Mariel.

Havana Club sees green

Havana Club, the iconic Cuban rum made

in a joint partnership between state-enterprise

Ron Cuba and France’s Pernod

Ricard, says it made more than $118 million

in profit in 2016. News service EFE

reported that Havana Club sold about

4.2 million boxes of rum, with about 28

percent of those boxes remaining in Cuba.

FedEx gets extension

The US Department of Transportation

granted FedEx a six-month extension to

start its Cuba services. It now has until Oct.

15 to kick off its five-times-a-week service

between Miami and Varadero. FedEx said

in its application that it needed more time

because it encountered several obstacles

including “Cuban regulatory complexities.”

Med school scholarships for a peace deal

Cuba offered the Colombian government

1,000 medical school scholarships in

exchange for its support for a peace accord

that hopes to end the decades-long conflict

with the Revolutionary Armed Forces of

Colombia (FARC). Colombia’s Cuban ambassador

says most of the scholarships will

go to FARC members and those who have

been affected by the conflict. Cuba hosted

the peace discussions between the Colombian

government and FARC members.

Home internet services kicks off

About 360 families have signed up for

home internet service that started on

March 1 in Old Havana, according to a

Fox News report. The signups follow a

two-month pilot program that installed

home internet service in up to 2,000

homes. High prices and slow connection

speeds have discouraged more Cubans

from signing up for the service. H

20 CUBATRADE APRIL 2017

APRIL 2017 CUBATRADE

21


GO GLOBAL

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of the Americas

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The World Trade Center Miami manages two hemispheric trade shows which draw more

than 17,000 buyers to Miami. Upcoming shows include the 21st annual Americas Food

& Beverage Show and the 14th Biennial Air Cargo/Sea Cargo Americas Trade Show and

Conference. Reported sales at these shows exceed US$239 million.

The World Trade Center Miami assists other global trade shows and organizations to

access the Americas marketplace by providing sales assistance overseas and by

bringing foreign buyer missions to trade shows.

Trade Assistance Center Services

BUYER SERVICES:

n Agent/ Distributor Services

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1007 North America Way, #500, Miami, FL 33132 n 305-871-7910 n info@worldtrade.org

www.worldtrade.org

22 CUBATRADE APRIL 2017

APRIL 2017 CUBATRADE

23


WASHINGTON REPORT

Photo by xxxxxxxxxxxxx

That Thorny Issue

Can ‘dealmaker’ Trump resolve the decades-old Cuba claim problem?

Washington-based attorney Robert Muse: There are a variety

of solutions. Left: Office Max holds $267 million in claims.

By Ana Redelat

When it comes to rapprochement between

Washington and Havana, few issues are as

contentious as U.S. property claims against

Cuba. Starting in 1959, the Cuban government

nationalized virtually all property

owned by Americans on the island—from

hotels and sugar plantations to power

companies and factories. The resolution of

those claims remains a stumbling block to

fully normalized relations today.

The Obama administration held

several meetings with Havana on those

claims but made little or no progress.

Now, with a new president in the White

House, some hope a deal may be in the

offing. “This is a fresh slate and a new day,”

says Robert Muse, a Washington-based

attorney who specializes in international

law and claims issues.

Those claims now tally $8 billion, a

calculation based on applying 6 percent

simple interest to the original claims,

which were valued at $1.8 billion. In

total, the U.S. Foreign Claims Settlement

Commission (FCSC) has certified 5,913

claims. About 900 belong to U.S. corpo-

rations; the rest are claims by private U.S.

citizens and their descendants. The FCSC

recognizes no claims by individuals who

were Cuban citizens at the time.

Holders of the corporate chits include

Fortune 500 firms like Coca-Cola, Exxon,

Colgate Palmolive, General Electric, General

Motors, and Starwood Hotels. Many

of these giants acquired their claims from

other companies via mergers or acquisitions.

The Cuban Electric claim—at $267

million the largest claim of all—is now

owned by Office Max.

While no one is sure where the

Trump administration stands on these

settlements, Muse says the claims could be

settled “in a variety of methods.”

Many corporations, he said, would

“swap out” their claims for an opportunity

to invest on the island. Individual claims

could be settled by pro-rata distribution of

money the Cuban government could raise

by imposing new export duties. Another

method would be to give shares to claimants

for any investment projects that use

their property or land.

In the meantime, Cuba has muddied

the waters with a counter-claim against

the United States for more than $300

billion in economic damage from the

embargo. Muse said the U.S. should reject

Cuba’s insistence on tying embargo damages

to the expropriations, because those

alleged damages occurred separately. “It

is not helpful to conflate certified claims

with Cuban claims,” he said.

Former FCSC Chairman Mauricio

Tamargo and his law partner Jason Poblete

represent more than 20 individuals

with certified claims. Tamargo says he had

claimant clients before December 2014—

when President Obama announced he

would normalize relations with Cuba—

but “that interest accelerated after Obama

made his announcement.” Now, he says, a

similar sort of anticipation is in the air.

“President Trump has already indicated

that he’s a very good dealmaker, so my

clients are hoping he puts those skills into

settling their certified claims,” Tamargo

said. “We need to get the claims negotiated

and settled.” H

24 CUBATRADE APRIL 2017


TRANSPORTATION

Photo courtesy of American Airlines

American wheat

growers stand ready

to meet demand

in Cuba.

It’s time to end

the embargo.

AN OUTPOST IN HAVANA

American Airlines opens the first ticket office in

Havana for any regularly scheduled U.S. airline

The Ribbon Cutting (from left): Christine Valls, director

of Florida and Caribbean sales; Lorena Sandoval, regional

operations manager; and Galo Berltron, country manager

By Doreen Hemlock

In the United States, it’s common for

travelers to book their flights online and

pay by credit card. Not so in Cuba, where

internet access is limited and few people

have credit cards. That helps explain the

excitement over the debut of American

Airlines’ new ticket service center in Cuba,

the first opened by a scheduled U.S. airline

on the island in more than half a century.

Passengers can visit the office weekdays

and on Saturday mornings to get information

or buy tickets in cash.

Havana resident Onelio Ortueta

visited on a recent Saturday to pick up a

ticket to fly to Miami that same afternoon.

The price: about $224 round-trip, paid in

Cuban convertible pesos called CUCs.

“This is marvelous,” said the 58-yearold

who works in tourism and found

the Saturday hours convenient. “And the

ticket is so cheap. Three months ago, when

there were only charter flights to Miami, it

cost me nearly $600.”

American Airlines has three Cubans

working at the new ticket center in the

Miramar Business Center, where other

travel companies also have offices. The

workers are not direct American Airlines

employees. “As per Cuban law, all foreign

corporations licensed to do business in

the country are required to hire employees

through a government employment agency,”

said Lorena Sandoval, who heads up

American’s ticket service centers in Latin

America and the Caribbean from Miami.

The office accepts cash only, paid in

CUC. Unlike offices in the United States

or in other parts of Latin America, customers

can’t check-in or receive a boarding

pass; the self-service machine is not operational;

and frequent-flyer program reservations

and inquiries are limited—at least for

now, Sandoval said by email: “However, we

are working to resolve these issues.”

American opened the office Feb.

1, a bit later than anticipated. It waited

until December holidays finished before

providing four weeks of training to the

contract workers, Sandoval said.

It’s no surprise that American is the

first U.S. airline to open a free-standing

ticket office in Cuba. The Texas-based

carrier has flown charters to the island for

more than 25 years and now offers the

most scheduled service to Cuba of any

U.S. airline: 10 daily flights to six destinations.

Despite the recent announcement

that both Silver and Frontier airlines were

cancelling their scheduled flights to Cuba,

American remains committed. It started

scheduled service to five Cuban cities in

September and added Havana on Nov. 28.

To open the ticket office, American

first needed to obtain a business license

from the Cuba Chamber of Commerce.

That license lets it enter into commercial

arrangements with firms in Cuba—to

lease space, for example—as well as hire

personnel.

Tourism worker Ortueta gushed over

the new convenience as he left American’s

office, ticket in hand. “Please tell your

President,” he told this Cuba Trade reporter,

“not to even think about taking away

these flights!” H

26 CUBATRADE APRIL 2017


THE CUBA BRAND

CELEBRATING

CUBAN CIGARS

CFI

Collaborative Action for

Improved Trade Relations

Cuba’s iconic cigars see

rise in worldwide sales

as U.S. market grows

By Suzette Laboy

The U.S. market is the world’s biggest for hand-rolled cigars

For cigar aficionado Jonathan Barbeau,

Havana was the place to be in March.

“I knew it would be great, but it

turned out to be phenomenal,” Barbeau

said of the 19th Festival del Habano

(Habano Festival) that attracted some

2,000 cigar enthusiasts and distributors to

Cuba. “I found the festival to be the single

greatest cigar event that I’ve ever gone to.”

This was the first time Barbeau,

general manager of New Hampshire’s

Two Guys Smoke Shop and host of the

Cigar Authority Radio Show attended the

annual festival held by state-run manufacturer

Habanos SA. Each year, it attracts

cigar lovers to Havana from more than

50 countries for seminars, tastings and

tours of the Habanos tobacco plantation

in Pinar del Río province’s Vuelta Abajo

as well as the H. Upmann and La Corona

factories. The Habanos company markets

27 hand-rolled brands, including the

iconic Cohiba, Partagas, Montecristo and

Romeo y Julieta. Habanos cigars are sold

in over 150 countries.

“We are very satisfied with our

business evolution in 2016,” said Luis

Sanchez-Harguindey, co-president of

Habanos, during the festival. And for

good reason. Worldwide sales in 2016

came to $445 million, a 5 percent increase

from 2015, despite a “challenging marketing

environment” that included inclement

weather affecting Cuba’s tobacco crop for

the last few years. “We have a very solid

base to face 2017 with great optimism.”

Added festival attendee René Castaneda,

head of North American operations

for Swiss cigar manufacturer Villiger: “The

brand loyalty to Habanos is impressive.

In the U.S. market, loyalty to a brand is

limited, and the loyalty to a country of origin

is almost nonexistent. [But] smokers

of Cuban cigars are for the most part

convinced that Habanos are the best cigars

in the world.”

Although the U.S. market is the

world’s biggest for hand-rolled cigars, for

more than half a century the embargo

prevented Americans from purchasing

Cuban cigars. Even as of October 2016,

Americans who visited Cuba could only

bring back up to $100 in rum and cigars.

That changed under the Obama administration’s

last policy adjustment, which

allows U.S. travelers to return with as

many Cuban cigars as they want. Castaneda

and other industry leaders say that’s

already having an effect—even though

it’s still illegal to sell Cuban cigars in the

United States.

Barbeau said he hopes he’ll soon be

able to purchase Cuban cigars back in

New Hampshire, and that Cuban tobacco

will be taken to a new level. “You don’t

have the opportunity to be truly great if

you are just using one ingredient,” he explained.

“When and if the embargo lifts, I

would love to see Cuban tobacco blended

with other cigars, like Venezuelan and

Nicaraguan cigars.”

The Habanos festival concluded

March 3 with an auction of seven cigar

humidors, raising $1.34 million for the

Cuban public health system. H

Developing and Managing Equity Projects in Cuba

We work closely with the business and political community to

improve the understanding between the U.S. and Cuba with

the aim of creating stable and synergistic consensus, trade,

and foreign direct investment partnerships.

Established 2008

www.ChicagoFoodsInternational.com

28 CUBATRADE APRIL 2017


R

MINING

Getting Ready for the

Building Boom

Rose Petroleum hopes for an exclusive deal in Cuba

to mine gypsum, an ‘essential input’ for construction

supplies. Next: oil and gas licenses

STILL THE ONLY CUBE OF ITS KIND.

By Oscar Musibay

Long-Standing Brands that Set the Standard

With tourism-driven construction set to

boom in Cuba, British oil, gas, and mining

giant Rose Petroleum PLC is negotiating

to become Cuba’s exclusive producer of

gypsum. A soft mineral found in abundance

on the island, gypsum is used to

manufacture wallboard, cement, and

plaster of Paris.

Rose CEO Matt Idiens says his firm,

through its wholly owned subsidiary, Rose

Gypsum Ltd., won a competitive process

after the Cuban government issued its

requirements for a bid. Gypsum assembled

a technical presentation that involved

working with Italian and German

engineering companies, besting four other

applicants—though Rose still needs to

complete negotiations. Idiens told Cuba

Trade that it was in “an ongoing process”

with state entity Empressa Materiales de

Construcción (EMC).

Rose Gypsum was selected thanks

to its technical and professional expertise,

said Idiens, following talks with EMC

and the Cuban Ministry of Construction.

Rose Gypsum is negotiating to become

the project’s joint operator, distributor and

manufacturer. If the deal goes through,

Rose Gypsum would become the sole

manufacturer of gypsum-related products

in Cuba—in particular wallboard.

For Rose Petroleum, which also

mines for oil and gold in Mexico and

shale in the United States, the processing

of gypsum would be a shot in the arm; low

world prices for oil and gas have kept that

division of the company in the doldrums.

“It’s a huge opportunity in a very

strong, growing market,” Idiens told

Proactive Investors media last summer.

“I’m sure everyone is aware that Cuba is

one of the few places in the world where

growth is exponential at the moment and

will continue so, in my view. Tourism is

growing there. It’s just leaps and bounds

[and] the construction industry itself, if

they don’t fulfill the requirements, then

tourism is going to struggle because there

simply won’t be enough hotel rooms.”

London-headquartered Rose

(LON:ROSE) began bidding for the

mining concession in March 2016, characterizing

the multiple requirements as an

Rose Petroleum expects to mine gypsum

from Cuba quaries like the one above in

Chile; it will be used to create wallboard

for home and office construction

“extremely challenging process.” Although

Idiens declined to tell Cuba Trade the

cost of the plant, he confirmed that his

company would employ locals for mining

and manufacturing.

In a January press release, Rose also

fleshed out its on-island progress in oil

and gas, noting that “good relationships”

with Cuba were yielding ancillary opportunities;

Rose has been in early stage

discussions regarding licenses with Cuban

national oil company CUPET. Energy

experts believe Cuba has more than one

billion barrels of recoverable oil.

Meanwhile, the demand for wallboard

must be met. Idiens said once his

company signs a contract with the Cuban

government, it will take 12 months to

begin producing construction materials. H

www.TheLegacyCompanies.com

30 CUBATRADE APRIL 2017


ENTREPRENEURS

Having Trouble Finding

a Hotel In Havana?

California Dreaming

By Doreen Hemlock

How a California-Cuban couple started a café in Havana

Shona Baum and Paver Core Broche, owners of the California Café in Havana

When American social worker Shona

Baum took a trip to Cuba seven years ago,

she never imagined she’d be running a

restaurant in Havana offering food from

her beloved California.

But Baum’s chance encounter on Havana’s

famous Malecon sea wall has taken

her on an unexpected journey. She fell in

love with a Cuban, Paver Core Broche.

They got married and lived for years in

San Francisco.

Fate intervened again when the

Spanish-speaking couple was considering

opening a restaurant in Mexico—and

Cuba liberalized its rules for self-employed

ventures. So, she and Paver teamed

up with Paver’s brother Ibrahim, bought

a small locale near the landmark Hotel

Nacional in Havana’s Vedado district, and

opened their bohemian California Café in

March 2015.

Fusing California and Cuba has

not always been easy, but the couple has

pooled its respective native insights to

navigate the cultural differences that affect

their business. This includes training a

Cuban staff to understand American attitudes,

especially the American idea that

“time is money.”

In Cuba for example, said Baum,

employees folding napkins might notice

U.S. tourists by the door and figure, “I’m

working. They can wait.” Her five-page

training guide tells them to drop the napkins

and greet the guests. “If Americans

stand there 20 seconds without help, they

are going to leave,” Baum instructs the

crew, all self-taught in English and eager

to meet foreign visitors.

Finding supplies also can present

challenges. The restaurant offers California

specialties such as veggie burgers and fish

tacos (and its dishes contain less sugar

and more vegetables than typical Cuban

eateries do.) “Apart from chicken [which

is imported into Cuba from the U.S.],

we try to serve everything that is locally

sourced,” Baum said. But with no wholesale

stores and irregular supplies at many

Cuban markets, items such as spices are

sometimes hard to obtain.

Katie Smith, a 25-year-old living

in Brooklyn, N.Y, wasn’t thinking about

those concerns as she enjoyed lunch at

the cozy 24-seat café one recent weekday.

She’d heard about the restaurant from

friends and found the idea of California-Cuban

fusion appealing—adding

California’s zest to what she considers

usually blander Cuban fare. “This is very

flavorful,” she said, munching on a Cuban

sandwich offered with the café’s homemade

hot sauce.

“The place reminds me of a little hut

restaurant you’d find in the Caribbean,

and it’s a connection to home, because I’m

from California,” Smith said. She and a

pal sat on a covered terrace near a painting

of a bear, California’s state animal, dressed

in a Cuban guayabera shirt and smoking a

Cuban cigar.

The intimate café appeals both to visitors

looking for a real “people-to-people”

experience and to Cuba’s emerging middle

class—including many young people

working in tourism—who can afford what

by U.S. standards is modest pricing, said

husband Paver Core.

Next up for the enterprising couple:

An inn on Havana’s Guanabo beach. The

likely name: California Hotel. H

Photo by Mario Luis Reyes

Why Not See It Like a Native?

Our apartments are in the Old Plaza (La Plaza

Vieja) in the heart of Old Havana. Here, visitors can

discover and get to know Cuba by walking the

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home being taken care of by a friendly Cuban host.

• Accommodations for two, four or six people.

• Reasonable rates. Breakfast included.

Contact Maylu Hernenandez at

maylu21@hotmail.com for availability and rates.

32 CUBATRADE APRIL 2017


TRADE

Photo by Michael Newsome

THE PENNSYLVANIA

RUM PLAY

Pennsylvania legislators flew to

Havana with a simple idea for

getting around the 55-year-old

embargo against Cuba: Trade

agricultural products for rum

By Brian O’Neill

The first idea Pennsylvania’s delegation

to Cuba had was a simple trade: food for

rum. Two days into their late February

trip to Havana, the plan got even simpler:

Just buy a boatload of rum for state liquor

stores and forget the embargo. Republican

state senate leaders say the 21st

Amendment—which ended Prohibition

30 years before the embargo began—gives

each state absolute control over alcoholic

beverages.

“You can’t just suspend the federal

constitution,” said state Sen. Chuck McIlhinney,

a Bucks County Republican and

chair of the state Senate Law and Justice

Committee.

A Pennsylvania play for Cuban rum

would be an extraordinary move at a time

when eased Cuban-American relations

under President Barack Obama have given

way mostly to guesses about President

Donald Trump’s stance. Toss in conservative

Keystone Republicans venturing into

one of the last outposts of socialism—

along with bureaucrats who have their

own spin on the art of the deal—and the

plot gets as thick as Cuban molasses.

If McIlhinney is right, Pennsylvania

may have a winning constitutional argument

to bypass the embargo. The Liquor

Control Board (LCB) is consulting its

lawyers and planning a strategy that could

end with Pennsylvania being the only

place to buy Cuban rums—though likely

not before a court battle.

Federal impoundment of cases of

Cuban rum at the Philadelphia docks

until the case is decided in court wouldn’t

be the worst publicity, either. That surely

would make national news and increase

U.S. appetite for the long-taboo spirits.

It seems more likely Pennsylvania

would seek a declaratory judgment. A

federal judge could issue a legally binding

decision before any rum leaves Cuba.

The irony of the state LCB being a

vehicle for reform is lost on no one in the

state house. Senate President Joe Scarnati

said, albeit with a smile on his face, that this

transaction would be “from one controlled

state to another.” Sen. McIlhinney said that

such a deal would do more to help capitalism

than the embargo ever did. And as

far as dealing with a socialist state, he said,

“The Russians are gone. I didn’t see any.”

If the deal does move forward, the

multi-day talks Pennsylvania state officials

34 CUBATRADE APRIL 2017


Photo by Michael Newsome

At the Table: State Rep. Paul Costa (left) meets with officials of the Food Industry Ministry.

had with a tag team of Cuban government

officials in and around Havana may

come to be seen as one uncommonly quiet

revolution. Three of the four minority

and majority chairs of the Pennsylvania

legislative committees overseeing liquor,

and two of the three LCB board members,

made the stops with other legislators, and

they ran into surprises from the get-go.

At their first meeting with Rafael

Suarez Rivacoba, director of international

relations for the government sugar group

Azcuba [rum is made from sugar], the

director asked through an interpreter why

all these visitors were even there. When

he heard “rum,” Suarez and his colleagues

understood.

“We think we have the rum that an

American citizen deserves to drink,” said

Rodrigo Diaz Sandoval, director of the

group’s division of logistics and exports.

In a joint venture with Pernod Ricard of

France, Cuba currently exports rum to

some 100 countries, but not to the U.S.

When LCB board member Mike

Negra said the Pennsylvanians were seeking

to buy, Suarez broke in with a question

36 CUBATRADE APRIL 2017

that might as well have been translated as,

“So what’s taking you?” He had a meeting

that afternoon with the state rum group,

and said it would be merely a technical

detail to create 750-milliliter bottles for

the U.S. market.

We want to end that

blockade

Orlando Hernandez Guillen

The Pennsylvanians later raised the

idea of bartering agricultural products in

exchange for rum. They were told that

in bygone days Cuba sent tons of sugar,

rum, and citrus fruit to socialist countries

in exchange for oil, equipment, and food.

But Cuba is past that now. They like to

be paid in cash. And they want to sell to

the U.S.

“We want to end that blockade,” said

Orlando Hernandez Guillen, president of

the Cuba Chamber of Commerce. Juan B.

Gonzalez Escalona, president of CubaRon,

told the Pennsylvanians that he’s sure

Americans sometimes smell Cuban rum

wafting across the Straits of Florida. He’d

like to end our frustration “for humanitarian

reasons.”

“We’ll all go home and be ambassadors

for Cuba and encourage our government

to end this unjust embargo,” said

Rep. Adam Harris, chair of the House

Liquor Committee.

Ironically, neither the rum nor any

domestic monopoly on its sales would last

long if Pennsylvania gets Cuban rum first.

Seventeen states control wholesale spirits.

If Pennsylvania’s constitutional argument

prevails, McIlhinney expects the entire

embargo to be broken.

“I’m not trying actually to be bootlegger,”

he said. “I would like the question

raised and settled.’’

After the meetings, Mike Diven, a

former state legislator from Brookline who

organized the trip as a combined amateur

boxing exhibition/trade mission, betrayed

no discouragement. “I didn’t hear a solid

no,” Diven said. “I hear it’s complicated.”

In the boxing tournament he organized

for visiting American pugilists, however,

the Cubans took six of the nine bouts. H


INTERVIEW

As Cuba aggressively courts foreign

investment in its energy sector,

renewable energy is at the top

of the list. Cuba Trade recently sat

down in Havana with Argelia Balboa

Monzón, senior advisor for renewable

energies with Cuba’s Ministry

of Energy and Mines, to get her

take on where the sector is heading

going forward.

An Interview with

Argelia Balboa

Monzón from Cuba’s

Ministry of Energy

and Mines

We do not refuse foreign

investment from any source

Argelia Balboa Monzón

Photo by Bahare Khodabande

By Michael Deibert

CT: How would you describe the changes

in energy policy in Cuba over the last

decade?

Since 2005 we have had something of a

revolution in seeking greater efficiency,

in trying to reduce our consumption of

fossil fuels, and in seeking to develop new

energy sources... We started to work by

changing thousands of refrigerators, thousands

of televisions, air conditioners and

so on [to allow] a considerable decrease

in fossil fuel consumption. At that time,

a multidisciplinary group was created for

the study of the development of wind

energy at the Universidad Tecnológica de

la Habana José Antonio Echeverría (CU-

JAE). They created a wind map of Cuba.

A factory had already been constructed

to produce photovoltaic solar

panels, but in very small quantities... That

factory nowadays produces 15 megawatt

photovoltaic panels and there has been

an investment to produce 65 megawatt

solar panels... So there has been a positive

shift since 2005, under the direction of

the country, to do this type of work. And

Cuba has also always been of the opinion

that the environment is very important.

In the 1980s, there was a large boom

in the construction of bio-plants, mostly

small producers. In terms of hydroenergy,

we do not have big rivers. We are a narrow,

long island that does not have large bodies

of water. But we have a policy to take advantage

of what we do have, especially in

mountain areas. We now have more than

132 small hydroelectric power stations

that generate electricity.

Where are we today? Today we have a

policy for the development of renewable energy

and increased efficiency, and the country

has several programs: A wind program, a

solar-photovoltaic program, a hydro-energy

program, a biomass program, etc.

CT: The government said it wants to

increase the share of energy produced by

renewable sources from 4 percent now to

24 percent in 2030. What is the mix you

are looking for within this 24 percent in

terms of biomass, solar, hydroelectric,

wind etc?

Biomass is going to be the most important...Today

we still have 57 plants [for

potential use in biomass energy]. Thus, 6

percent of this 24 percent should constitute

biomass... [Eventually] biomass must

contribute 14 percent [of all energy]. Then

there is wind energy and solar energy, as

well.

CT: What are the financial approaches?

Which countries will be the best contributors?

The financing of our development of

renewable energy requires an adequate

combination of both state credits and

foreign investment. We have Law 118

(passed in 2014) which describes all the

FOR YOUR WORLD TRADE CENTER

WHERE: At a Venue in Your City

HOW: By Co-Venturing with World Trade Center Miami

By co-venturing with the World Trade Center Miami and Cuba

Trade Magazine, you can share unique market intelligence

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from the U.S. Department of Commerce, the U.S. Chamber’s

Cuba Business Council, Engage Cuba and the U.S. Agricultural

Coalition for Cuba, the World Trade Center Miami and Cuba

Trade Magazine have developed half-day and day-long seminars

that will address the following:

• An Overview of the Cuban Economy

• Specific Sector Opportunities

• Cuban and U.S. Rules & Regulations

• The Politics of the Embargo

• Navigating Cuba’s Infrastructure

• Case Studies of U.S. Companies

Call a WTC Miami representative today to see how we can partner in order to bring

your membership a timely seminar on a topic that has attracted attention nationwide.

Please contact:

Charlotte Gallogly, President, World Trade Center Miami at 305.871.7910 or

Richard Roffman, Publisher, Cuba Trade Magazine at 786.206.8254 ext 403

Or send email to: info@worldtrade.org

38 CUBATRADE APRIL 2017


BEFORE THE EMBARGO,

Cuba was the top

destination for our rice.

Photo by Matias J. Ocner

Energizing Cuba: The country needs energy investments in order to power its cities

ways we can have foreign investment.

And our main socio-economic partner

is no secret: It is China, which also has

significant experience in the development

of renewable energy, with both solar and

wind technology. But we do not refuse

foreign investment from any source—that

is according to our foreign investment

law. We can talk. Other countries are also

negotiating. We have at this time plans to

build 14 wind parks. Of these 14, eleven

will be built with foreign investment, from

countries that include Spain and Holland,

as well as China.

CT: What measures are being adapted

to facilitate the process of approving and

financing foreign investments?

We have Law 118 regulating all of that—

and it is transparent. We are working in

that direction. We have a portfolio of

investment opportunities that was highlighted

at the Havana International Fair

[which took place in November of last

year]. We have been collecting proposals

for three years—that is, we offer and say

that we want to build such and such parks,

and in such and such provinces. And we

have the special zones of development like

Mariel [a 180-square-mile free trade and

development zone near Havana].

CT: Are there specific geographic areas

for energy investment in Cuba?

In terms of wind energy, for example,

although there is wind elsewhere the

highest velocity from what we have

studied so far is along the north-east

coast, in places like Gibara, Las Tunas,

Holguín, and Maisí, and there are four

park projects already in discussion with

a foreign company. There is very good

wind capacity that can reach factors of

very high indices [of energy production],

a capacity of 36-37 percent [for regional

power requirements], and in times of

winter it can reach up to 40 percent in

the area of Gibara. And in the Punta de

Maisí (in Cuba’s Guantánamo Province),

it is better still because there the

wind blows with great force. It is a zone

privileged by the wind in the country,

you might say.

As for the sun, it strikes Cuba

everywhere more or less with the same

intensity. We have some provinces that

are hit more intensely, however, and that

has been studied by the Instituto de

Meteorología de Cuba (Cuban Meteorology

Institute). There is more sun in

some areas of the provinces of Granma

and Cienfuegos where it is a bit more

intense. But definitely the zone where

we are located, near the equator, receives

something like, on average, 5 kilowatts

per square meter per hour of intensity.

We are going to take advantage of

everything and we intend to continue

studying some sources that can help us

do so. H

LET’S GET THERE AGAIN.

40 CUBATRADE APRIL 2017


SPORTS

TAKE THE NEXT STEP TO DO BUSINESS IN CUBA

Soccer’s Turbulent

Rise in Cuba

Cubans are embracing the beautiful game, despite

the country’s fondness for baseball—and its unusual

political history with the sport

By Nick Swyter

Cuba’s preference for baseball over soccer

is so well known that it once nudged the

world closer to nuclear war.

More than a year after the botched

1961 Bay of Pigs invasion, a CIA analyst

told President John F. Kennedy that he

spotted soccer fields on the coast of Cuba,

which he interpreted as an indication of

a Soviet presence on the island. “Cubans

play baseball, Russians play soccer,” the

analyst reportedly told Kennedy.

That suspicion was one of several

factors that motivated Kennedy to approve

U-2 flights over Cuba to photograph Soviets

installing missiles on the island, setting

in motion the Cuban Missile Crisis.

“The presence of soccer fields was,

indeed, interpreted as an indicator that

a base was for Soviet rather than Cuban

troops, but obviously, it did not signify

missiles,” said William LeoGrande, an

American University professor and author

of Back Channel to Cuba: The Hidden

42 CUBATRADE APRIL 2017

Groups of young men play daily pick-up games on the sidelines of Havana landmarks

History of Negotiations Between Washington

and Havana.

U.S. intelligence once again treated

soccer fields as an indication of a Soviet

presence in 1970. Then-Secretary of State

Henry Kissinger urged the Soviets to halt

construction of a submarine base near

Cienfuegos after U.S. intelligence spotted

soccer fields, says LeoGrande.

Baseball is traditional, but

soccer is what’s happening

now

Rodolfo Hernandez

More than 25 years after the collapse

of the Soviet Union, soccer fields are still

largely absent in Cuba, and the existing

ones are not well maintained. What isn’t

missing, however, is the island’s growing

enthusiasm for the sport.

Groups of young men play daily

pick-up games on the sidelines of Havana

landmarks such as El Capitolio and the

U.S. Embassy. Younger boys can usually

be spotted practicing their footwork with

tattered balls at Parque de la Fraternidad

or Paseo del Prado. For those who prefer

to watch the game, countless bars and

cafés televise La Liga and Champions

League matches to fans wearing

counterfeit Real Madrid and Barcelona

merchandise.

While Cuba is still by no means a

soccer powerhouse, the game is picking

up popularity in a country that has historically

punched above its weight in sports

such as baseball, boxing and athletics.

“I’m tired of baseball,” said Rodolfo

Hernandez, a young Cuban who practices

with his friends at a crumbling sports

complex next to Havana’s Calixto Garcia

Monument. “Baseball is traditional, but

soccer is what’s happening now.”

Photo by Matias J. Ocner

Manuel Supervielle

Supervielle.cp@gmail.com

305.215.8002 • cpxxi.com

HOW DO I…

• Register my company in Cuba?

• Submit paperwork for accounting, banking and taxes?

• Approve business travel to Cuba?

• Find industry-specific market analysis?

• Stay up-to-date with the latest regulations?

• Collaborate with locals?

Caribbean Portal XXI in Miami and Akokan in Havana have the answers to simplify business

opportunities in Cuba. The joint team of experts advise on legal, financial, regulatory, practical, political

and cultural factors to help you set up your business for success in Cuba.

We offer accurate risk/reward calculation associated with pursuing economically viable, legally

compliant and logistically sustainable projects.

CONTACT US FOR A CONVERSATION ON YOUR NEXT STEP

Angel Ayala

negocios@akokan.com

011.53.5818.6888 • akokan.com


The football here is good,

what isn’t good is the

conditions

Departures from Miami, Tampa and Key West.

Photo by Matias J. Ocner

Operated by

Making do: Young men play on a pitch that is more dirt than grass.

Hernandez and his friends play

a very informal style of soccer. No

11-a-side matches on a regulation size

pitch for these men. Instead, they play

seven-a-side matches on a smaller field,

with a tattered ball and sticks wedged

in the ground for goalposts. The result

is a fast-paced game where neither side

controls possession for long.

Part of the appeal of the game, says

Hernandez and his friends, is that the

game is relatively easy to pick up despite

the obstacles. “You just show up and start

playing,” said Fabian Falcon Dominguez,

another Cuban who plays with Hernandez

and his friends.

While Hernandez and Falcon

Dominguez look forward to the daily

pick-up games, they admitted that

arranging games comes with challenges.

The pitch they use is more dirt than grass.

They also tend to use tattered balls because

high-quality ones are hard to come

by. Like many products in Cuba, they say

the best balls come from the suitcases of

people who travel abroad.

“The football here is good, what isn’t

good is the conditions,” Hernandez said.

“Look here, I don’t have shoes.”

Cuba’s persistent enthusiasm for the

sport is also calling the attention of the

United States. Six months after the two

countries normalized relations, the New

York Cosmos of the North American

Soccer League (NASL) played a friendly

match against Cuba’s national team.

Legendary players Pelé and Raúl were

in Havana for the historic match that

ended with a 4-1 victory for the Cosmos.

More recently, the U.S. national team defeated

Cuba 2-0 last October in a friendly

game in Havana.

However, just like in baseball, U.S.

involvement in Cuban soccer is a double-edged

sword. Cuba’s national team has

the unfortunate reputation of losing players

each time it sends a team to the Gold

Cup, the biannual North American soccer

tournament usually hosted in the United

States. The Seattle Sounders’ Osvaldo

Alsonso, who is arguably the best Cuban

player, defected during the 2007 tournament.

Four players defected during the

2015 tournament, which overshadowed

the team’s accomplishment of reaching the

quarterfinals. Cuba did not qualify for the

2017 Gold Cup, which will also take place

at various U.S. venues.

It’s not yet clear to what extent Cuba

is willing to invest in its growing enthusiasm

for soccer. Still, there are some signs

that the Castro government is keeping an

eye on the rise of the sport.

According to a Reuters report, one

of Fidel’s final acts was to order a soccer

field for the kids of his neighborhood—a

decision he made after neighbors told

him there was nowhere for them to play

soccer other than the street. H

Phone: 305-615-4151

44 CUBATRADE APRIL 2017


AGRICULTURE

Urban farming: The Alamar Organic Nursery, located in the Havana suburb of Alamar

Organic Growth

In suburban Havana, Cuba’s organic

farming sector thrives

By Michael Deibert

Photos by Jon Braeley

Dotted with stark Soviet-style apartment

complexes built years ago to house workers

and advisers from Cuba’s Cold War

patrons, the Havana suburb of Alamar is

better known as the birthplace of Cuban

hip-hop than for any bucolic attributes.

It is nonetheless a hotbed of the urban

organic farming movement.

Alamar is home to the Organoponico

Vivero Alamar (The Alamar Organic

Nursery), organized as a Unidad Básica

de Producción Cooperativa (Basic Unit

of Cooperative Production), a type of

agricultural co-op in Cuba that has been

instrumental in instigating the organic

farming boom taking place on the island

over the last 25 years. Borne out of necessity

during the período especial (the “special

period” in the early 1990s when subsidies

from Cuba’s former patron the Soviet

Union evaporated), the practice has now

become a key component of the island’s

drive towards economic self-sufficiency.

“We have two goals with this enterprise,”

says Miguel Angel Salcines Lópe,

one of the farm’s founders, as he strolls

along neatly-tended rows of mushrooms,

brilliant green lettuce, and other vegetables.

“The first is to supply food, to provide

organic products at tolerable prices. The

second is to create employment. Here

there are 125 people working on 25 acres

We have a lot of women and elderly

people, who have a lot of knowledge and

experience.”

The devastation caused by the loss

of Soviet support (the country’s Gross

Domestic Product dropped by 34 percent)

is what pushed Cuban agriculture

from one dependent on fertilizer and

diesel-powered machinery to one based on

sustainable organic practices. At the same

time, food rationing and a break down of

distribution systems led to an explosion

of urban agronomy. The result is that,

according to Cuban government estimates,

there are today some 10,000 organic urban

farms in cities across the country.

The Alamar Organic farm, founded

at the end of the “special period” in 1997,

started as a mere 8,000-square-foot plot.

It now harvests 300 tons of vegetables annually.

The farm also provides subsidized

meals to workers, who toil 7 hours a day

and are entitled to take 1.5 pounds of food

home with them at the end of each shift.

“I think what happened was there was

already a group of scientists and certainly

farmers who were seeing the negative impact

of the highly intensive, industrialized

agriculture system that Cuba had in the

1980s,” says Margarita Fernandez, the Executive

Director of the Burlington-based

Vermont Caribbean Institute. “They were

seeing a lot of negative impacts, and they

were looking at the more holistic approach

to grow food. The crisis allowed the political

space for their vision to spread.”

Organic farming—a type of farming

APRIL 2017

CUBATRADE

47


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Feeding Havana: The Alamar Organic Farm provides subsidized meals to workers

use that does not use antibiotics, fertilizers,

genetically modified organisms, growth

hormones, or pesticides—has become an

increasingly attractive option for consumers

in the United States and Europe. Cuba

already exports some organic produce to

Europe, but is banned from doing so to

U.S. markets.

Buoyed by the rapprochement

initiated by former U.S. President Barack

Obama, however, numerous U.S. agricultural

groups have sent fact-finding

missions to Cuba, and Cuba’s organic

farming sector has hosted visits from

both the U.S. Agriculture Coalition for

Cuba (USACC) and the Organic Trade

Association. “There could be a huge

market in the U.S. for organic produce

from Cuba,” says Paul Johnson, co-chair

of the USACC. “Unfortunately, this will

not happen until exceptions are made to

the U.S. embargo, or until the embargo is

altogether lifted.”

One of the big hurdles that remains

There could be a huge

market in the U.S. for organic

produce from Cuba

Paul Johnson, co-chair of the USACC

is that Cuba’s land remains 80 percent

government-owned, and current U.S.

policy—even with exceptions—bans the

import of any good that is not produced

by a private enterprise.

Ironically, one byproduct of Cuba’s

recent tourist boom —2016 was a record

year for the island, hosting 4 million

visitors—is causing something of a new

food crunch, even as it brings much needed

cash to the island. Local markets for

Cuban citizens are being drained of the

best produce, which is being snatched up

by palaldares (private restaurants) to feed

hungry visitors in tourist-heavy neighborhoods

in Havana and other cities.

“Today you certainly have an opportunity

to grow the national production of

food to feed that new market [of tourists],”

says Margarita Fernandez. “But

there is a risk that organic food produced

on the island is going to be targeted to the

tourist sector.”

Even so, people like farmer Salcines

López argue that the phenomenon of organic

farming in Cuba has given it a sense

of self-sufficiency that has been absent

in a country which still imports 70 to 80

percent of its food needs.

“There are still mechanical problems

and bureaucratic problems, of course,” Salcines

López says, walking past a majestic

ceiba tree, its branches covering a broad

road near Alamar’s tower blocks, its roots

festooned with objects (candles, chicken

bones) indicating it as a place of veneration

for Cuba’s santería religion. “Here,

organic farming arises out of necessity

and, make no mistake, this farm has had a

profound social impact.” H

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48 CUBATRADE APRIL 2017

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RISE OF THE PROGRAMMERS

Since the 1980s, Cuba has been producing

skilled programmers who ultimately

seek opportunities with leading companies

overseas. Now, some of Cuba’s young entrepreneurs

are choosing to stay and develop

onshore startups. Will economic reforms

and a government-controlled internet keep

pace with the rising global demand for tech

talent?

By Victoria Mckenzie

It has been a mixed year for Cuba’s tech scene. “At this point,

it’s not something that is a boom,” says John Caulfield,

former Chief of Mission of the U.S. Interests Section in

Havana, and co-founder of the Innovadores Foundation, “but it is

something that’s happening.”

Thanks in part to the coordinated efforts of international

foundations and tech accelerators, a number of Cuban entrepreneurs

are getting their tech businesses off the ground, the

majority of them designed to serve the needs of Cuba’s emerging

private sector. Developers of apps for everything from restaurant

reviews to Cuba’s version of Craigslist have taken the lead, with

more heavy-duty programing for U.S. corporations in the wings.

But the substantial cost of a “cuentapropista” license, limited

internet connectivity, and a lack of banking services still makes

going into a private IT business a risky venture for Cubans.

The Innovadores Foundation (IF) began working in Cuba

two years ago with the goal of creating an incubator for young

entrepreneurs in the areas of programming and design. “Our

goal is to help create an ecosystem in Cuba where intelligent,

hardworking Cubans have a reason to stay, and don’t go to work

abroad, or make money for people abroad,” explained Jono Matusky,

who oversees the foundation’s operations in Havana.

“You know—actually work in Cuba and solve problems in

Jono Matusky of the Innovadores Foundation uses

the internet connection of the Habana Libre hotel

which is conveniently located near his home in

Vedado, Havana

Photo by Jon Braeley

50 CUBATRADE APRIL 2017


Photo by David Ramos Casin

Photo by Thos Robinson

Working with less: Software programmers are the latest Cuban entrepreneur Connecting through the Catholic church: John McIntire, chairman of the Cuba Emprende Foundation

Cuba,” said Matusky. “That’s sort of our dream.”

Innovadores is now in the third year of its internship exchange

program, which brings Cuban high school and university

students to work with the NYC-based accelerator Grand Central

Tech. Down the road they hope to create a full incubator program

on the ground in Havana, which will provide interns with

access to resources like the internet, software, computers, mentorship,

and a co-working space.

Much like any foreign organization or business hoping to

establish a presence on the island, the Innovadores Foundation

has been in talks with government officials for years, and still

awaits approval from the Ministry of Culture. “We got in at a

nice time, and because we have a good partner down there, it

was going well,” said Matusky, referring to the Ludwig Foundation

of Cuba (LFC). But after an uncertain year, the government

has begun hitting the breaks on international projects.

“There was a Rolling Stones concert, Chanel show, all these

big international projects,” Matusky said. “I think the government

felt like they weren’t sure if everything that was happening was

what they wanted in terms of the cultural standpoint. So they

sort of froze a lot of approvals for international [projects] under

the Ministry of Culture.”

Then, of course, came Donald Trump’s election, and Fidel’s

death. “The government is not taking any big risks right now, so

we’re just being patient, and doing what we can in the meantime.”

While they wait for the green light to open their Havana incubator,

Innovadores is still able to provide mentorship and other

non-material support to local cuentapropistas—licensed workers

in the private sector—such as connecting one young designer to

New York fashion insiders, and helping an artist-programmer duo

run an Indiegogo campaign to raise money for their video game.

Matusky, himself an engineer and the co-founder of a gluten-free

microbrewery in Pittsburgh, refers to the young Cuban

entrepreneurs as “teams” even though legally, they work as individual

cuentapropistas under either a programmer’s or artist’s license.

Right now, there are two ways these innovators can work

together on projects. “There’s the one model where it’s a team

of equal developers,” said Matusky “and they’re sort of sharing

things, and doing it without a contract, based on trust.” The

other model is that of sole proprietorship, where one designer or

programmer owns a business, and hires other licensed entrepreneurs

who “are basically contractors, if you look at it from a U.S.

[perspective].”

For the Innovadores incubator—and for the native tech

industry as a whole—internet access remains the sticking point.

“We could do almost everything we wanted to do right now

without approval from the government,” Matusky told Cuba

Trade. “We could rent a space. We could invite different people to

come and work there. But as soon as you want to provide internet

access, that’s where you really run into difficulty… You have to

have explicit approval from the government, and then they want

to know what you’re doing.”

The Talent Pool Awaits

Although the introduction of wifi hotspots and cuentapropista

licenses have made it possible for a small entrepreneurial tech

scene to exist in Cuba, the government’s cautious steps forward

have not been enough to counter the global demand for skilled

IT workers, which has lured talented computer scientists off the

island for decades.

In a conversation with Cuba Trade earlier this year, John

McIntire, chairman of the Cuba Emprende Foundation, said

that “a disproportionate number of people who have left in the

last few years are people in their 20s and 30s who are computer

programmers. They know their skills are employable, and they

can earn a lot more money outside of Cuba.”

McIntire’s Cuba Emprende Foundation has for years been

raising money to support the Catholic Church of Cuba’s Proyecto

Cuba Emprende, which trains potential entrepreneurs with

the skills they need to run private businesses. So far more than

2,000 students have gone through programs administered via

the church, including many in the high-tech sector, with an eye

toward remaining in Cuba.

One U.S. employer who runs a small development team

in Cuba describes a desperate “war for talented programmers”

among the most advanced technological companies around the

world. He believes Cuba’s pool of skilled techies is waiting to

be discovered. “If you have a place like Cuba where there are

talented people, the companies that could potentially hire them

are going to find them.”

The biggest concern, he says, is the lure of higher wages off

island. “It’s bad there right now,” he added. “There’s a big gulf

between the cost of living and wages. How much longer is it

sustainable to pay people a dollar a day?”

A History of High Tech

Cuba’s private tech sector may be nascent, but it’s state tech sector

is not. The government has a long history of training coders

that goes back to the 1970s, when developers were busy creating

programs for the sugar industry. At the time, Cuba hoped to improve

its centrally run economy through cybernetics—the science

of communications and automatic control systems—the same

degree that young Innovadores interns are graduating with today.

The severe economic collapse of the late 1980s left few

52 CUBATRADE APRIL 2017

APRIL 2017 CUBATRADE

53


practical applications for software development on the island,

according to Merdardo Rodriguez, one of Cuba’s leading computer

scientists and co-founder of the first “official” video game

development group (Merchise). That’s when the IT sector became

concentrated on outsourcing, “which I think is very sad,” he

said, “because I consider these practices to be a form of modern

exploitation.”

Things have improved significantly since the 1990s, when all

but a few Merchise members left the island to work for overseas

firms. Wilder Mendez, who was hired by an Ottawa game

developer, recalled that “back then, an investor had to import everything

into Cuba: computers, printers, keyboards, cameras, scanners,”

and they had to travel to Cuba with cash to pay workers.

“Now, a lot of investors can go to Cuba and find decent programmers

everywhere that already have their computers at home.”

But the limited connectivity is still a problem. Even as outsourced

labor, “a Cuban programmer still cannot compete with a

Vietnamese programmer, due to the simple fact that the Cuban

does not have internet in order to submit regular updates of his

or her work, to test the app, and get paid for it,” Mendez told

Cuba Trade.

And if you don’t live near a public wifi spot,

then in terms of working with international

customers, you are kind of screwed.

Jono Matusky, Innovadores Foundation

Cuba’s internet provider, ETECSA, happens to be one of

the government’s highest earning companies. “It’s a monopoly,”

said Caulfield, “and it’s essentially funded by foreigners because

it’s really foreign customers who are able to afford the fees—not

necessarily directly, but through money they send to their relatives

in Cuba.”

Wifi hotspots cost $1.50 an hour, and though black market

resellers are offering cheaper connections using Connectify software

and NanoStations, the cost remains steep when compared

to the average monthly salary in Cuba which hovers around $28.

To rent a decent sized work space with internet access would

cost around $1,000 a month, “which is astronomical if you’re just

an independent freelance developer,” said Matusky. “You couldn’t

afford that, so you would rely on public wifi spots. And if you

don’t live near a public wifi spot, then in terms of working with

international customers, you are kind of screwed.”

Despite these significant obstacles, Bernardo Romero,

founder of the IT startup InGenius, says he prefers to develop

his business in Cuba rather than just being part of the workforce

in another country—even if he could earn a lot more money

elsewhere. Besides the obvious benefits of staying in one’s own

country, near family and friends, “I have potential here. These

days in Cuba there are a lot of opportunities, and there will be a

lot of opportunities opening up in the future.”

Since Ingenius was first profiled by the Washington Post two

A wifi hotspot in Old Havana attracts both locals

and tourists who are willing to pay the cost of

$1.50 an hour to go online

Photo by Jon Braeley

54 CUBATRADE APRIL 2017


I have potential here.

These days in Cuba

there are a lot of

opportunities

Photos on both pages by David Ramos Casin

The New Wave: Bernardo Romero, founder of the IT startup InGenius

Startup: The InGenius workshop in Havana

years ago, Romero has added one more employee and expanded

his office. Thanks to a new wifi hotspot, he gets reception in his

office and no longer has to run to the park to communicate with

clients. Still, the majority of his customers are smaller companies

“because of the conditions we have [here]—the payment method

and slow internet,” said Romero. “Small businesses have more

flexibility to work within our limitations.”

Romero was also a winner of 10x10k, a competition by the

Cuba Emprende Foundation and #CubaNow that brought a

group of ten startups to the U.S. for a two-week accelerator program.

His new project, Cubazon, is an online marketplace that

allows people outside of Cuba to order items produced by the

Cuban entrepreneurs, for delivery anywhere on the island.

The Internet Throttle

Insiders are quick to point out that programmers and coders

don’t need the internet to do their jobs. But the lack of connection

limits entrepreneurs, who are the ones creating the need for

a local tech industry. When Cuba Emprende and #CubaNow

co-sponsored their 10x10k contest to support tech startups, they

were flooded with proposals for apps and websites geared toward

the service industry: advertising platforms, B&B finders, cultural

guides, platforms to connect freelancers with clients, “all kinds of

stuff that you’d see in a developing economy,” said McIntire.

But the developing economy can only grow as fast as it’s

communications system. “The poor people in the Airbnb,” Caulfield

told Cuba Trade. “It’s very frustrating [for] them because

they have to go out into the park every day to see who’s registered,

and they’re often running into problems where they get

double booked because they can’t be online all the time.”

If the government wanted to provide Cubans with internet

access, “they could do it tomorrow,” said Caulfield. “They could

certainly purchase the technology, and there’s plenty of people

offering it to them. It’s just that so far they are reluctant to go

there.”

The Cuban government understands the economic necessity

of improving communications, “but they’re very worried,” Caulfield

told Cuba Trade. Because internet access undermines the government’s

monopoly on information, “They’re constantly back and

forth between opening it up a little [and] kind of restricting it.”

Growing Pains

As Cuba emerges from a completely state-controlled economy to

one with a stronger private sector, there will be inevitable growing

pains as the old methods give way to the new. It is a two-stepforward,

one-step-back process of evolving economic models. As

part of this process, one of the challenges faced by the high-tech

entrepreneurs of Cuba is just how public they can make themselves

as independent, private businesses.

“Unfortunately, as soon as something gets a lot of international

publicity, that the government is not running itself, it

causes problems,” Caulfield told Cuba Trade. “This is just part of

the reality of living in Cuba.”

If the government wanted to provide

Cubans with internet access, “they

could do it tomorrow

John Caulfield, co-founder, Innovadores Foundation

Last August, for example, a much-anticipated startup weekend

organized by the Merchise Startup Circle was shut down a

day before the event, all of the hotels suddenly claiming “technical

problems.” Earlier that spring Stripe Atlas, a U.S. firm that

helps internet businesses get started, announced it was partnering

with Merchise to help Cuban entrepreneurs gain access to bank

accounts and accept payments from all over the world.

The deal gained considerable international attention, and

President Obama even mentioned Merchise during a speech

in Havana. But following this burst of international attention,

Merchise was erased from Cuban media.

On the other hand, Cuba’s underground railroad of digital

entertainment—El Paquete (the packet), a collection of video and

music transferred by flash drives—has for years been distributed

across the island without government interference. At last year’s

eMerge technology conference in Miami, one of the Paquete’s

founders said this tolerance was based on the absence of anything

political in the content.

It’s not certain what this means for young entrepreneurs

who are learning how to brand themselves, or for the new waves

of students graduating from such academic powerhouses as the

Universidad Tecnológica de la Habana José Antonio Echeverría,

named after the famed student leader who died during the

Revolution.

“Most of the entrepreneurs that we work with are the ones

that are willing to be a little more public in what they’re doing,”

Matusky said of the Innovadores interns. “So a lot of them are

kind of developing apps, are developing websites, and are deliberately

generating press and generating a little bit of attention.”

It’s a “much riskier proposition,” said Matusky, as opposed

to working under the table in the grey market—but it is happening.

“I’m seeing guys that were doing just the independent

software development, and now they’re seeing that other people

are being successful trying to make apps, and they’re able to talk

about it, the government isn’t shutting them down. And so I

think that now people are starting to take a little bit more risk

and try new things.”

So far the mission of the Innovadores Foundation, which is

to foster onshore businesses and create a reason for talented graduates

to stay in Cuba, seems well aligned with the interests of the

government. “That’s why I think we’ve been allowed to operate

as we are,” said Matusky, “and why we’re still hopeful about our

program and our internship.” H

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We rarely have days

where we aren’t booked

Jesús Fombellida

CUBA OPENS ITS DOORS

ENTREPRENEURS ARE TAKING THE REINS ON HOSPITALITY,

AND IT'S PAYING OFF

By Nick Swyter

Photos by Matias J. Ocner

58 CUBATRADE APRIL 2017


A Dubai theme: The Fombellida household has freshly painted white walls and shiny black-and-white tile floors

Left: Angel Pupo Rosa and his wife Maria Mercedes Oliveros at their home near Vedado. Right: An adjacent home under construction.

Three blocks from Havana’s iconic Hotel Nacional seems

like an unlikely place for a Cuban who emigrated to the

U.S. during the periodo especial to open a casa particular, or

private lodging. But that gamble appears to be paying off, because

Jesús Fombellida and his wife Yusimi say they’ve been welcoming

a steady stream of visitors since opening their doors in November

2016.

“It’s been so busy,” said Fombedilla said from the living room

of his recently renovated two-bedroom apartment. “We rarely

have days where we aren’t booked.”

The Fombellidas are among thousands of Cuban families

riding a recent wave of prosperity in Cuba’s casa particular industry.

While Cuban families have opened their homes to tourists

for decades, recent U.S.-Cuba policy changes have allowed

homeowners to welcome more American visitors by using San

Francisco-based hospitality giant Airbnb to take reservations.

Those changes, along with the Cuban government’s willingness

to allow entrepreneurs to play a larger role in the tourism

sector, mean that private homes now account for about 25 percent

of Cuba’s available accommodations, according to a recent

Brookings Institution report. Former President Barack Obama

acknowledged that achievement by inviting Airbnb CEO Brian

Chesky on his historic 2016 visit to Cuba. During that trip,

Obama applauded Chesky for making the island Airbnb’s fastest-growing

market. It was a promising message for a high-tech

company that’s been operating in a country with limited internet

access for only about two years.

While those numbers are encouraging for entrepreneurs, the

Fombellidas know from personal experience that starting and

maintaining a casa particular requires a lot of grunt work. Nearly

every task—from financing renovations, to booking guests, to

buying supplies—requires additional steps and workarounds to

complete.

“It’s not easy, but it’s possible,” he said.

GETTING IT OFF THE GROUND

Unlike many Havana tourist accommodations, nothing in

the Fombellida household looks like it was made in the ‘50s. The

home has freshly painted white walls, shiny black-and-white tile

floors, black faux-leather sofas, flat-screen TVs, and frilly silk

duvets covering each bed.

But perhaps the most unusual part of the apartment is its

offbeat theme: Dubai. Felt posters of the Middle Eastern city

adorn several walls, and nearly every table has glass models of the

iconic Burj Khalifa skyscraper.

Even a quick glance of the apartment should tell visitors that

close to nothing inside the apartment comes from Cuba.

“Nearly everything was purchased outside [of Cuba],” said

Fombellida, explaining that he bought nearly all his furniture

and appliances in Panama’s Colón Free Trade Zone and had it

all shipped to the island. As for the Dubai souvenirs, he says his

son brought them back from his frequent travels there. “I myself

have never been to Dubai,” he said with a chuckle, while wearing

a Dubai hat.

It’s difficult to find good quality materials

and products here. You need to find products

in Panama and Mexico

Angel Pupo Rosa

Buying and shipping products from Panama is prohibitively

expensive for most Cubans, but Fombellida is no ordinary Cuban.

He left the island on a balsa for the United States in 1994 to

escape the economic crash that followed the Soviet Union’s collapse.

He eventually made his way to New York, where he earned

a living as an apartment building manager. During his time in the

U.S., he kept in close contact with friends and family back home,

and made frequent visits to the island. Maintaining those ties

allowed Fombellida to fall in love with his wife Yusimi.

Several years ago, Fombellida permanently returned to the island,

begging the question of why somebody would leave the comforts

of the United States to go back there. “To be with his wife, of

course,” said Yusimi Fombellida, answering the question herself.

While the Fombellidas are fortunate enough to be able

to use American-earned dollars to spruce up a casa particular,

many Cubans look elsewhere to finance home construction and

remodeling projects.

Retired engineer Angel Pupo Rosa and his wife Maria

Mercedes Oliveros—friends of the Fombellidas—asked their

daughter in Italy to help pay for renovations to their casa particular.

A quick look at their five-room colonial-style home makes it

clear that it wasn’t cheap.

After learning that the second floor of the building where

they lived was crumbling, Rosa and Oliveros bought and renovated

the entire second floor. This involved doing some construction,

remodeling all the bathrooms, painting walls, modernizing amenities

and buying furnishings. Rosa says the entire project cost

about CUC 50,000—roughly US$58,000. A considerable portion

of that money came from his daughter through wire transfers or

in-hand deliveries.

“It’s difficult to find good quality materials and products here,”

said Rosa. “You need to find products in Panama and Mexico.”

The result of their investment is a casa particular that offers

guests a taste of what upper-class homes in Cuba were like before

the Revolution—an ambience found at historic hotels such as the

Saratoga and Nacional for a much steeper price.

“It has a balance of modern and classic,” Rosa said.

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Licenses for renting houses and rooms for tourists (Casas Particulares), 2010-2015.

Provinces Licenses* % Percentage

Pinar del Río 1,374 5.11

Artemisa 792 2.95

La Habana 12,119 45.07

Mayabeque 417 1.55

Matanzas 2,506 9.32

Villa Clara 1,109 4.12

Cienfuegos 962 3.58

Sancti Spíritus 1,488 5.53

Ciego de Ávila 680 2.53

Camagüey 973 3.62

Las Tunas 547 2.03

Holguín 1,252 4.66

Granma 456 1.70

Santiago de Cuba 1,583 5.89

Guantánamo 545 2.03

Isla de la Juventud 85 0.32

Total 26,888 100.00%

30,000

25,000

20,000

15,000

10,000

5,000

0

10,779

2010

26,888

2015

The average room in Havana rents for about

$45 a night, compared to $25 for rooms in

other tourist destinations

Source: Havana Consulting Group based on data from Oficina Nacional de Administración Tributaria (ONAT).

* Licenses for renting houses and rooms (2015)

WIGGLING THROUGH LOGISTICS

Despite Airbnb’s meteoric rise in Cuba, its entry into the

market hasn’t been without challenges.

For one thing, Cuba’s sparse internet access creates real issues

for homeowners. Double bookings happen regularly because

reservations are hard to confirm. It’s also difficult for hosts to

showcase their listings and communicate with guests. However,

like most tasks in Cuba, there are workarounds.

Just like financing renovations, many homeowners call on

relatives living abroad for help with managing reservations.

Rosa and Oliveros say their daughter in Italy manages all their

Airbnb bookings. She alerts them of their guests’ arrival and

departure dates. Their system isn’t perfect, but it beats going to a

wifi hotspot and paying for a 30-minute session just to confirm a

booking request that may or may not exist.

“The most difficult thing is dealing with the internet,” said

Fombellida, who doesn’t rely on relatives to confirm bookings.

Instead, he goes to the nearby Hotel Capri each day to pay for

an hour-long wifi session. The drawback of this strategy is that

he loses contact with prospective customers during the gaps, and

sometimes has to deal with double-bookings.

While there is little he can do to stay in better contact with

customers, Fombellida handles double-bookings in a classically

Cuban way. He refers such customers to the home of his cousin

or upstairs neighbor—making sure the money reaches the pockets

of his loved ones.

That upstairs neighbor, Ana Betancourt Bulnes, told Cuba

Trade she’s happy to welcome those guests, since referrals mean

she rarely has to go online to manage reservations. To confirm all

other bookings, the retired economist depends on her son who

lives abroad. “My son in Spain helps me out,” she said. “I have

not had a negative experience.”

Simply put, there is no cookie-cutter way to make a casa particular

reservation. Guests have the ability to book on platforms

such as Airbnb, but they can also email hosts directly to ask them

to reserve dates. Other guests, particularly backpackers, sidestep

the internet completely by knocking on doors of homes that have

the omnipresent blue-and-white signs.

“I go from casa to casa and ask ‘can you take me?’” said

Estonian backpacker Kristina Rosenberg while strolling through

the beach resort town of Varadero—a sign that many visitors

would rather stay in a Cuban home than in one of the countless

all-inclusive resorts on the tourist strip.

THE MATTER OF MONEY

One of the biggest draws to opening a casa particular is that

homeowners make significantly more money than the average

Cuban salary of about 25 CUC (about $29) per month.

62 CUBATRADE APRIL 2017


A welcome sign for visitors who would rather stay in a Cuban home Casas particulares provide work for many skilled trades Guests can experience what upper-class homes in Cuba were like before the Revolution.

The average room in Havana rents for about $45 a night, compared

to the $25 a night that rooms in other tourist destinations

such as Viñales and Trinidad cost. Some fancier homes tend to be

more expensive, but most are still well below the prices of hotels.

Of course, like all private businesses on the island, the government

takes a share of the earnings. The Fombellidas say they

pay the state 10 percent of the money they make from each room

they rent to guests, a fee they do not consider exorbitant. “We can

get by with those taxes,” said Fombellida.

The impact of modest prices and taxes, coupled with high

demand for rooms, is that many luxuries such as eating at private

restaurants and going on vacation are now within reach for some

casa particular owners. A homeowner who asked to remain

anonymous told Cuba Trade that most of her income comes from

renting out rooms, even though she’s earned several prestigious

degrees. She now earns enough money to take modest vacations

in Varadero—a destination whose beaches are still mostly

off-limits to Cubans.

The rise of casas particulares is also bringing money to the

hands of entrepreneurs who work alongside homeowners. Many

homes, like those of Rosa and Betancourt Bulnes, offer guests

breakfast for a modest price. In many cases, homeowners also hire

additional workers to clean and prepare food for guests. Other

casas offer guests discounts at restaurants run by relatives.

Almost all my guests have been American.

They have been really friendly

Jesús Fombellida

Even though casa particular owners tend to earn more than

average Cubans, it can take weeks or months for money to actually

reach their hands. Travelers cannot use credit or debit cards

to pay homeowners directly since few U.S. financial institutions

work with Cuban entities. To get around this hurdle, many booking

organizations use money remitters to pay hosts. Airbnb, for

example, uses the Miami-based remitter VaCuba.

This form of paying hosts still comes with delays, despite innovations

such as mobile remittance transfers and in-person cash

deliveries on the island. Even though Rosa has opened his doors

to tourists through Airbnb since last December, two months later

he still hadn’t been paid for his services. He appeared to take a

laissez-faire attitude towards the delay, saying that complications

are inevitable when starting a new business in Cuba.

“It takes a while to get paid,” he said. “I’m not worried.”

LOOKING AHEAD

Even though Cuba’s GDP is expected to drop once again in

2017, the future looks bright for Cuba’s burgeoning casa particular

industry.

In 2016, Cuba welcomed about four million tourists—a number

likely to jump this year thanks to loosened travel restrictions

and the arrival of U.S. commercial flights. An endemic shortage of

hotel rooms means the Cuban government sees casas particulares

as a way to accommodate excess demand from tourists.

The Havana Consulting Group estimates the cost of refurbishing

a casa particular in an existing home at $500 to $1,500

per room. For rooms built in newly constructed homes, the cost is

between $3,000 and $5,000.

On the other hand, says the company, building a new hotel

costs between $150,000 and $200,000 per room. The fact that

many casa particular refurbishments are financed by outside

resources and are finished more quickly make them an even more

attractive alternative for the government than new hotels.

The rise of casas particulares is also, for the most part, seen

positively by both opponents and supporters of U.S. re-engagement

with Cuba. The freedom to privately operate them is one

of the few Cuban government reforms that tend to satisfy the

agendas of both camps, since it encourages private sector growth.

Except for the monthly taxes and some additional fees, the

income goes directly into the hands of private entrepreneurs

rather than the government. Casas particulares also encourage

American travelers to have meaningful cultural exchanges with

Cubans, as opposed to visiting the island for pure tourism. Since

the industry also depends on the internet to survive, it encourages

development of that infrastructure. Those positive impressions

will be valuable to the casa particular industry as the Trump

administration reviews all Obama-era Cuba policies.

“Almost all my guests have been American,” said Fombellida.

“They have been really friendly. I’ve been having a good time

with them.” H

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When it comes to

servicing the cars of

yesteryear, few Cuban

enterprises can beat

Nostalgicar—the provider

of choice for everyone

from local taxi drivers

to former First Lady

Michelle Obama

By Doreen Hemlock

Photos by Mario Luis Reyes

Julio Alvarez remembers the first time he went

to the United States to talk about his venture,

Nostalgicar, which restores classic cars and also

rents them out with drivers as taxis. He was wowed

by lengthy meetings with White House staff and

members of Congress, but disappointed to find

many friends in Miami too busy to meet with him

because of heavy workloads and expenses. He called

that capitalism.

Three years later, he jokes to a crowd of

American tourists visiting his Havana garage, “I’m

capitalistic in Cuba. I hardly have time for friends

or family, and the money is not enough.” He’s now

looking to rent out a larger space to restore more

Back to the Future

In The Repair Shop: To be sure, not all the

parts in Nostalgicar’s American classics are

original, or even “Made in the USA.”

66 CUBATRADE APRIL 2017


A Labor of Love: Nostalgicar owner Julio Alvarez and his wife, Nidialys Acosta, beside their 1956 Chevy BelAir "Lola"

On The Job: The garage on Avenida Boyeros employs 14 people. Below, left: Alvarez welcomes curious visitors to his workshop.

cars and seeks a Cuban bank loan to help finance the expansion.

Alvarez hopes that when the U.S. embargo is lifted, his venture

can become a hub for restoring cars shipped to Cuba from

around the world. The expertise and inventiveness of Cubans in

restoration, plus labor costs below those of many other nations,

could make Cuba an ideal site for his specialty business. “What

we have to protect here is that the initiative comes from the

Cubans,” Alvarez told his visitors.

Dreams of developing a global hub are a long way from his

days working solo in his home garage, restoring a 1955 Chevrolet

BelAir that he inherited from an uncle. Alvarez started his

venture by transforming that car into a gleaming turquoise-andwhite

beauty dubbed Nadine and renting her out as a taxi. “I was

fishing for tourists outside the Hotel Nacional,” trying to recoup

the initial investment, he said.

Next, he sold an old Polish-made Fiat126p to buy another

Chevy BelAir, this time a beat-up 1956 model that he restored

into the pink-and-white “Lola.” His wife, Nidialys Acosta, drove

Lola as a taxi, too. The couple then teamed up with other owner-drivers

outside the Hotel Nacional, and the group soon had a

dozen vehicles to rent. Nidialys, who has a degree in chemistry

and ably handles numbers, agreed to coordinate all the rentals.

What we have to protect here is that the

initiative comes from the Cubans

Julio Alvarez, owner Nostalgicar

Today, Alvarez works with 14 people at his Havana garage

on Avenida Boyeros. His wife handles bookings for 22 cars, each

individually owned. The fleet features at least one Chevy for

every year from 1950 through 1960, none of them convertibles.

Nostalgicar rents direct to customers and also through government-owned

tour operators such as Havanatur and Gaviota.

Two-hour trips for tourists are the most popular bookings, but

Cubans rent their cars as well for special occasions such as weddings

or 15th birthday parties (“quinces”).

Still, keeping Nostalgicar humming is a challenge. Alvarez

said he works with a “friend” in Miami, who buys him specialty

parts from U.S. sellers. The friend uses a credit card to make the

purchases and then charges Alvarez a 20 percent markup. “With

those kind of friends, I don’t need enemies,” joked Alvarez.

Friends visiting Cuba sometimes bring the parts to Alvarez,

or else he arranges for shipments to Cuba, often paying $8 to $10

per pound for ocean cargo that can take three months to arrive.

That’s on top of whatever customs duties may be required in

Cuba, he said. The upshot: parts sometimes cost 50 percent more

than the initial purchase price in the United States.

So far, Alvarez said he’s financed the venture without loans,

relying largely on cash flow from the rentals. By Cuban standards,

his outlays are big. Alvarez figures it cost some $24,000 to buy

and fix up a 1960 Chevrolet Impala recently. That vehicle might

sell in Cuba for $60,000 and would retail for a lot more overseas.

“I can’t export. It’s not allowed,” said Alvarez. Renting out the car

as a taxi in Cuba brings in anywhere from $25 to $50 per hour or

more, depending on whether the booking is retail or through tour

operators, length of rental, and other factors.

To be sure, not all the parts in Nostalgicar’s American

classics are original, or even “Made in the USA.” Alvarez said

that about six years ago the Cuban government brought in an

abundance of diesel engines from Europe, and many Cubans

installed them to boost mileage from roughly 4-6 kilometers per

liter (9-12 mpg) to 14-15 kilometers per liter (33-35 mpg). Some

cars also have engines from Toyotas or other Asian makes.

But those details don’t deter visitors from enjoying Nostalgicar’s

classics. Cars in the group have been rented by music and

film celebrities such as Bon Jovi, Madonna, and Susan Sarandon,

by U.S. governors Andrew Cuomo of New York and Terry

McAuliffe of Virginia, and even by such U.S. leaders as then-Secretary

of State John Kerry and then-President Barack Obama

with his family.

The wall of Nostalgicar’s office proudly features a framed

“thank you” note from then-First Lady Michelle Obama, written

on White House stationery. Mrs. Obama thanks Niadlys for

her “warm welcome” to the family, says her efforts “did not go

unnoticed” and calls it “truly an honor to have the opportunity

to experience the culture and traditions of the Cuban people

first-hand.”

Alvarez appreciates the growing people-to-people contact

with Americans in Cuba––and during his visits to 10 U.S. states

so far. But his love for American cars goes further back. Before

Cuba’s 1959 revolution, Alvarez’s father worked with the American

auto maker General Motors on the island. “Since I was

eight, I’d help my dad restore these cars,” said the 48-year-old

Alvarez with nostalgia. “I wish my Dad were still around to see

everything we’re doing now.” H

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market report

Cuba Remittances

and the Shifting Pattern of Cuban Emmigration

Despite setting a new record

in 2016, remittances

to Cuba may be slowing

down in the wake of the

U.S. decision to end the

wet-foot, dry-foot policy

By Emilio Morales

President Obama’s Jan. 12, 2017, announcement abolishing

the “wet foot, dry foot” policy that had long granted residency

to any Cuban who set foot on American soil, ended

the hopes of thousands of Cubans already planning emigrate to

the United States. Many thousands more will now never make

the attempt.

The repeal of this policy marks the end of an era of unrestricted

Cuban immigration to the U.S. and begins of an era with

substantially reduced numbers of Cubans arriving on U.S. shores.

This new scenario starts just as cash remittances to Cuba

reached a record $3.4 billion last year, an increase of 2.7 percent

from 2015. Of this amount, 56 percent is estimated to have

arrived by formal means, 44 percent by informal means.

The rise in remittances was mainly due to the increase in

Cuban migration to the U.S., principally through informal routes

(of the approximately 80,000 Cubans who arrived last year,

50,000 came informally, i.e.under the wet-foot, dry-foot policy).

And new immigrants tend to send more money home to friends

and relatives than those who have been in the U.S. longer.

Another factor boosting remittances was a jump in air traffic

to Cuba from U.S. airports, especially after regular commercial

flights to the island began in late 2016. Cuban-American passenger

counts rose as the cost of round-trip tickets—which had

averaged about $450—tumbled by more than half.

The number of Cuban citizens traveling to the United

States also rose substantially. Many make several trips a year,

working informally for two or three months before

returning to the island with the money they’ve saved.

Studies conducted by THCG reveal that about 30,000

Cubans with Spanish citizenship travel to the U.S. more

than once a year. Most come to work in factories and

farms, and in healthcare. Between 20,000 and 40,000

Cubans, blessed with five-year U.S. visas, travel several times a

year to the United States.

During the eight years President Obama was in office

(2009-16), the State Department granted 188,115 tourist visas

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Remittances to Cuba, 2011-2016 (in millions USD)

REMITTANCES TO CUBA. 2011-2016 (in millions USD)

Remittances to Cuba, 2011-2016 (in millions USD)

Source: The Havana Consulting Group and Tech

Source: Havana Consulting Group and Tech

Source: The Havana Consulting Group and Tech

Cuban emigration through legal (visa) and illegal routes, 2002-2016

CUBAN EMIGRATION THROUGH LEGAL (visa) and ILLEGAL ROUTES, 2002-2016

Cuban emigration through legal (visa) and illegal routes, 2002-2016

In the last 12 years, 644,047 Cubans

emigrated to the United States via

formal and informal means. These

new arrivals boosted remittance

growth in recent years

to Cuban citizens, in addition to more than 20,000 migrant visas

per year. Cuban authorities report that from January 2013 to

December 2016, some 671,000 Cubans traveled off the island,

making 1,745,000 trips.

The Remittances Impact

Foreign currency remittances sent by Cuban exiles was decriminalized

by the Cuban government in 1993, and have gradually

gained a preponderant place in the country’s economy. Remittances

are now the main support of the dollarized retail sector of

the island, and their value exceeds that of the six of most important

export commodities and services of the Cuban economy.

72 CUBATRADE APRIL 2017

In 2015 Cuba’s receipt of remittances in cash and merchandise

totaled $6.85 billion, while the combined value of exports of

nickel, sugar, drugs, tobacco, and fresh and frozen seafood, and of

tourism sales, amounted to about $5 billion.

Undoubtedly migration has greatly influenced these figures.

In the last 12 years, 644,047 Cubans emigrated to the United

States via formal and informal means. These new arrivals boosted

remittance growth in recent years; so did the Obama administration’s

lifting of all regulations that limited Cuban-American

travel and money transfers to the island. Large remittance companies

have taken advantage of that by initiating correspondence

procedures with Cuban authorities so they can operate in the

Cuban market.

Photo by Jon Braeley


Source: The Havana Consulting Group and Tech

Comparison of remittances with main sectors of the Cuban economy (in millions of

COMPARISON OF REMITTANCES WITH MAIN dollars), SECTORS OF 2015 THE CUBAN ECONOMY (in millions USD), 2015

VARIABLES AND POSSIBLE ACTIONS THAT WOULD STIMULATE REMITTANCES TO THE ISLAND

Variables and possible actions that would stimulate remittances to the island.

Variables

Actions

Real estate

Elimination of restrictions on the sale of

homes to foreigners by Cuban residents.

Elimination of the limit on the number

of houses that Cubans can own.

Automotive sector

Change in price policy regarding the sale

of cars to the population, with a view to

stimulating sales of cars on the island

and improving the transportation

demand of the population.

Investments of Cubans

living abroad

Private sector

Allow Cubans living abroad to invest in

the island.

Approval of the new law for small and

medium-sized enterprises, increase

modalities for private employment,allow

self-employed persons to have legal

personality.

Internet acces

Source: Havana Consulting Group and Tech

Massive Internet engagement in Cuban

homes.

Source: The Havana Consulting Group and Tech.

Source: Havana Consulting Group and Tech from reports of the National Statistics and Information Office (ONEI) and own sources

Source. The Havana Consulting Group and Tech from reports of the National Statistics and Information Office

(ONEI) and own sources

MIGRATION FROM CUBA BEFORE AND AFTER THE REPEAL OF THE DRY FOOT, WET FOOT POLICY

Migration from Cuba before and after the repeal of the dry foot, wet foot policy

Source: Havana Consulting Group and Tech

Source: The Havana Consulting Group and Tech

The Wet-Foot, Dry-Foot Impact

Analysts now wonder if the repeal of the 1966 Cuban Adjustment

Act—informally known as the “wet-foot, dry-foot”policy—

will shrink remittances. The slowdown in migration will result

in 20,000 to 25,000 Cubans emigrating to the United States

annually, based on the minimum number of visas Washington is

committed to giving Cubans under a bilateral accord. This is signficantly

less than the 70,000 to 80,000 who were arriving annually

in recent years. In other words, 183,000 fewer Cubans will emigrate

to the U.S. in the next three years than in the previous three.

If we assume the same patterns of sending remittances observed

in the last years—$200 dollars average per month for each

Cuban that sends remittances to the island—plus the $3,500

each traveler carries on average on their annual trip to Cuba to

visit family and friends, the potential loss of income for Cuba

would more than $1 billion.

Another way to look at emigration projections is via accumulated

numbers of emigres for the period 2005 to 2020.

Assuming that President Trump will adopt a policy of zero

tolerance towards illegal emigration and will limit legal emigration

to the minimum level possible, the accumulated emigration

would be about 724,047 Cuban emigres in 2020. If the wet-foot,

dry-foot policy had not be rescinded, and if legal emigration were

expanded to the maximum level permitted, accumulated emigration

in 2020 would have reached about 964,047.

In this secnario, the potential loss of income for Cuba would

be about $ 1.4 billion. Even if we base the estimates on the po-

tential shares of the 240,00 people who would theoretically

have sent remittances to Cuba, using 40 percent as the lower end

of the range and 70 percent as the higher, the loss in 2020 would

range between $566 and $991 millions dollars.

What alternatives could counteract this potential

loss of remittances?

All indications suggest that the growth in remittances will

decline over the next few years. However, some variables could

offset the effect of repealing the wet-foot, dry-foot policy.

The Cuban government could counter the potential decline

of remittance growth by liberalizing or opening the economy.

Specifically, there are five variables that could stimulate a faster

growth of the flow of remittances to the island.

These five variables are: Opening the real estate market

to foreigners; reducing restrictions on private auto ownership;

allowing investments from Cubans living abroad; passing new

laws to permit more small and medium-sized enterprises; and

dramatically increasing internet access.

Currently, the areas associated with these five variables are all

restricted and their development limited. Liberalizing them would

immediately boost remittances and improve the economy. And

there would be a multiplier effect, generating hundreds of thousands

of new jobs, injecting investment capital into the economy,

improving living conditions for hundreds of thousands of Cubans,

stimulating foreign investment, and creating a more competitive

market—all contributing to a big leap in remittance flows. H

74 CUBATRADE APRIL 2017

APRIL 2017 CUBATRADE

75


How do you conduct business in Cuba? With patience and an

understanding of the state-driven Cuban economy. These are the

insights of a veteran who has guided multinationals through the

maze of the island’s intricate business culture for 25 years. His

most important advice: Don’t wait.

Making The Deal...

Cuban Style

By Doreen Hemlock

As the only Havana-based foreign lawyer representing an international law firm, Gregory

Biniowsky offers a unique perspective on doing business in Cuba. The 48-year-old from western

Canada began living in Havana in 1992, and has worked as a consultant on the island for a

variety of clients including the Canadian government, the United Nations, nonprofits, foreign

companies and now, law firm Gowling WLG.

Bioniowsky sees Cuba as a promising market, but warns foreign executives not to confuse

its moves toward a state-driven, mixed economy as a rush toward capitalism. He suggests that

entrepreneurs embed their projects within Cuba’s social and political priorities, while staying

polite and patient. The potential payoff: In Biniowosky’s view, “Within five years, I think

Cuba will be a booming place.”

Within five years, I

think Cuba will be

a booming place

Gregory Biniowsky,

Gowling WLG

CT: How did you get started with Gowling WLG, the merged

Canadian-British law and consulting firm?

Gowling is a very entrepreneurial firm. In fact, they opened up

an office in Moscow in 1988. They heard about me, reached out

and said they wanted to be the first international law firm with a

presence in Cuba. I’ve been with them exclusively for two years as

their representative on the island.

To be very clear, I’m not a Cuban lawyer, although I did a

year of law school at the University of Havana. And Gowling

WLG does not have a formal office in Cuba. What I offer is

strategic advice, on-the-ground problem-solving and accompaniment

to Gowling WLG clients who decide to explore or enter

the Cuban market.

CT: What kind of clients do you work with?

It’s very diverse, from clients who want to get involved in tourism,

hotel development, rum production, manufacturing, health

tourism, airlines, pharmaceuticals, biotech, airports, construction,

infrastructure, and selling Cuba food and beverages.

CT: Are your clients diverse in size, from multinationals to small

entrepreneurs?

Unless small entrepreneurs have a really unique product or service

to offer, I’d say they’re going to have great difficulty entering

the Cuban market. The Cuban government is more interested in

medium and especially large companies. The business you’re doing

is invariably with the Cuban state. So if you do cut a deal, it’s

going to be a very large project or large purchase order, and often

small entrepreneurs can’t handle those volumes.

CT: What mistakes do foreign companies tend to make in

Cuba?

One is to think that Cuba is launching itself head over heels into

some sort of capitalism. It’s not. Is Cuba making economic reforms

that try to be more market-oriented, to give a greater level

of autonomy to state enterprises, to raise productivity and efficiency?

Yes. But this is still going to be, at least for the foreseeable

future, a state-driven economy. Related to that, clients may think

that with Cuba “opening up,” they have to go in quick, make

money quickly, and cut quick deals. There’s no such thing as a

quick deal in Cuba. The mistake is clients having high short-term

expectations. I try to lower my clients’ short-term expectations

and raise their medium- to long-term expectations.

Another mistake is to think that because Cuba might have

economic difficulties it will be easy to negotiate one-sided deals,

because the Cubans need the investor’s capital, know-how,

market or technology. The reality is it doesn’t matter how difficult

things are, Cubans are very nationalistic and proud. They don’t act

desperately. They’re willing to close the door on a lot of money if

it doesn’t fit with the state’s political and social priorities, or if the

investor has not earned their trust.

And that comes to another mistake: to think “business is

business,” and you don’t need to understand the Cuban government’s

priorities and the political context in which the economy

operates. I say to those people: “Maybe Cuba is not the right

market for you, because this is a country in which politics and

social priorities are inextricably linked with business.” Sometimes,

my challenge is assisting the client to embed their business

proposal within what I see as the Cuban government’s priorities.

If you’re sensitive to those priorities, you have a greater chance of

actually being successful.

CT: How do you align client projects with Cuban priorities?

It’s understanding that 1) the Cuban government needs hard

currency coming into the country; you have to show that. And

2) the Cuban government is very cautious about giving up control.

They feel threatened, I think, for justifiable reasons. So, for

most ventures, they want 51 percent control, so they can make

sure the business is managed in a way that meets whatever their

priorities are—whether it’s buying inputs for that business from

one country over another or when payments are made.

For instance, take hotels and where Cuba wants them. Right

now, they’re really saying to foreigners with equity, “No, it’s not

Havana. It’s not Varadero. We’re going to start building hotels

in Las Tunas or these outlying provinces that are not benefitting

as much from the influx of tourism.” So, their social priority is

to start spreading around the wealth, and where a hotel is being

built is more important than the size.

Where politics also trumps business is in decision-making.

Foreign executives sometimes expect that the government official

sitting across the table in Cuba is the actual person who makes

the decision, and they’re not. These big decisions are made higher

up, so it makes the negotiating process more complex. Why? Because

the Cuban government wants to vet, control, approve and

analyze all ventures signed.

CT: What time horizon do you tell clients to expect on Cuban

projects?

For a simple trade agreement, to sell the Cubans something, it’s

shorter—maybe several months, not days or weeks.

But if you’re looking at a project where there is an investment

or a long-term contract for some kind of service, you’re

looking at a year at least. It’s slow partly because the Cubans are

cautious, and partly because the bureaucracy is slow, a bit overwhelmed,

and doesn’t have a lot of the resources it would like.

My advice is, be patient and take the time to understand the

Cuban government’s priorities. Read some of the key documents

that encapsulate those priorities, like the Lineamientos and the

Portfolio of Opportunities for Foreign Investment, to get an idea

of where their heads are at.

CT: What other recommendations do you have for negotiating

business in Cuba?

I suggest five Ps. First, be polite. Don’t come in here with the arrogance

and hubris of a cowboy, saying “I know what the Cubans

need, and I’m going to tell them what they need.” I tell my clients,

“Your first meeting with the Cubans, shut up and listen. Don’t go

right into your sales pitch. Listen. Ask questions. Then, when you

finally make your pitch, you say something like, “On the basis of

what I understand to be Cuba’s priorities—social, political and

economic—I think this business idea might find alignment with

your government’s long-term development strategy.”

So, come in with humility. Understand that these guys have

stood up to the United States for 50 years, and they don’t take

76 CUBATRADE APRIL 2017


TELECOM

TOURISM

This page: Tourists on the beach at Guardalavaca

Opposite top-left: Locals gather at a Wifi hotspot in Holguin

Opposite bottom-left: Organic farming near Havana.

Opposite right: Building renovations in old Havana.

(Photos by Jon Braeley)

AGRICULTURE

CONSTRUCTION

kindly to the arrogant businessman, who often is the American.

What makes U.S. business culture so successful in the world is

your aggressiveness and in-your-face self-confidence. That may

work in a lot of countries. But it doesn’t work in Cuba. So, be

polite. Be humble. Hire a Canadian with Cuba experience to do

your negotiating. [Laughs out loud.]

Second, be prudent. Understand this is not a Third World

country where you can go through backdoors, have “friends,”

slide envelopes across tables. That doesn’t happen in Cuba, and

if it does, it’s taken seriously and punished quite severely. This

is a rules-based country with a lot of surveillance. There are no

secrets on the island. This is a sophisticated country. They have

an intelligence service that has been protecting them from the

United States and can easily be applied to companies that think

they might pull the wool over the Cubans’ eyes.

Third, you have to be persistent. I’ve had clients who stuck

to a business idea, and when the Cubans didn’t respond, they

politely and tenaciously kept knocking on the Cubans’ door, until

finally the Cubans said, “Let’s talk about this.”

The next P is patience. You have to sometimes sit tight and wait.

And the fifth P? Patience, again.

CT: Where do you see Cuba going medium- and long-term?

Within five years, I think Cuba will be a booming place. Will it be

where the Cubans or foreign investors want it to be in five years?

No. But it will have an economy rising up from the ground floor.

Some cynical people say, “I’ve been waiting 25 years since the

Wall came down.” But there is a difference: The last 25 years for

business are not the next five years.

I believe two fundamental things are going to happen: The Cuban

government is going to accelerate and deepen its economic

reforms … so that it’s easier to invest and the economy becomes

more efficient. They’re reforming partly because they don’t have a

large benefactor outside and also because they’ve come to realize

it’s needed for the good of the country.

The second change is that the U.S. embargo is going to be

lifted. We don’t have to wait for a Democratic-controlled Congress

or administration. I’ve spoken to enough U.S. companies

and visitors who in increasing numbers say, “This embargo doesn’t

make sense.”

When you hear voices like that, and when you hear Cuban-American

voices like Carlos Gutiérrez and some Fanjuls

endorsing economic engagement with Cuba, you realize there’s a

growing political mass within Republican and conservative sectors

saying, “This is just stupid.” So, I can’t imagine the embargo

lasting more than five years.

CT: With openness growing, where do you see the biggest opportunities

for business in Cuba?

The lowest-hanging fruit is anything directly or indirectly related

to the expanding tourist sector. Cuba is maxed out now at four

million visitors per year, and projections are that once the travel

ban is lifted, visitor arrivals can easily double in a short period.

So, that means opportunity in hotel construction, infrastructure,

importing cars for rentals, selling food (Cuba imports 80 percent

of its food, so most food at hotels comes from abroad); investing

to produce food, because the Cuban policy is import substitution

to produce locally instead of importing; selling them pillows and

sheets for hotels; airport expansion; roadway improvement. The

list is long and attractive.

Next is anything based on Cuba’s greatest resource: its people.

This is arguably the best-educated country in Latin America,

with a huge number of university-trained professionals. I can see

Cuba becoming a center for hubs tied into pharmaceuticals and

biotech, health sciences, health tourism, information sciences,

engineering, agronomy—any sector where you would have high

value-added human resources involved.

CT: What about this notion that European, Canadian and

Chinese companies have an edge over U.S. companies because

they’re in Cuba first?

For sure, if you’re not an American company, you have an advantage,

because you don’t have an embargo on you. When the process

of normalization was initiated by President Obama, I had a huge

upswing in contacts by non-American companies saying, “I’ve got

to get in now. It’s the beginning of the end of the embargo. We

need to move.” I try to dampen people’s expectations in terms of

cutting the quick deal before the Americans come, because there’s

no quick deal with the Cubans. But yes, start now. I even had some

non-Americans tell me when Donald Trump got elected, “Great,

another four years of opportunity for us to cut deals before the

Americans really come on the scene as competitors.”

CT: Any other specific suggestions for U.S. business executives?

To do business in Cuba, you need face time. You need to meet the

Cubans. You don’t do business through emails and phone calls. It’s

relationship-building. So, Americans have to get down here.

I once had a U.S. executive tell me, “Gregory, I was here. I

was impressed. I had all these meetings on a political protocol

level, but I would have liked to sit down across the table from the

director of the state enterprise with which I would do business. I

would have liked to get a better sense of how they see things and

how a relationship would work. Could I have initiated a moot

negotiation without violating the embargo?”

So, I phoned up some lawyer friends in Miami who know

the embargo well, and the consensus was that as long as it’s

non-binding and there’s no transaction of services, an American

company can sit down across the table from any Cuban state

enterprise and talk as if the embargo didn’t exist. And that is an

important process, because both sides put down on the table their

conditions and their priorities, and they get to know and trust

each other.

But would the Cuban side entertain the idea? I initially

thought the Cubans would say, “Lift the embargo first.”

But when I went to a senior Cuban official, he said, “I

think we would be open to talking about a concrete project

in a hypothetical context,” which shows pragmatism on

their side.

So, after consulting your attorney, you have the opportunity

to talk with the Cubans without violating the embargo.

Start now, because it takes two years to negotiate a joint venture

anyway. So, when the embargo is lifted, you’re hitting

the ground running. Relationships in Cuba are not built over

six months. It takes longer. Trust-building is so important.

It’s not done over a couple of visits or couple of mojitos.

Start now. H

APRIL 2017

CUBATRADE

79


When it comes to doing business with Cuba,

Puerto Rico offers powerful advantages

By Alex Díaz

Sitting on the corner of Obrapía and Aguiar in Old Havana

since 1693, Oratorio San Felipe de Neri looks like any of

the hundreds of churches in colonial towns and capitals

across Latin America.

San Felipe, however, has a unique heritage. It was built as an

oratory church, so it wasn’t a typical place of worship. The founding

Oratory Congregation, while led by a bishop, featured secular

priests who used music prominently in Mass, much like gospel

services in American black churches.

When municipal authorities decided to turn San Felipe into

a concert hall as part of a 1990s renovation, most Cubans took it

in stride. It made historical sense. After all, the church still carries

the word Oratorio in its name.

At about that time César Cordero began a series of trips

to Cuba. The Puerto Rican engineer and entrepreneur—then a

professor at the University of Puerto Rico—was a member of

Andares Antillanos (roughly translated as Antillean Journeys), a

group of volunteers who promoted regional art and culture.

Cordero’s group discovered and began working on cultural

exchanges with San Felipe, culminating in the early 2000s with

Continued on page 80

80 CUBATRADE APRIL 2017


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the replacement of a large plain-glass window at the Oratory.

“We took a Puerto Rican artist by the name of Marcos

Alegría to replace a window at San Felipe with a stained-glass

work of art, to give the place a touch of its church origins,” he said.

Cordero continued traveling to Cuba, on cultural and

sports-related missions with Andares Antillanos. One of the

group’s most publicized events took place in 2012, when they invited

Cuban sculptor Yarovi López to tour Puerto Rico, putting

on an exhibit of his work hosted by Banco Popular.

The following year, however, Cordero changed gears. For his

latest trip, Cordero took a different turn, to business—another

passion he shares with his Cuban friends and colleagues.

“Business in Cuba had been on my mind from the very beginning,”

says Cordero, who was already managing director of the

San Juan-based Business Venture Group (BVG). “The challenge

has always been to figure out the niche that would work within

the legal limitations [of the embargo].”

Cordero joined a 2013 “trade” mission organized by the

Puerto Rico Manufacturers Association (PRMA)—“they were

more educational missions at this point,” explains PRMA President

Rodrigo Masses—and decided that Cuba offered opportunities

for BVG in the technology arena, in particular for a BVG

food innovation that extracts nutrients and other high-value

materials from plants. And for that project to move forward, his

cultural links with Cuba were an asset.

“I discovered early on that the cultural ties would be of great

benefit when the time was right to explore the business side,”

he said, “since it is something Cubans, including government

82 CUBATRADE APRIL 2017

Rodrigo Masses, President, Puerto Rico

Manufacturers Association

authorities, value very highly, and more so when it comes to

doing business with someone from Puerto Rico, given the history

between our two countries.”

Cuba and Puerto Rico have long shared strong cultural and

historic ties. Both were still part of the Spanish empire when the

1895-98 War of Independence freed Cuba from Spain. During

the 30 years of rebellion that led to that final war (which also

made Puerto Rico an American protectorate) many high-profile

Puerto Rican cultural and political leaders joined the efforts of

Cuban revolutionaries, including those led by José Martí.

The decades of liberation wars where, in fact, intended to

free both countries—yielding, among other things, flags with

identical designs except for the inverted colors.

“Cuba and Puerto Rico remain de un pájaro las dos alas,”

Eusebio Leal Spengler said during the 2009 ceremony that

unveiled Alegría’s stained glass. Leal was the official historian of

the City of Havana, and the phrase, which translates as “the two

wings of a bird,” hails from a poem written in 1893 by Puerto

Rican author Lola Rodríguez de Tió. Rodríguez lived in Havana

for much of that rebellious 30-year period, and her name is

enshrined in roads, schools and other places in Cuba.

“The love runs deep,” agrees Richard Carrión Matienzo,

executive vice president in charge of business development and

international banking for Banco Popular, Puerto Rico’s largest

and oldest financial institution. As Washington and Havana have

come closer to lifting restraints on trade and investment, Carrión

has been a strong proponent of using Puerto Rico as a U.S.

bridge to Cuba.

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In a nod to the new U.S.-Cuba rapprochement that began in

December 2014, Carrión had the bank produce a music documentary

and CD, Cuba y Puerto Rico, in 2015. The bank releases

a special Christmas music CD every December, but that year’s

was a special gesture as the bank explored the Cuban market for a

financial product it could launch.

“The cultural affinity jumped out at us immediately, and we

decided to feature the historic musical relationship and special

bond of our two countries in the 2015 edition,” he told Cuba

Trade. “Today, as we look back, we can say without hesitation

that it was that cultural exchange that led directly to our card

business in Cuba.”

Carrión is referring to the MasterCard Popular launched

last year for use by tourists who visit Cuba. “It has been a great

success thus far, and we continue to explore other opportunities,”

including serving as a facilitator for U.S. companies establishing

a Puerto Rico presence to export to Cuba, as well as launching a

Popular branch network and lending operation in Havana.

“We realize some of this will take time, since the embargo

would have to be liberalized further,” he says. “But taking a long

view is in the nature of doing business with Cuba at this point,

and we’re okay with that.”

THE NATURE OF THE BUSINESS

Carrión’s conclusions on the nature of doing business with Cuba

include the historic and cultural ties with Puerto Rico, a bond

not shared with any other jurisdiction in the United States. But

beyond history and culture, Puerto Rico offers unique, competitive

advantages within the context of U.S. trade with Cuba.

Above all else, Puerto Rico has been a U.S. territory since that

1898 war with Spain.

“It is far more important than most people realize, and it can

help any American company in its efforts to penetrate the Cuban

market,” said Wilfred Labiosa, a principal at Cuban Strategic

Partnerships, a New York based firm that helps companies identify

and capitalize on opportunities created by the normalization of

U.S.-Cuban relations.

Labiosa, a Puerto Rican with strong personal ties to Cuba,

plays the culture card in his own right, promoting artistic exchanges

between galleries in Havana and San Juan. “It is a big

door opener and relationship builder,” he says.

The PRMA’s Masses, keenly aware of the potential trade

advantages that cultural exchanges bring, was himself born in

Cuba and migrated to Puerto Rico with his parents at an early

age. Masses is easily Puerto Rico’s biggest Cuba booster, having

organized two trade missions and now planning a third, slated for

later this year to Havana and Santiago de Cuba.

“Puerto Rico has a number of big advantages to offer any

U.S. company looking to do business in Cuba,” he says. These include

a series of incentives that slash a company’s tax burden dramatically—federal

taxes doesn’t apply on the island, and Puerto

Rico’s Treasury Department taxes exports (including to the U.S.

mainland) at only 4 percent. Puerto Rico also has a high concentration

of coveted engineering and management talent, advanced

infrastructure, and a strategic location in the eastern Caribbean.

84 CUBATRADE APRIL 2017


“Instead of doing business with Cuba from a location in the

States, companies should find a local partner in Puerto Rico and

export from here,” said Masses, who owns one of Puerto Rico’s

leading office-furniture companies.

Masses’ missions were the island’s first salvos in the nascent

U.S.-Cuba opening. The Puerto Rico Chamber of Commerce is

following suit with a mission to Havana in May.

“Our goal, as is the case for every other organization

promoting trade and exports, is for Puerto Rican companies to

position themselves as the Cuban market continues to open and

opportunities emerge,” says Chamber President David Rodríguez.

The Puerto Rican government, for its part, has been aggressively

promoting the island’s uniqueness as a Cuban trade

platform within the U.S.—foreign for taxation, domestic for

everything else—in missions and road shows, as well as through

advertising and publicity.

Starting July 1, the administration of Gov. Ricardo Rosselló,

which took office in January, will transfer the island’s promotion

to the private sector in a recently enacted public-private partnership

called Enterprise Puerto Rico, modeled after the highly

successful Enterprise Florida.

“The policy of this government is to let the private sector

handle all promotion,” Economic Development & Commerce

Secretary Manuel Laboy told Cuba Trade. “Our role will be to

facilitate and provide the resources needed, as well as to reduce

the cost of doing business in Puerto Rico to make it more attractive

for companies to use the island as a bridge for their exports,

including exports to Cuba.”

For the latter, the government is focusing on Puerto Rico’s

strategic advantages in manufacturing, construction and services.

“Those are natural strengths of ours, and we see great potential in

working closely with the new Enterprise Puerto Rico to penetrate

the Cuban market.”

Given the complexities of the embargo and the uncertainties

surrounding the opening with Cuba, the first challenge facing

any company is figuring out what’s allowed. “Aside from the

industries open for trade, Cuban and U.S. authorities have been

fairly flexible in granting licenses to businesses that are related

in some way to this activity,” said Gerardo González, an economist

in Puerto Rico and one of the organizers of PRMA’s next

mission. “That’s how Banco Popular got it done.” Born and raised

in Cuba, González was an analyst at the South American Studies

Center in Havana before migrating to Puerto Rico in 1996.

“Cuba right now is a challenging market. It’s not for

everyone,” he says. “That’s the significance of these missions, of

going and learning and building relationships. It’s a bet for the

future, like so many we make in business. The important thing

is to make your move now, because as the market opens up and

the embargo is later lifted, those companies that put in the time

and effort today will be best positioned to be rewarded—as the

Cubans like to say, the first companies who got in the line.”

From Cordero’s point of view, if you’re going to stand in line,

you might as well stand next to a Puerto Rican. “It’s all part of a

chain, and I can point to a lot of links in the chain that have to improve.

But there is one that has stood the test of time and remains

a big part of building relationships in Cuba, and it comes back to

dos alas,” he says. “When it comes to Cuba and Puerto Rico, that’s

one link in the chain you don’t have to worry about.” H

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art

Glexis Novoa's Untitled (1989).

Perez Art Museum Miami collection.

Photo courtesy of Museum of Fine Arts, Houston

The latest exhibition of post-revolution Cuban

art on display at Houston’s Museum of Fine

Arts is a testimony to time and displacement

SAYING GOODBYE TO UTOPIA

By Ariana H. Reguant


"From Aachen to Zurich” (2005) depicts the word Revolución in changing typographies

“Untitled” (2013) by Alejandro Rodríguez Falcón

Russian military-style posters at the installation of Adios Utopia

The museum had not yet opened and there was already

a line of people all the way to the corner. It was a rainy

Sunday in March, and the exhibit “Adios Utopia: Dreams

and Deception in Cuban Art since 1950” was opening to the

public at Houston’s Museum of Fine Arts (MFAH).

From the museum’s second floor, huge panels depicting heroic

images with Russian lettering ushered visitors into what might

have been an homage to a bygone dream world, the revolutionary

utopia. What followed, however, was not the evidence of a failed

project, but a testament to the creative experimentation made

possible by revolutionary socialism—even if in spite of itself.

Adios Utopia is ambitious. Organized by the Cisneros Fontanals

Foundation (CIFO), in partnership with the MFAH and

the Walker Art Center in Minneapolis, it is co-curated by René

Francisco, Gerardo Mosquera and Elsa Vega, all distinguished

scholars, critics and curators. It is probably the most comprehensive

exhibition of post-revolutionary Cuban art ever undertaken.

It is not, however, a chronological retrospective. Rather, it responds

to a thesis: Artistic experimentation was intrinsic to a revolution

that was, first and foremost, ideological. Even as it pushed

the limits marked by Fidel Castro’s guiding motto, “Within the

Revolution, everything; against the Revolution, nothing,” art was

meant not to merely interpret reality, but to remake it.

The exhibit spans the last six decades, with works familiar

to connoisseurs but unknown to the general public. It includes

photojournalism as well as poster art and comic strips that were

central to a revolutionary project that sought to make culture

available to the masses.

That raw zeal is apparent; it was more than a quarter century

after the Revolution before the Instituto Superior de Arte (ISA)

was founded for the professionalization of contemporary artists.

But by the time the first cohort graduated, the crisis of the Mariel

boatlift had left behind a general disenchantment that produced

the most critical art in recent memory. This well-educated elite

became at once the Revolution’s source of pride and failure. The

New Man was not a yes-man.

Adios Utopia only loosely follows a time line. It is instead

structured around recurrent preoccupations, both in terms of artistic

form and of the artists’ critical gaze. The marvel of pre-revolutionary

abstraction that sought to speak in a universal language

is soon silenced by the euphoria of the epic sixties. Photojournalism,

poster art, and comic strips served the state’s merger of art

and ideology in the service of a political project.

Later this popular art was deconstructed by Cuba’s newly

educated artists. In the museum, a heroic image like Korda’s Che

is pointedly placed in dialogue with its subversions, including

Tomás Esson’s painting of a mute Ché watching a scatological

act (“My Homage to Che,”1987) and Arturo Cuenca’s photograph

of the supporting structure to a gigantic Che billboard

(“Science and Ideology: Che,” 1987-88).

Similarly, in a section on revolutionary rhetoric, works seek to

divert the viewer’s attention from content to form. Ernesto Oro-

za’s animation “From Aachen to Zurich” (2005) flashes the term

“Revolution” with changing typographies, as if to strip the term

from its aura, while contributing to its overwhelming presence.

In another section, devoted to what playwright Virginio

Piñera called the “damned circumstance of water everywhere,”

artists ponder the twin conditions of island and exile. The

exhibit’s own farewell is “Inverted Utopias,” comprising works

that challenge that “within” of the Revolution by exposing both

ideology and the critiques that have worked to reinforce it.

Among all these works, one that is small, understated, and

as white as the wall behind it, can be seen as a powerful synthesis

of this proclaimed post-utopian turn in Cuban art. It is a scruffy

square volume of what appears to be paper pulp, still revealing

fragments of words and ink: “Untitled” (2013), by Alejandro

Rodríguez Falcón. Through a manual process of paper recycling,

Rodríguez reduced an official pocket-sized copy of the 1976 Cuban

Constitution—its first socialist Constitution—to wet paper.

In so doing, it turned it into a unique art object.

Like Ai Wei Wei’s famous smashing of archaeological vases,

Rodriguez’s iconoclastic gesture is the art’s genesis. He degrades

the most valuable symbol of the nation, its foundational document,

the revolutionary state’s own contract with its citizens, in

an act of wishful thinking. Then, it carefully displays it behind

glass and inside an oversized frame, as a precious object whose

value no longer resides in its content but in its bare materiality.

Unlike Wei Wei, Rodríguez does not claim the capitalist

market as the arbitrator of value. His might be the kind of act

that in 1990 cost another artist, Angel Delgado, prison time

when he defecated on a Granma newspaper. Today, however,

the Constitution’s defacement hardly produces scandal. Instead,

we squint at the nicely framed volume and celebrate the clever

aesthetics of the transmuted object, whose destruction we were

not invited to witness.

If the museum is the place for salvaged relics, the Cuban

Constitution is there before its time. The Constitution’s power

exceeds its matter; and it still rules the law in the land, unthreatened

by the artist’s act. Which begs the question: Has art, like

the Revolution itself, lost its power to shock and awe, or at least

provoke the imagining of another world?

We know one thing: They no longer need each other, and the

very organization of Adios Utopia proves this point. Cuban state

institutions did not participate, and the artworks were selected

from private collections and museums outside Cuba, apparently

to prevent bureaucratic impediments at an uncertain time in

U.S.-Cuba relations.

One has to wonder if an adios to utopia is not a farewell to

art itself—and hope that this is just a momentary surrender. H

““Adiós Utopia: Dreams and Deceptions in Cuban Art Since 1950” is accompanied

by a catalog coordinated by CIFO’s chief curator Eugenio Valdés Figueroa.

The exhibit is on view through May 21 at the Museum of Fine Arts, Houston.

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REPORTER'S NOTEBOOK

Havana

H

A Visit to Holguín

A veteran Cuba

watcher revisits the

city and province of

Holguín after a 20-

year absence to

discover that much

has changed

Holguín

H

By Doreen Hemlock

Photos by Jon Braeley

Cuba’s northeastern province of Holguín is best known for

farming, beach resorts and indigenous history, but I must

admit that what surprised me the most was my octopus

dinner: two large discs with legs extended like sunrays, deliciously

grilled, with vegetables, for about $8. I’d have paid at least $35

in Miami for something smaller and not as tasty. Wasn’t this

supposed to be a backwater?

Much has changed in the 20 years since I first visited Holguín

en route to a Revolution Day speech, when the food was

nothing to write about. Back then, it was hard to find a local who

would talk to a U.S. reporter. The few foreigners in town stayed in

government hotels and ate in state-owned restaurants. Tourism

was just starting to be embraced in Cuba after the collapse of the

Soviet Union.

Today, locals in Holguín chat easily with the many visitors

from Canada, Spain, Italy and other nations. There’s a boom in

privately owned homes renting out rooms, plus private taxis and

For sunsets, tourists flock to the Loma de la Cruz, or

Hill of the Cross, for an expansive view over the city

APRIL 2017

CUBATRADE

93


Holguín boasts five main plazas with traditional parks and Spanish-style churches. Students from Montreal, Dana Moshaev and Dennis Mirne Guardalavaca lifeguard Carlos Medina, proudly displays his tattoo

private eateries like TripAdvisor’s top-rated 1910 Restaurante,

where we dined three times for octopus and other treats. Tourism

is taking off, with more hotels planned along the province’s white

sand beaches including Guardalavaca.

To be sure, many things remain the same. I was the first

American woman that many of my new acquaintances had ever

met. Most people I talked with had never been outside of Cuba,

and many hadn’t even visited Havana, some 500 miles away.

Holguín is still a distant province in a once-isolated nation,

but it was clear as soon as I touched down at the airport that it

was a long way from 1997. For starters, we flew in from Miami

on American Airlines for around $200 round-trip. U.S. commercial

flights to Cuba began just last year after a half-century hiatus;

charters before that had often cost more than double. Holguín’s

Frank Pais International Airport, named for a leader of the

Cuban Revolution, used to be smaller, and I recall a mural on the

airport wall of Fidel Castro and other revolucionarios with thick

beards. Now, I saw only tourist posters.

Our taxi driver, José Serrano, turned out to be an agricultural

engineer who used to run a state enterprise overseeing hundreds

of workers. He said he now earns more money working fewer

hours with fewer headaches driving tourists and others in his

1980s Russian car. José dropped us at one of the city’s five main

plazas next to a traditional park with a Spanish-style church.

We rented rooms in a 1913 house that hosted a private medical

practice before the Revolution. The family, who inherited the

house and now lives there, calls it Casa Don Diego to honor their

young son. They’ve been renting to travelers for three years.

Greeting us was friendly and efficient Sahily Fernández, the

wife and mom who holds a degree in economics and worked 13

years in banks. She offered us fresh guava juice as she filled out

government paperwork required for rentals. Her husband, a doctor

named Nestor Mendez, had spent five years in Venezuela on a

medical mission that paid better salaries than those in Cuba. He

saved up that money and invested it in appliances and improvements

to the house. He never could have afforded the upgrades

and entered the tourism sector, we found out, if he’d relied only

on salaries paid in Cuba. Specialist doctors in Cuba typically earn

less than $90 per month, even after recent raises.

I paid 25 CUC, or about $28, per night for a clean, spacious

room upstairs, with gorgeous Cuban floral tiles, a 13-foot ceiling

and a view overlooking a clay-tile roof to hills in the distance. I

had my own bathroom just outside in the hall. Breakfast cost less

than $5 per day for a fruit plate with fresh guava, mango, banana,

and pineapple, plus eggs, ham, cheese, toast and all the café con

leche I could drink. In Havana, the room likely would run 30-50

CUC and breakfast 5 CUC or more.

To stay in touch with the United States, I bought a card

from the office of state telecom company ETECSA in the city’s

main plaza, and either stood or sat there to use wifi at a cost of

1.50 CUC per hour. Around me, locals chatted over video-apps

with family and friends overseas, and some children called out

“Papi.” Wifi connections were much better than in Havana,

possibly because there were fewer users at each wifi spot. Even 10

years ago, the idea of public wifi would have been unthinkable.

In all, more than 1 million people now live in Holguín province,

including some 300,000 in the municipality that hosts the

capital dubbed “the city of parks.” The place gets its name from a

Spanish military officer who founded a settlement there in 1545.

A world-class bronze mural spanning an entire block next to a city

park depicts the area’s history, starting with the indigenous Taino

Indians, the Spanish conquistadors and Holguín himself, slavery

and abolition, and Cuban independence. It’s only part of the

extensive street art added around the city in recent years, including

clay sculptures that resemble trees and life-size bronze figures.

Still, for many visitors, the real attraction isn’t the town but

the province’s largely undeveloped beach. We headed out one day

to Guardalavaca, a favorite among Canadians for its powdery

white sand. There we met lifeguard Carlos Medina, 39, who has

family in Canada and Italy, but prefers to stay in Cuba where he

earns a decent living in tourism. He proudly wears a tattoo that

says in English, “We may not have it all together, but together, we

have it all.”

Sunning on beach chairs were two college students from

Montreal: Dennis Mirne, 22, and Dana Moshaev, 23, who both

speak Spanish. Mirne was on his third trip to an all-inclusive

resort on the beach and encouraged his friend to join. The price:

About $700 each, covering round-trip airfare on Cubana Airlines

from Canada and a week-long stay with food, drinks, and even

alcoholic beverages. “It’s safer compared to Mexico or other places,”

said the finance major, who had traveled outside the resort

to hang out in a city nightclub, among other spots. “And price to

quality, the value is very good.”

A student of history, I couldn’t forego a visit to a Taino burial

site near Guardalavaca. Excavated by a team from the University

of Holguín, it’s been made into a small indigenous museum,

Chorro de Maita, that also exhibits relics such as coral-bead bracelets

and ceramics. Across the street there’s a somewhat touristy

recreation of a Taino village, which does manage to convey the

basics of life before Christopher Columbus, including the round

palm-roofed huts called bohios, the hammocks used for sleeping,

and the many plants used for medicine.

For sunsets, we were advised to scale the Loma de la Cruz, or

Hill of the Cross, for an expansive view over the city. José took

us by taxi, but many locals climbed the 365-plus stairs to the top,

some in exercise gear. Visitors from near and far happily snapped

photos.

Driving past sugarcane fields, farms, a baseball stadium, and

even a hotel that boasts the renown beer-drinking donkey Pancho,

you can work up an appetite in Holguín. I heartily suggest

a visit to the 1910 Restaurante, run by Hugo Pupo and his wife

Marisol Corpas in a family home. Pupo said few Americans

come, but he welcomes them: “They tip the best.” And definitely,

if you like seafood, order the octopus, grilled. H

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BOOK REVIEW

INTERPRETING THE

MYSTIQUE OF HAVANA

One of the greatest charms of former

Chicago Tribune Caribbean correspondent

Mark Kurlansky’s Havana: A Subtropical

Delirium, is that it’s not quite a book on

the history of Havana, but rather, the

history of Havana-isms.

Instead of segmenting five centuries

of the city’s history into chapters that

follow chronological order, Kurlansky

wrote fifteen short chapters (including an

epilogue and prologue) on themes that

have shaped the identity of modern Havana.

These themes include the complicated

relationship Habaneros have with the sea

that hugs their beloved Malecón, the ways

mulatas (women with black and white ancestry)

have charmed locals and foreigners

alike, and the growing pains of nationalizing

industries that were prosperous before

the Revolution.

Havana: A Subtropical Delirium also

succeeds in distancing itself from discussing

the city’s clichés. The work doesn’t

dedicate itself to reiterating the often-repeated

tales of the CIA allegedly trying

to send Fidel Castro exploding cigars.

Instead, it focuses on Castro’s infatuation

with ice cream and his efforts to get

96 CUBATRADE APRIL 2017

Mark Kurlansky’s Havana:

A Subtropical Delirum offers an

intimate look into what makes

Havana a city like no other

By Nick Swyter

Vedado’s iconic Coppelia ice cream parlor

off the ground. Kurlansky also doesn’t

dedicate entire chapters to Ernest Hemingway’s

time in Havana. Rather, the book

discusses modern Havana’s obsession with

the legendary writer and what happened

to papa’s housekeeper after he died and

Castro tightened his hold on Cuba.

The result is a book that strays from

repeating what most already know about

Havana, and instead tells the origins of

the city’s unique cultural characteristics.

While the book includes original drawings,

recipes, and historic photos, Kurlansky

truly captures the pulse of Havana by

showcasing the works of influential Cuban

writers. They are referenced so often—

and to such great effect—that the book’s

dedication reads: “To Cuban writers, those

who opposed the Revolution, those who

supported it, and those who did both.”

Kurlansky references the poems

of revolutionary leader José Martí to

showcase the yearning for a free Cuba in

the late 19th century. He also cites Cirilo

Villaverde’s Cecilia Valdés to explain the

social ills created by slavery in Cuba. The

detective novels of Leonardo Padura are

also included to show how literature that

doesn’t paint Cuba in a positive light will

sometimes be tolerated.

Showing Havana through the

eyes of writers, rather than academic

historians, also has the effect of painting

multilayered portraits of the city.

The book doesn’t skimp on imagery.

Kurlansky, and the writers he references,

illustrate the yellow hues of Havana’s

crumbling buildings and the violet

of the sea during daybreak. Readers

will also appreciate the description of

Cuba’s unbearable sun, as well as the

omnipresent sweat––and the shade that

Habaneros use to beat the heat.

Havana is a city known for inspiring

different reactions from nearly everyone

who visits. They range from romanticism

to frustration. Throughout history, countless

people have found beauty in Havana’s

chaos. Others have shown outrage

towards the city’s leadership—whether it

was Spanish, American, or a member of

the Castro family. Kurlansky’s guide to

Havana is an entertaining collage of the

attitudes that have existed throughout its

five-century history. H

EDITORIAL

CALENDAR 2017

JANUARY- FEBRUARY

Economic Predictions

Top Economic thinkers from US

Universities and Think Tanks

MARCH

The Embargo Issue

Where US Congressmen

and Senators line up on

the question

APRIL

High Tech Cuba

Software, telecom, biomed and

pharmaceuticals

MAY

The Tourism Issue

A look at the hospitality industry as

it expands in Cuba: Hotel chains,

cruise lines, private B&Bs, air transport,

travel companies, etc

JUNE

The Cuba Advisors

A comprehensive guide to the top

lawyers and consultants for doing

business in Cuba, from law firms to

lobbyists to economists

JULY

Cuba’s Luxury Brands

Cigars, rum, coffee and fashion, a

look at Cuba’s luxury goods, and

how the Cuba brand has grown

worldwide

AUGUST

The Logistics Issue

How to move things in and out of

Cuba, the top transport providers,

and in-depth looks at the ports of

Mariel and Santiago

SEPTEMBER

The Energy Issue

Leading sectors emerging in the

near future, from oil to renewables

OCTOBER

The Cuba 100

The top multinational corps doing

business in Cuba

NOVEMBER

The Agriculture Issue

From US exports of rice, wheat and

corn, to Cuba exports of organics

DECEMBER

Foreign Direct Investment

The top sectors–and Cuban priorities–for

foreign investment

Subscribe online at

cubatrademagazine.com


in closing

Put America first

by lifting the

Cuban embargo

By U.S. Senator Jerry Moran (R-Kan.)

Approximately 95 percent of the world’s consumers live outside

America’s borders. Markets in the United States will continue to

evolve to meet domestic consumer demand, but the vast majority

of the future growth in food and agriculture markets will be made

through exports. And the best way to boost prices for American

producers now and in the future is to export more of our agriculture

products to these foreign markets.

Our farmers and ranchers produce the safest, highest-quality

products in the world. Despite this advantage, we are in the

midst of one of the worst economic downturns for farmers since

the Great Depression, with farm income down nearly 50 percent

since 2013 and expected to continue its decline.

The 2016 harvest in Kansas and across much of the country

had record-breaking yields, but unfortunately, there are still large

piles of wheat, corn, and other grains sitting on the ground next to

grain bins that are filled to capacity. American farmers need more

markets to sell the excess supply of food and fiber they produce.

Meanwhile, only 90 miles from our shore, Cuba and its

11 million people offer a significant opportunity for increased

exports. As in years past, I am again championing legislation that

would lift our nation’s Cuba trade embargo so we can improve

the outlook for American farmers and ranchers.

Cuba imports the vast majority of its food. In fact, wheat is

Cuba’s second largest import, second only to oil. And when we

don’t sell to Cuba, another country does. While our unilateral

trade barriers block our own farmers and ranchers from feeding

this market, willing sellers such as Canada, France and China

benefit at the expense of American farmers.

To understand what we are missing out on, consider our

current trade relationship with the Dominican Republic (D.R.),

another nearby Caribbean nation with a comparable population,

income level, and diet. Between 2013 to 2015, the D.R. imported

an average of $1.3 billion in U.S. farm products. During the same

time, Cuba imported just $262 million. That difference represents

a billion dollars of exports that U.S. farmers are missing out on

because of our trade restrictions on Cuba. There is a clear and substantial

potential for increased exports if we lift the trade embargo.

My bill, the Cuba Trade Act, would amend our country’s

laws so American farmers can operate on a level playing field

with the rest of the world. As I often say, in Kansas we will try

anything once—and sometimes twice or even three times. However,

when we have been trying something for more than five

decades and it has yet to work, it is time to change direction.

The Cuban embargo was well intentioned when it was

enacted. Today it only serves to hurt our own national interests by

restricting American freedoms to travel and to conduct profitable

business. If we’re truly committed to putting America first, lifting

the embargo is an easy choice. I encourage my colleagues to

recognize the need for this change, and to join me in my effort to

open the Cuban market for the good of the American people. H

Sen. Jerry Moran (R-Kan.) recently introduced Senate Bill S.472 to

lift the U.S. embargo against Cuba.

98 CUBATRADE APRIL 2017


EXPLORE CUBA.

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Varadero or Camaguey, now you can fly nonstop from Miami.

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