The Cuban Economy: After the Smoke Clears

(page 3 of 3)

Browse Issues

Browse the BusinessWeek Archive

Related Items

• When Will Cuba Be Open for Business?

Small biz: A shoemaker at work in Havana Sven Creutzmann/Getty Images

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• digg this
• save to del.icio.us

The epicenter of this effort is the Tourism Ministry, a 1950s edifice overlooking the Malecón—Havana's seawall—whose breezy hallways are plastered with travel posters. To keep wealthier visitors busy, the ministry wants to offer those most capitalist of amusements, golf and yachting. Ten golf courses—to supplement the two Cuba has today—are on the drawing board. "To compete, we really need as many as 25 golf courses," ministry adviser Miguel Alejandro Figueras says, noting that the Dominican Republic has 35. And he figures that Cuba could receive 49,000 pleasure boats from the U.S. each year if the embargo were lifted, but the country has just 500 or so berths in its 10 marinas.

Tourism, though, has its share of troubles. For starters, business has fallen off slightly in recent years as tour prices have crept higher and resorts have aged. Arrivals fell to just over 2.1 million last year. Worse, it's tough to create a service culture in a country where the propaganda machine has long frowned on anything smacking of luxury. Hotel phones go unanswered, taxi drivers are notorious scammers, and you can queue for an hour simply to buy extra minutes for an overpriced mobile phone rented from the government monopoly.

Another potential moneymaker: tapping Cuba's huge corps of doctors to offer foreigners a tummy tuck or help in kicking a drug habit. Cosmetic surgery and other procedures in Cuba can cost less than half what they do in the U.S. Last year, 6,000 foreigners visited Cuban hospitals and clinics for treatment, bringing in a total of $22 million, and Argentine soccer star Diego Maradona has checked in twice to overcome a cocaine addiction. "By charging [foreigners] for these services, we help defray the cost of our universal health system," says Gelacio Aday, director of international services for Cubanacan, the health tourism agency.

American business, meanwhile, is eager to join the party. A growing number of U.S. farmers, manufacturers, and oilmen argue that they're missing a chance to get a foothold in post-Fidel Cuba. In their place are companies such as nickel and oil producer Sherritt and Spain's Sol Meliá, which runs two dozen hotels across the country. All told, Spanish companies have 73 joint ventures in Cuba, particularly in tourism. Canada has 38 and because of Sherritt is the country's single biggest investor. Relative newcomer China has 12, and even Iran has gotten into the game, selling freight cars to Cuba's state railway.

Only a handful of Americans have managed to get a foothold, using the few licenses that the U.S. Treasury Dept. has issued to food exporters. One of them is John Parke Wright IV, a 58-year-old rancher from Florida whose family began trading with Cuba in the 1860s. At the time of the revolution, he notes, Cuba "was one of the richest cattle countries in the world," with 6 million head. Today, there are fewer than 2 million. "We've witnessed agricultural decline on a massive scale," he says. That drop, though, has created a big opportunity for Parke Wright, who has visited Cuba frequently over the past eight years to help restock the country's herds.

Don't expect Cuba to achieve the kind of hypergrowth seen by Asia's stars anytime soon. The U.S. embargo will continue to bite, forcing Havana to pay higher prices for everything from powdered milk to satellite telephone connections. But 7.5% growth isn't bad, and if Raúl Castro can ease in changes that his brother might not have tolerated, the regime isn't likely to collapse in the near future either. "Raúl needs legitimacy, and the only way he can get it is by delivering results through significant economic reforms," says Carlos Saladrigas, a Cuban-American businessman in Miami who heads a group drafting strategies to deal with post-Castro Cuba. "He doesn't really have much choice."

Join a debate about lifting the U.S. trade embargo against Cuba.