Saturday, August 28, 2010

Cuba eases property laws, could open door to golf

Posted on Friday, 08.27.10
Cuba eases property laws, could open door to golf
Associated Press Writer

HAVANA -- Cuba has begun allowing foreign investors to lease government
land for up to 99 years, a step toward a future that could be filled
with golf courses ringed by luxury villas, beachfront timeshares and
vacation homes for well-heeled tourists.

But while overseas developers are cheering, some caution that the
communist island has been down this road before, embracing foreign
ownership with an eye toward bolstering tourism revenues - only to scrap
those reforms when the economy improved and profit margins no longer
seemed as important as maintaining state control of commerce.

A decree that was published as law Thursday loosened property laws
enough to allow 99-year leases for foreigners. A measure appearing the
following day expanded self-employment, letting Cubans grow and sell
small amounts of farm products out of their homes or special kiosks.

Large agricultural holdings are state-controlled, but small farmers were
already allowed to work their own land. The law will allow more Cubans
to do so and let them sell what they produce, but will also make them
pay taxes on their profits.

The moves are significant as President Raul Castro promises to scale
back the state's near-total dominance of the economy while attempting to
generate new revenue for a government short on cash.

Still, it's too early to herald a new Cuba, said John Kavulich, a senior
policy adviser for the U.S.-Cuba Trade and Economic Council in New York.

"I don't think it's going to open a floodgate. I think it may turn on a
tap so that people know there's water," he said.

Far more optimistic was Robin Conners, president and CEO of
Vancover-based Leisure Canada, which wants to build hotels, villas and
two golf courses on a stretch of beach in Jibacoa, 40 miles (64
kilometers) east of Havana.

"We see the times are changing, so to speak," Conners said.

Cuba already allowed leases of state land for up to 50 years with the
option to extend them for an additional 25, but foreign investors had
long pressed tourism officials to endorse 99-year lease deals to provide
additional peace of mind to investors.

The longer leases also mean lower interest rates on international
banking mortgages, Conners said.

"I think this is huge," he said by phone while vacationing in Paris.

Conners' company hopes to begin construction on a luxury hotel in the
Havana neighborhood of Miramar next year - with the project at Jibacoa
and another plan for development on Cayo Largo, a cay off Cuba's
southern coast, "not far off."

Investors in Canada, Europe and Asia have been waiting to crack the
market for long-term tourism in Cuba, built on visitors who could live
part-time on the island instead of just hitting the beach for a few
days. The U.S. bars its companies from doing business with Cuba.

The change may also help Cuba embrace golf. Investment firms have for
decades proposed building lavish 18-hole courses with luxury housing for

Despite years of grand plans, however, Cuba has just two golf courses
and has yet to approve construction of any new ones - though the tourism
Ministry says it would like to build 10 more.

Andrew Macdonald, CEO of Britain's Esencia Hotels and Resorts, said his
company had planned to start construction last year on the Carbonera
Country Club, a $300 million development outside the resort of Varadero,
but is still waiting for government approval. In addition to an 18-hole
golf course, Macdonald's plan calls for 800 luxury apartments and 100

"It's exceedingly good news," Macdonald said of the new rule. "It's been
a long road. But having said that, it's very important for the country
that they get each step right, and this is a very big step for them."

The new law makes it clear Cuba is looking to boost profits, saying the
step is necessary "for the sustainable development of the country and
the international economy."

While the longer-term leases could reshape international investment in
Cuba, meanwhile, allowing more production and sales of agriculture
products will likely have far greater impact on ordinary Cubans.

The law marks the first major expansion of self-employment since Castro
said in an address to parliament Aug. 1 that his government would reduce
state controls on small businesses and private enterprise - a big deal
in a country where about 95 percent of people work for the state.

Cubans already sell fruit, pork, cheese and other items on the sides of
highways across the country, fleeing whenever the police happen past.
The new measure legalizes such practices by letting Cubans grow whatever
they wish and sell it, while bolstering state coffers with new taxes on
their earnings.

Oscar Espinosa Chepe, a state-trained economist who became a dissident
anti-communist and was jailed for his political beliefs in 2003 before
being paroled for health reasons, called the decree "an intelligent move."

"It's good, though still something very limited," Espinosa Chepe said.

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