In socialist Cuba, a burgeoning tourist market and gradual reforms are awakening a spirit of entrepreneurialism.
With jet-black hair and a chestnut tan, Martin Payne channels a distinctly Cuban look. Married to a native of Havana, the British travel agency manager has experienced life in Cuba for the past two decades. The island’s economy has been in transition since president Raúl Castro unveiled cautious pro-market reforms in 2010. Now Payne is witnessing the impact of the island’s rapprochement with the US.
“The pace of change is slowly accelerating,” he says. “There’s wireless internet in public parks and hotels. Cars can be bought and sold privately. People can own land and small businesses. But the biggest thing is the huge influx of tourists.”
Some 3.5 million foreigners visited Cuba last year – an increase of half a million over 2014, according to the University of Havana’s Centre for the Study of the Cuban Economy – and tourism on the island is booming. As restrictions on US-Cuba flights and travel are lifted and companies such as Starwood Hotels, Carnival Cruises and Airbnb enter the market, the steep upward trend is set to continue.
Situated 180km west of Havana in the province of Pinar del Rio, Vinales is home to 30,000 people. Its authentic culture and stunning limestone scenery make it the second-most popular Cuban tourist destination after Havana. The hundreds of foreigners who arrive there daily are housed in a burgeoning number of hotels and casas particulares (homes offering private accommodation), while the local market is filled with Cuban-themed kitsch.
Sisters Anai and Danai Rivera Portela opened the three-bedroom Casa Jesus y Maria in Vinales four years ago. “There are so many tourists now, we often have to turn people away,” says Anai. “They always pay in Cuban convertible pesos, which are worth a lot more than Cuban national pesos (see breakout, right), so of course the boom is good for us.”
Supply and demand
Juan Manuel Vandy’s family has been growing tobacco on the rich red soil of Pinar del Rio for three generations. Their Casa Manolo farm is located inside the Vinales Valley, a UNESCO World Heritage Site and national park. By May, their case de secadora (curing house) is filled, top to bottom, with row upon row of desiccated tobacco leaves.
If the trade embargo with the US is lifted, Cuba’s tobacco industry will have access to the world’s largest cigar market. Yet despite this new opportunity – and an apparently bumper harvest – Vandy is apprehensive about the future.
“The government takes 90 per cent of every Cuban tobacco grower’s crop, and they buy it at a really low price,” he explains. “We can only sell 10 per cent of our tobacco privately. We sell cigars to tourists, but it’s hardly enough to make ends meet. I don’t get enough fertiliser and fuel from the government, either.”
These problems may go some way to explaining why Cuban tobacco production fell 21 per cent between 2009 and 2014, according to figures from Cuba’s national statistics office.
“There’s a lot of uncertainty,” says Vandy. “Many Cuban farmers could increase production, but there has to be an incentive.”
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Small business surge
When the Soviet Union broke up in 1991, Cuba was suddenly deprived of basic staples such as oil, tractors and fertiliser. In some ways, the island’s economy has yet to fully recover. An underdeveloped manufacturing sector and unwieldy state distribution system mean that Cuban supermarket shelves are frequently empty or filled with goods that nobody wants to buy.
Yet Cuba’s small business sector is slowly starting to fill the gap. Havana has just announced that it is legalising small and medium-sized private businesses, although it is unlikely they will be able to import or export goods.
Mayrelis Peraza Barroso, who opened the art-themed restaurant Esto No Es Un Cafe in Havana in 2014, would like to see reforms go further. At the moment, her menu is constrained by the limited scope of goods available in state-run shops.
“If I could import goods, it would make my life so much easier,” she says. “With no access to finance from Cuban banks, opening this restaurant was also hugely difficult. I had to borrow from friends.”
Much of the estimated US$2 billion remitted back home every year by Cubans living in the US is now being funnelled into small business.
“A lot of people on this island are entrepreneurial,” says Barroso. “For many years, they have cherished what we call ‘sleeping ideas’. Step by step, those ideas are now becoming a reality.”
A tale of two currencies
Cuba currently has two currencies – the Cuban convertible peso (CUC) and the Cuban national peso (CUP). The CUC is worth about 25 times more than the CUP and is pegged to the US dollar.
Havana originally introduced CUCs back in 1994 for use in the tourism and luxury goods industries, but this has since created issues of access and inequality (most Cubans receive their wages in CUP).
In 2013, Havana announced it would phase out the CUC, issuing price conversion charts and introducing larger CUP bills. As of June 2016, the CUC is still in circulation, while many Cubans attempt to convert their savings into dollars.
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