To Have and Have Not
Cuba: Foreign investors — and ordinary Cubans — can just keep dreaming of making easy money
Filip Hoffmann speaks of his Cuban "partner" with more than a hint of sarcasm. The Belgian businessman, an employee of the Spanish tourism firm Iberostar, manages the Hotel Neptuno in Havana-but practically every important decision is made by the international hotel's owner, the Cuban government. The government built the place only four years ago, but Hoffmann says it's already falling apart. The government hired the staff, including a bartender who didn't know what a martini is and chambermaids who emphatically don't care where they're supposed to place the toiletry kits. Anything Hoffmann buys, including food, has to be obtained from the government, which often means either doing without or paying more than one third extra in duties for imported goods. "My partner is doing very well, thank you," says Hoffmann, "maximum income for minimum effort."
Foreign investors can just keep dreaming of making easy money in Cuba. The potential is certainly there: the finest beaches in the Caribbean, at least one third of the world's known nickel reserves, a literate work force that never goes on strike. And the government clearly wants to attract foreign money. On his visit to New York last month, Fidel Castro even wore a banker's pinstripe suit instead of his trademark military fatigues and talked up Cuban investment at every opportunity. Since 1988 Havana has allowed some 250 foreign companies to invest an estimated $737 million in the country, and deals worth an additional $4.3 billion are under negotiation. But Cuba is no China; it's not even Vietnam. The government's commitment to a state planned, centrally controlled economy remains as inflexible as ever.
Sign here: Every detail of doing business in Cuba is minutely regulated. One leading Western businessman was obliged to cool his heels two months before the Cuban government granted him permission to buy a company car. His application slowly climbed the bureaucratic ladder all the way to Carlos Lage, vice president of the Council of Ministers and operational director of the economy, who finally affixed his signature. Now the foreign executive is seeking permission to buy a dish antenna. He wants to watch soccer games and news from home. "This is a communist country that doesn't want to stop being one," he grumbles. As Castro himself confidently declared in September, "we will not only save socialism, but we will perfect it." The president was hailing the National Assembly's passage of a bill that supposedly liberalized Cuba's foreign-investment laws.
The most galling restrictions on overseas businesses may be Cuba's labor laws. Havana makes sure foreign bosses don't reward Cuban workers too generously. Almost all hiring is done by the state, and the law says employees must be paid in pesos, not dollars. The government, in its capacity as partner and paymaster, reserves any hard-currency earnings for its own use. Companies are allowed to offer estimulos (bonuses) --subject to government approval on a case-by-case basis. But the government bars joint ventures from paying any Cuban worker a bonus of more than $50 a month in convertible pesos. "This is to avoid the introduction of privileged classes, privileged groups of workers," explains Octavio Castilla, vice minister of foreign investment. A bonus of $50 can still be good money in a country where the average wage is the equivalent of $7.20 a month. Yet many workers resent the government for exploiting them. "I got tired of knowing that my salary was being paid to the state in dollars," says an engineer who quit a relatively high salaried job in order to sell handicrafts on the street.
Few ordinary Cubans appear to share their government's disdain for bourgeois comforts. If their incomes allow it, they flock to paladares , the newly legal restaurants run out of private homes. Such places routinely serve better food than state restaurants at half the price. Some restaurateurs even distribute advertising handbills, a practice unheard of until recently in communist Cuba. "The pleasure of home cooking," says a leaflet for a place called Eddy's, the converted living room of a former villa in central Havana. "For special service, call for a reservation." And thousands of private citizens journeyed by bus, car and bicycle to Havana's recent annual trade fair. They gazed covetously at the displays of foreign-made light. industrial machinery and the kind of consumer items that many non-Cubans would take for granted. Among the exhibitors was Alberto Sato Hirata of Mexico City's Goba Internacional, which hopes to sell $200,000 worth of staplers, paper-punches and scissors in Cuba (via a state-run import house, of course) over the coming 12 months. Mexicans can buy such wares at any local stationery shop, but the Cubans were dazzled. "They keep asking where they can buy scissors like these," Sato said.
No bread: Aside from a few highly publicized deals, most investments in Cuba are still petty cash. The Mexican firm Grupo Domos paid $1.5 billion (half of it a noncash debt swap) for a 49 percent interest in the island's telephone system in 1994, but most foreign companies are keeping no more than a toehold in Cuba for now. "There isn't as much investment in Cuba as people believe," an official in Spain's Trade Ministry says from Madrid. "By definition, it is risk capital. If I were a company, I wouldn't put money there for anything." Other financial analysts agree. "Foreign capital can't take root where people don't have bread, don't have jobs, are confronted with the urge to leave," says Thomas Trebat, emerging-markets research director for New York's Chemical Bank. "Cuba to me is a place basically for the next century." Yet many foreigners in Cuba say they're sure the boom will come. "The future has very big possibilities," asserts Hoffmann. Perhaps so. But Havana is trying to postpone that day as long as possible.