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2007-12-01 / Pavel Res

Cuba Is Never Alone

‘Castro’s Cuba has never been alone’, smiles Alicia, a Cuban revolucionaria in her sixties who rents rooms in her Havana flat.  Unfortunately this might actually betrue. Whenever there is only an indication that Castro’s regime is on the verge of collapse from economic reasons, there is always somebody to help. In 1960s it was the Soviet Union and since 1990s it has been the European Union.

If such help had not been provided to Castro, he would have probably been forced to change his political course and to allow for more economic freedoms. Unfortunately because of political and strategic, economic, social, egoistic or other reasons, countries have various attitudes towards authoritative or dictatorial states like Cuba, and therefore there will always be somebody to please Alicia.

Saving Cuba and the EU’s Investments

Today Venezuela and China are taking over the role of the European Union. However, European capital keeps saving Cuba as it tries to protect a diminishing position of influence.

            The flourishing European tourism industry has become one of the most important motors of Cuban economic growth and in this field Spain continues to be the most significant player. The Spanish hotel chain Sol Meliá has opened its 23^rd hotel in Cuba, giving it command over 37% of the market. In addition, other hotel companies such as Iberostar Hotels or Barceló are going to expand and by 2010 Barceló will inaugurate six new hotels. Cuban tourism generates over 2 billion US dollars every year, which represents a very significant source of hard currency and employs about one hundred thousand people.

            ‘Once again tourists visit Cuba because of the three Rs – Rum, Rumba and Romance.’ Even though the glamour of Havana, as described in the novel Three Trapped Tigers by Cabrera Infante, is not as it used to be fifty years ago, for many tourists Cuba has become a brothel again. ‘Cuban prostitutes are the cheapest as well as the most intelligent ones – even university educated women do this job’, giggles a pimp who introduces himself as Julio and offers his cousin. Even though prostitution is prohibited in Cuba but it is difficult for many to resist earning two months salary in an hour.  The average monthly salary is 11 Euros.

Cuba is visited every year by more than two million tourists, most of whom arrive from Europe, although Canada contributes a healthy 25% of this number. It is true that the flow of tourists has been stagnating over the last two years – tourists are discovering new destinations and often they are not satisfied with the relatively high prices and poor services provided in Cuba. In 2006 the number of tourists visiting Cuba from several countries dropped: Spain by 5,7%, Italia by 15%, Germany by 9,8%, France by 5,2% and Canada by 1,9%. On the other hand, the number of English tourists increased by 5,2% over the last year. Nevertheless, the tourism industry is expected to keep growing and accordingly, Cuba is supposed to continue expanding its tourist capacities, which currently can accommodate a maximum 3 million tourists annually.  Of course, the speculation of an avalanche of tourists coming from the USA persists into the unidentified future since it could represent almost 2 million additional holidaymakers every year.

            Tourism is not the only thing that draws hard currency from the European Union. The most important EU-Cuba foreign trade item is Cuban nickel. Cuba is the sixth biggest provider of nickel in the world with five percent of global production and extracts over 70 thousand tons annually.  In addition, the world market’s price for nickel has grown remarkably over the past few years.  Since 2002 nickel prices have risen by approximately 500% and the current prices fluctuates around USD 30,000 per ton. Around 300 million euros worth of nickel is exported to European markets through the Netherlands, where it is redistributed to other countries. However, since Dutch importers continue to face sanctions because of the US’s embargo, Europe’s imports are 50% lower than they were and the Cuban government has started to focus raw material exports to China whose enormous demand continues to boost prices. The extraction is implemented in the cooperation of the state company Cubaníquel and the Canadian company Sherritt International.

            The main pillars of Cuban wealth are not dependent only on tourism and nickel for gaining to hard currency.  The exportation of services has definitely become the most important one, since there are around 30,000 Cuban doctors work abroad these days in Venezuela and other countries. ‘I am going to see my doctor and there is a note on the door saying: “I am in a mission.” so, I am going to see the substitute doctor and again there is a note on the door saying: “I am in a mission.”’, Gerardo, a retired engineer, complains about the medical system in Cuba. And we must not forget about the annual income of nearly 1 billion dollars sent as remittances from relatives living in the US.

Cuba exports several different commodities. The most significant ones, other than nickel, are sugar, tobacco and cigars, lobsters, medical products, citrus, coffee and rum. And most of these commodities are also exported to the European market.

            Due to the reciprocal nature of business, the European Union places their goods in the Cuban market. Hundreds of EU companies sell their products or have investments in Cuba. Next to the previously mentioned investments in tourism, the largest European exports and investments are made within industrial sectors: mineral extraction; the chemical and petrochemical industries; equipment for power plants and various kinds of machinery including cars and other means of transport. Also, EU members export daily consumer goods: primarily food followed by clothes, brewer’s malt, wine, etc. Some EU countries even prefer exporting to Cuba through third countries. The trade of the European Union with Cuba grew by 19% in the year 2006. In comparison with 2005 especially the exports of Spain, Germany, France, Belgium and Italy rose.

Foreigners that have direct investments in Cuba (tourism, extraction of raw materials, building industries, transport, communications, etc.) usually have to invest their money in so called empresas mixtas, which are semi-public companies where the Cuban government owns 51% and the foreign investor 49% of the enterprise. The most active European direct investors are Spain, then Italy, France and in a lesser extent Great Britain and Germany. Contracts cover a determined period of time, for example for 10 years, in which these businesses strictly have to follow Cuban requirements that do not allow for much flexibility.  When these contracts expire and are not extended, these companies usually become again complete state owned like it used to be in the magnificent 1980s. Cuba usually pays foreign investors through the actualized profits. As a result, some foreign investors have already left the country. Sometimes the departure is not very smooth; there have been various disagreements and some of these disputes even ended up in arbitration courts. For instance, this year two major Spanish multinational investors, Acciona Infraestructuras, S.A. and Zell Chemie SL have launched lawsuits against the Cuban government.

Foreign investments according to countries in 2005 (number of investments)

Source: IPS-Resumen Economico Anual 2006

There are several business zones where foreign companies may own up to 100% unlike 49% in semi-public companies,but they are strictly isolated in designated special duty free areas, which only represent some 25% of production within the Cuban market. Furthermore, usually these companies are expected to assemble semi-finished products and there is always the Government interference.Most of these business zones have been abandoned. For example in the Berroa Zone, close to Havana, there were 102 companies in 2002, allegedly today there are only about 18. The investors fled because they were not allowed to sell the quantities they had wanted to in Cuba. Another reason might be the fact that the Cuban government prioritizes ideological fellow-believers like Venezuela and China and therefore, hassle the European companies until they leave most of these spaces.

Cuba discriminates against European investors in these matters. Simply put, the Europeans are not ideal partners; they only support the regime economically and not politically and ideologically in the ways that Caracas and Beijing are willing to. Moreover, some European governments continue to annoy the government over its human rights record and by supporting dissidents, and the regime no longer wants to deal with these reproaches. Why are the Castro brothers venturing to discriminate against the EU? They apparently do not need the European investments to the extent that they needed them ten years ago. In 2005 alone the exportation of services to Venezuela generated 40% of Cuban hard currency income (USD 2,9 billion). ‘Cuba called us when they needed us and now they are getting rid of us, because they have different plans for the future’, say some European investors.

Business between EU Countries and Cuba in thousands of euros for the year 2006:

As you can see, large amounts of money has been lent to Cuba from the pockets of European citizens. Because of this, Castro’s economy achieved GDP 12,5% growth in 2006 according to official Cuban data, although this is perhaps an exaggerated figure, because Cuba uses a special method of GDP calculation. The real growth of Cuba’s GDP is estimated to be around 7,5%, which is still considered robust.  

Based on this summary, it would seem that money does not respect human rights. The world revolves around money, a sacred truth in all societies including Cuba and the USA, the biggest exporter of democracy in the world.

Common business obviously cannot be stopped from human rights reasons, even EU politicians do not do their best not to harm their European economies. The European Parliament has adopted resolutions urging EU members to focus on improvements of the human rights in Cuba, but most of the countries do not respect this formal requirement.

 An economic blockade is probably not going to change the political situation in Cuba. There will always be somebody’s shoulders that Cuba can lean its tired head upon. On the other hand, this fact should not be used as an excuse by well-established democratic countries of the EU. Those who support business with Cuba sometimes say: ‘The richer a country’s population is, the more conscious the inhabitants are about demanding their rights. So in doing business with Cuba we are supporting democratic changes.’ Or as José Martí said: ‘Freedoms die where they are not sustained by wealth.’ This judgment may sound good, but the US’s 47 year old embargo has not succeeded in overthrowing Castro.

Regardless, investors should enforce some procedures which are common in Western Europe and refuse to comply with most of the Cuban regime’s pro-Castro requirements. In general, the investment requirements in Cuba today do not support human rights, instead they simply collaborate with the Castro brothers’ ideology and rule.  A positive example of this can be seen in one of Cuba’s most active business partners: the Netherlands. The Netherlands provide the greatest amount of support for the dissident movement through their embassy. A less positive example can be seen in of Italy. This country has refused to get involved in the human rights situation in Cuba at all, but by only doing business they are harming dissidents. The telecommunication company ETECSA, which eavesdrops on Castro’s opponents with the support of TELECOM ITALIA capital in Cuba.

The most important EU business partner is Spain. Taking into account the historical events, Cuba was the last Spanish colony and there has always been an unbreakable bond between these two countries. Spain still wants to maintain a paternalistic attitude towards Cuba and treat Cubans like children. As in life, it is difficult for parents not to fulfill their children’s wishes and to cast a blind eye towards the injustice they cause. Remember that the Cuban government has developed in part from Spanish heritage. So Spain always seems to forgive Castro’s regime. But the Spanish investors’ behaviour sometimes goes too far. For example, in 2005 the Meliá Habana Hotel cancelled the Czech embassy’s reservation to celebrate the Czech national holiday at the very last moment, because the Czech embassy had invited the “counterrevolutionary” Ladies in White. These manners are simply unthinkable in Spain, but when they are in Cuba the Spaniards do not seem to mind.

Business can help build a better society in Cuba if ethics are involved in the investments. The companies could at least try to respect the Arcos principals – the moral code compiled by the dissident Gustavo Arcos defining the ethics principles of foreign investments.[1]  Let’s merge the profits they make with ethics and human dignity.

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People In Need @2007 / Sokolská 18, 120 00 Praha 2, E-mail: cubalog@peopleinneed.cz
People in Need (PIN) is a Czech organization that provides relief aid and development assistance, while working to defend human rights and democratic freedom.