Cuban military expands its economic empire under detente
Published September 09, 2016 Associated Press
HAVANA – At the height of Cuba's post-Soviet economic crisis, a man
with the obscure title of city historian began transforming Havana's
crumbling historic center block by block, polishing stone facades,
replacing broken stained glass and repairing potholed streets.
Over a quarter century, Eusebio Leal turned Old Havana into a
painstakingly restored colonial jewel, a tourist draw that brings in
more than $170 million a year, according to the most recent available
figures. His office became a center of power with unprecedented
budgetary freedom from the island's communist central government.
That independence is gone. Last month, the Cuban military took over the
business operations of Leal's City Historian's Office, absorbing them
into a business empire that has grown dramatically since the declaration
of detente between the U.S. and Cuba on Dec. 17, 2014.
The military's long-standing business wing, GAESA, assumed a higher
profile after Gen. Raul Castro became president in 2008, positioning the
armed forces as perhaps the prime beneficiary of a post-detente boom in
tourism. Gaviota, the military's tourism arm, is in the midst of a hotel
building spree that outpaces projects under control of nominally
civilian agencies like the Ministry of Tourism. The military-run Mariel
port west of Havana has seen double-digit growth fueled largely by
demand in the tourism sector. The armed forces this year took over the
bank that does business with foreign companies, assuming control of most
of Cuba's day-to-day international financial transactions, according to
a bank official.
"GAESA is wisely investing in the more international — and more
lucrative — segments of the Cuban economy. This gives the military
technocrats a strong stake in a more outwardly oriented and
internationally competitive Cuba deeply integrated into global markets,"
said Richard Feinberg, author of "Open for Business: The New Cuban Economy."
Castro has never publicly explained his reasoning for giving so much
economic power to the military, but the armed forces are widely seen in
Cuba as efficient, fast-moving and relatively unscathed by the low-level
payoffs and pilferage that plague so much of the government. Economic
disruption also is viewed as a crucial national security issue while the
government slowly loosens its once-total hold on economic activity and
renews ties with its former Cold War enemy 90 miles to the north.
While U.S. President Barack Obama has said detente was meant partly to
help ordinary Cubans develop economic independence from a centrally
planned government that employs most of the island's workers, the Cuban
government says the U.S. should expect no change in Cuba because of
normalization with the U.S.
The takeover of Old Havana shows how the Cuban government is, so far,
successfully steering much of the peace dividend into military coffers.
The announcement nearly two years ago that the U.S. and Cuba were
restoring diplomatic relations set off a tourism boom with Old Havana at
its epicenter. The cobblestone streets are packed with tourists browsing
souvenir stands, visiting museums and dining in trendy private
restaurants. World figures and celebrities from Madonna to Mick Jagger
to Pope Francis and Obama have all visited. Hotels are booked well
through next year.
The largest business arm of the historian's office, Habaguanex, named
for a pre-Columbian indigenous chief, directly runs some 20 hotels and
30 stores and more than 25 restaurants in Old Havana.
Under a special exemption by the ruling Council of State, the office has
been allowed to use its revenues as it sees fit rather than returning
them to the national treasury and receiving a yearly budget allocation
from the central government. That 1993 measure is widely credited for
giving Leal the power and flexibility to restore Old Havana to
international standards while much of the rest of Havana suffers from
neglect that has left buildings collapsing and streets rutted with big
A towering figure in Cuba's intellectual and political life, Leal, who
turns 74 on Sept. 11, is often chosen to deliver meditations on Cuban
history and culture at major public events. He has never groomed an
obvious successor. He has appeared frail and thin in some recent public
appearances and close associates say he has been receiving treatment for
a serious illness.
"I'm giving up everything that I think should be, under current
conditions, better directed," Leal told The Associated Press when asked
about the military takeover of his financial operations. "There's a
reality. I was trained and educated to work in cultural heritage, and
that's my calling."
Through its economic wing, the blandly named Business Administration
Group, the Cuban armed forces have become the nation's biggest retailer,
importer and hotelier. The military corporation Cimex, created two
decades ago, counts retail stories, auto-rental businesses and even a
recording studio among its holdings. The military retail chain TRD has
hundreds of shops across Cuba that sell everything from soap to home
electronics at prices often several times those in nearby countries.
Gaviota has 62 hotels with 26,752 rooms across Cuba, pulling in some
$700 million a year from more than 40 percent of the tourists who visit
Cuba welcomed more than 3 million tourists last year, a nearly 20
percent rise over 2014.
"It's obvious that the military has an economic power far beyond what's
needed for its national-security responsibilities," said Arturo
Lopez-Levy, a political science lecturer at the University of Texas-Rio
The Cuban government did not respond to a request for comment on the
military's business operations.
The Business Administration Group, known by its Spanish acronym GAESA,
formally took over the city historian's office on Aug. 1, according to
three employees with the office who spoke on condition of anonymity
because they were not authorized to talk with the press.
"They're going to carve everything up and it'll be absorbed by military
businesses that are already operating. The hotels go to Gaviota, the
restaurants to Cimex and the stores to TRD," said one of the officials.
Going forward, the historian's office will be responsible only for
cultural projects and will retain only the proceeds of museum entry fees
and souvenir stores, officials told the AP.
"They're going to impose discipline and probably it'll function better
that way," said another official in the business wing of the historian's
office. "It will affect those of us on the business side, but I don't
think it will affect cultural projects. The Cuban military isn't stupid."
Associated Press writer Michael Weissenstein contributed to this report.
Andrea Rodriguez on Twitter: https://twitter.com/ARodriguezAP
Michael Weissenstein on Twitter: https://twitter.com/mweissenstein
Source: Cuban military expands its economic empire under detente | Fox