A capitalist in Cuba – indications of a free-market economy; includes information for U.S. citizens wishing to visit Cuba

Manuel Schriffres

When a Kiplinger’s writer visits–before sprucing up for the Pope began–he finds early signs of a developing free-market economy.

The billboards that dot Havana’s streets and the surrounding countryside still spout political slogans: “Cuba–ninos con escuelas” (Cuba–children with schools); “En mi casa mando yo” (In my house I am in charge); “Socialismo o muerte” (socialism or death). But on this warm, starry evening, as I dine at a private, for-profit restaurant, they seem oddly out of date.

The fare in the paladar is plentiful. I and the dozen other Americans in my group are offered mounds of black beans and rice, fried plantains and a choice of pork or chicken. I can wash down my meal with Cuban beer or a cubalibre, a popular rum-and-cola drink.

Named after a popular Brazilian soap opera, paladares are restaurants set up in Cubans’ homes. Although the state limits paladares to 12 seats, this restaurant hosts not only our group, but also another containing a half-dozen more people. Paladares may not serve shrimp or lobster–the government wants no competition for these high-profit-margin items–but my chicken dinner is more than satisfactory.

Unshackled free enterprise it obviously isn’t. Still, Cuba, one of the last bastions of communism, is taking its first tentative steps toward a free-market economy. And it’s doing it without the help of its giant neighbor 90 miles to the north. The U.S. has not had diplomatic relations with Cuba for 37 years, and a tough trade embargo generally prevents U.S. companies from doing business in Cuba.

The embargo also prevents most Americans from traveling to Cuba, so I didn’t hesitate when given the opportunity to visit the mostly forbidden Caribbean island. What I found was a country of contradictions. It is a place of majestic beauty, both natural and constructed by human hands. Yet the city of Havana is filled with buildings that look as if they’ve just been strafed by machine guns. Hunger is nowhere to be found in Cuba and citizens are guaranteed free medical care, but cubanos admit that they want something better, and in particular they crave U.S. dollars. The government proclaims the joys of socialism while it encourages foreign investment and permits Cubans to engage in free enterprise. And though Cuba’s people bear the brunt of the U.S. boycott, they seem to bear no ill will toward Americans and are friendly toward all foreigners.

Although our government bans most Americans from traveling to Cuba, journalists, scholars and those with approved religious and humanitarian organizations are free to do so. Though I could have gone as a journalist, I chose to visit Cuba with a humanitarian group called Jewish Solidarity. Its mission is to deliver food, medicine and religious supplies–not to mention moral support–to the 1,500 Jews of Cuba. (For information on traveling to Cuba, see the box on the facing page.)

Actually, I could have entered via yet a third route. I was born in Cuba, and I will always be considered one of its citizens. But it had been 44 years since I had last set foot on Cuban soil. My Spanish, I’m ashamed to say, is nonexistent. So I decided that it would be wiser–and perhaps safer–to travel on my U.S. passport.

It’s 7 o’clock on a Sunday morning, and Miami International Airport is bursting with activity. Scores of people are checking in for our chartered flight to Havana. Almost everyone, it seems, with the exception of the Jewish Solidarity contingent of 15, is checking two, three or four enormous suitcases or duffel bags filled with food, clothing, toiletries and medicine. These are Cuban Americans, many of whom arrived during the 1980 Mariel boatlift or during the 1994 raft exodus and are returning with bounty for the relatives they left behind. The gifts are not subject to the U.S. embargo, which applies to business contacts. Meanwhile, almost everyone spends several dollars to shrink-wrap each case for security purposes. We don’t know any better, so we follow suit.

Despite the excess poundage, our Airbus A-310 manages to lift off. Since President Clinton banned direct travel between the U.S. and Cuba in the wake of the shoot down by Cuba of two U.S. civilian planes in 1996, our chartered flight engages in a minor subterfuge. We stop first in Nassau, where no one is permitted to deplane. After a 20-minute layover, we’re back in the air for the brief flight to Jose Marti International Airport, named for the Cuban national hero who fought for independence from Spain in the 19th century. With the stop in Nassau, the whole trip takes less than two hours.

My visit gets off to a poor start when the number on my passport doesn’t match the number on my visa application. Shortly before leaving Washington, I learned that passports must be valid for at least six months beyond the time of your stay in Cuba. Mine was scheduled to expire in just a few weeks. I scurried over to the passport office, applied for expedited approval and got my new passport just three days before departure. My Spanish-speaking father and stepmother, who accompany me on the trip, relay my explanation to the immigration officer. Nevertheless, he orders me to stay in the drab holding area for new arrivals. After a 25-minute wait that seems much longer, I am allowed to pass through.

There is no need to rush because my group is still waiting for its luggage. It is close to two hours after our arrival before we finally see our suitcases. Meanwhile, we meet our Havanatur guide, who escorts us to our bus. Outside the terminal, throngs of Cubans eagerly await their gift-laden relatives.

As we make our way toward Havana, the view from our air-conditioned Toyota tour bus reminds us that Cuba is indeed a poor country. Buildings are decrepit and ramshackle. Horse-drawn carts are a popular mode of transportation. We pass the national sports complex, and it too looks as though it’s seen better days. We spot a group of youngsters playing what appears to be a pickup baseball game in an untended field.

Our base in Havana is the Habana Riviera, a 357-room hotel that opened in 1957. Said to have been a haunt of American gangsters during the corrupt reign of dictator Fulgencio Batista, the hotel is situated on the Malecon, a boulevard with a wide sidewalk that hugs the coast of the Straits of Florida. The lobby is spacious, and so are the rooms. The rugs are a bit worn, but the rooms are clean, and everything seems to work, including the air conditioning and the TV. That allows me to stay abreast of what’s happening in the rest of the world via CNN (neither American newspapers nor the International Herald Tribune are available in Cuba). We’re asked for $20 deposits on the TV remote controllers, apparently a favorite object of pilferage.

The hotel and most of the restaurants we patronize are government-owned. But ever since $7 billion a year in subsidies disappeared along with the Soviet Union several years ago, Castro has grown more willing to tolerate private ownership, as the spread of paladares indicates. Cuba has also become more willing to allow foreign investment, and Canadian, Mexican and European companies have jumped at the opportunity.

We get a taste of this capitalist invasion during a brief side trip to Varadero, a beach resort about 90 miles east of Havana. We stay at the Sol Palmeras, the first joint venture between a foreign lodging company, Spains Sol Melia Group, and the state-owned hotel company. Sol Melia operates this hotel and six others in Cuba.

Sol Palmeras is a world-class resort, complete with two swimming pools and tennis and volleyball courts. Bronzeskinned employees lead sun worshippers on the pristine beach in exercises and Cuban dances. The ocean is spectacularly clear. A golf course–a rarity in Cuba–is under construction nearby. The resort’s guests are mainly Canadians and Europeans. We’re apparently the only Americans, and the only Cubans are employees.

Cuba is a small part of Sol Melia’s business. For the third quarter of 1997, management fees from Cuban operations totalled 800 million Spanish pesetas Oust over $5 million at today’s currency rates), or 8% of all revenues. Interestingly, while revenues from Cuba were up 32% from the third quarter of 1996, revenues per available room dropped 16%. The company attributed the decline to several bombings in Cuba last year and to the strong dollar, which made Cuba a more costly destination for Europeans.

Back in Havana, we see firsthand the explosion in Cuba’s entrepreneurial class. A 1993 law allowed a dramatic increase in self-employment. According to one report, between 10,000 and 15,000 Cubans were self-employed in 1993. By the end of 1996, the number had mushroomed to 180,000. Artisans sell jewelry and paintings from tables at key tourist spots. Others sell everything from food to sandals to bongo drums at stalls in open-air flea markets. Bargaining is perfectly acceptable, and the dollar, which became legal in Cuba in 1994, is the preferred method of payment.

Still, modern Cuba is not to be mistaken for a liberal democracy. We get a reminder of this one evening when two Cuban men in their early twenties engage my father and stepmother in conversation as we stroll along the Malecon. They tell us that they’re generally satisfied with their lives but want to be able to buy more consumer goods. Their big complaint, though, is with the police, who, they say, frequently harass them for no apparent reason. One tells us he was once arrested without being charged and was held for 13 hours before being released. Not only is this not a democracy–Cuba, we are reminded, is still a police state.

Perhaps when Castro, who is 71, dies, democracy will come to Cuba, the U.S. embargo will be lifted and capitalism will flourish. There’s already a closed-end fund, called Herzfeld Caribbean Basin, devoted to ferreting out promising Cuban investment opportunities. Based in Miami, the fund invests in companies that would benefit from the lifting of the embargo. Among its holdings are Florida East Coast Industries, which runs the railroad along the east coast of Florida; PanAmerican Beverage, the largest soft-drink bottler in Latin America; and Carnival Corp. and Royal Caribbean Cruises, both of which, says manager Thomas Herzfeld, stand to benefit once American tourists are allowed back into Cuba.

For the three-year period to January 2, Herzfeld Caribbean Basin delivered an annualized total return of 12.8% on assets, according to Morningstar Inc. The fund, which trades on Nasdaq (symbol CUBA), recently sold at a 5% discount to net asset value. For more information, call 305-271-1900. Like stocks, you buy closed-end funds through a broker.

About as close to a pure investment play on Cuba that’s available to U.S. investors is the stock of a Canadian company called Sherritt International. The company is 50-50 partners with the Cuban government in a nickel- and cobalt-mining venture. It’s also involved in agriculture and oil production and seeks to become a major player in Cuba’s burgeoning tourism industry. In 1996 Sherritt sold junk bonds to raise more than $500 million, which the company intends to invest in Cuba. As a result of Sherritt’s activities, its chairman, Ian Delaney, has been barred from entering the U.S. for violating the Helms-Burton act. Helms-Burton punishes foreign nationals and companies that invest in properties once owned by U.S. interests that were expropriated by the Castro regime. Sherritt’s stock, which trades on the Toronto Stock Exchange, recently sold for $5 (Canadian) per share.

Meanwhile, Castro is showing no signs that he will depart from the stage anytime soon or do so quietly. At the Cuban Communist Party Congress held last October in Havana, the first in six years, Castro seemed to cast aside, at least for now, rumors that his health was failing. His speech to open the congress lasted nearly seven hours.

RELATED ARTICLE: GETTING THERE

Because of the trade embargo that has been in force since 1963, visiting Cuba is difficult, but not impossible, for Americans. U.S. government officials, journalists and people visiting relatives can travel to the island without special permission from the U.S. Treasury Department. Those engaged in humanitarian missions or traveling in connection with professional, educational or religious activities can obtain specific licenses from the Treasury’s Office of Foreign Assets Control. (Some Americans visit the country illegally via Mexico, Canada, Nassau or Grand Cayman, and Cuban officials abet them by not stamping their U.S. passports.) For more information about obtaining a visa to Cuba, contact the Cuban consulate in Washington, D.C., at 202-797-8609.

Several travel agencies offer packages to Cuba for qualified Americans. For example, this year Global Exchange (800-497-1994) is sponsoring programs focusing on renewable energy and the Cuban public health system and alternative medicine. A ten-day excursion in September is called “Cuban Culture: African Roots, Rhythm and Religion.”

Marazul Tours (800-223-5334; 201-319-3900 in New Jersey) is arranging trips in 1998 for various religious groups, as well as for those interested in such subjects as veterinary medicine, architecture and anthropology. The agency also arranges travel for the Center for Cuban Studies (212-242-0559), which sponsors trips dealing with religious, arts, education and health issues.

Jewish Solidarity (305-856-0177) is planning its next humanitarian trip to Cuba for the week of March 22 to March 29.

There are several helpful books for visitors to Cuba. Among them are Cuba: A Lonely Planet Travel Survival Kit (Lonely Planet Publications, $17.95); Fodor’s Cuba (Random House, $14) and Ulysses Travel Guide Cuba (Ulysses Travel Publications, $25).

Americans are not permitted to bring back to the U.S. more than $100 worth of Cuban goods. In my case, that was easily enough to allow me to return with a bottle of rum and two boxes of Cuban cigars. I have distributed the cigars to friends and colleagues. The rum sits unopened, awaiting a special occasion. Perhaps when democracy comes to Cuba, I’ll open the bottle, mix it with some cola and celebrate with a cubalibre.

COPYRIGHT 1998 The Kiplinger Washington Editors, Inc.

COPYRIGHT 2000 Gale Group