By Duncan Hooper
Fidel Castro’s successor may offer a more business-friendly breed of communism
Cuba has been enjoying something of an economic resurgence recently. After losing its economic lifeline to the Soviet Union a decade ago, the communist country is now forging links with China, has found a wealthy local ally in Hugo Chavez’s Venezuela and even discovered oil.
As a result Fidel Castro can afford to be a little more picky about whom he allows into his party. Even those foreign investors willing to tie up their fates in government-controlled joint ventures are finding an increasingly frosty welcome. The good news for those sitting on the sidelines eagerly eyeing the Cuban market is that change may be in the wind.
Fidel Castro, now 79 and in declining health, swept to power in 1959, overthrowing the regime of pro-United States dictator Fulgencio Batista. Ever since, he’s held the imagination of his people through his goading, combative defiance of Cuba’s superpower neighbour. All that time his younger brother and preferred successor Raul has remained steadfastly at his side, largely unnoticed by the outside world. The coming change of regime will need a change of tactics.
“Raul isn’t Fidel. He isn’t charismatic; he’s feared and disliked by large parts of the population. Raul is going to have to give them bread as opposed to circuses,” says Brian Latell, a former CIA analyst who’s spent four decades researching Cuba and recently exposed Raul’s character and ideals in his book After Fidel: the inside story of Castro’s regime and Cuba’s next leader.
Though Raul will want to harvest the fruits of overseas investment, he’s unlikely to move the country closer to democracy or broach the thorny issue of rights to land and property appropriated during the revolution. Progress will be gradual: “Think the China model,” says Latell, currently researching for the Institute for Cuban Studies at the University of Miami.
Multinational companies are already eyeing up the promise of a post-Fidel Cuba. The bearded, cigar-puffing president has appeared weak and disorientated in public appearances, fuelling reports that he suffers from debilitating Parkinson’s disease.
“Certainly a lot depends on how long Fidel lives, what the succession is going to be like and how smooth it will be,” says a senior manager at an international bank who asked to remain anonymous. “But I can see the economy moving forward fairly quickly.”
77 PLUS
Entrepreneurs who entered Cuba in the immediate aftermath of the passing of foreign investment law No. 77 say their businesses have been able to flourish under a cooperative and decisive government. British millionaire Malcolm Pearce has expanded his business on the island from distributing newspapers to breeding dairy herds, running hotels and importing motorbikes.
Fellow countryman Steve Marshall was one of the first foreign businessmen to set up there, running residential and commercial property companies and founding a string of websites including Cuba’s first online travel agent. He’s also set up his own consultancy to advise multinationals on operating in Cuba, and lists Pepsi and Kraft foods among his clients.
“Running a business here is very similar these days to what it is anywhere else,” Marshall, who’s worked in Spain, France and Russia, says by telephone from his office in Havana. “I’ve found it relatively easy.”
Not everything’s been smooth running for the 37 year old. He ran afoul of the US trade embargo in the late 1990s and briefly had a warrant out for his arrest over dealings with a real estate franchise. Marshall also says that these days the space in Cuban markets for businessmen like him is starting to get squeezed.
On the quiet
The stigma attached to Castro’s regime means that many of those companies are still wary of talking publicly about their operations. Sol Melia of Spain passed up the opportunity of discussing the hotels it runs on the island, and French tobacco maker Altadis didn’t want to speak about its business exporting famous Cuban cigars. Nestle, the Swiss food giant, was similarly tight lipped when approached about its own Cuban division.
Some investors are more frank about their interest in a post-Fidel regime. Thomas Herzfeld runs the Caribbean Basin Fund from Miami, investing in companies and assets that would benefit from an expansion of trade and an end to the US trade embargo on Cuba. His portfolio includes shipping companies Carnival, Seaboard Marine and Trailer Bridge. Herzfeld also holds defaulted bonds issued by the overthrown government of Fulgencio Batista with a face value of $165,000 and shares in the Cuban Electric Company, which has lodged claims in Washington for assets nationalized by Castro.
Cuban Electric is in good company. Other claimants include some of America’s most prestigious names: Ford, Citigroup, Exxon and General Electric.
Herzfeld’s plan is to be among the first wave of US investors into Cuba after the end of the embargo, helping fund the construction of new infrastructure on the island of 11 million people. There certainly is room for growth: Cuba’s GDP per capita is $3,300 on a purchasing power parity basis, a little above Indonesia and well below neighbouring Jamaica and the Dominican Republic.
How long Herzfeld and his fellow investors will have to wait might well depend on the life spans of the two Castro brothers. What will happen after that is anybody’s guess. Latell, the former CIA analyst, cautiously predicts democracy within 20 years, but he’s not willing to place a bet on where Cuba will be in 2016.