People gathering during a commemoration
Left to right, Commander Guillermo Garcia, Commander Ramiro Valdez,
Cuban former President Raul Castro and Cuban President Miguel
Diaz-Canel take part in the Torchlight March commemorating the 171th
anniversary of the birth of national hero, poet and activist Jose Marti
in Havana, on Jan. 27, 2024. (Adalberto Roque, AFP, Getty Images via
TNS)
(Tribune News Service) — Even as Cubans have been dying because of
shortages of medicines and supplies at hospitals, and the government
claims it doesn’t have the money to buy them due to U.S. sanctions,
companies run by Cuba’s military have stashed away billions of dollars,
according to financial records obtained by the Miami Herald.
Gaviota, a company that runs tourist hotels and is just one of many
owned by the military, is sitting on about $4.3 billion in its bank
accounts, the documents show.
That’s almost 13 times the $339 million the government said it needed
to buy medications to supply Cuban pharmacies annually. The country’s
healthcare system lacks 70% percent of the essential medications to
treat most illnesses, Cuba’s prime minister said earlier this month.
As the country has plunged into its most profound crisis since the end
of the Soviet Union’s subsidies in the 1990s, a multi-headed
conglomerate known as GAESA, owned by the Cuba’s Revolutionary Armed
Forces, has been holding on to hundreds of millions of dollars that
enter the island yearly — and using it in ways that have dramatically
worsened the lives of Cubans and increased the country’s debt.
For the first time, a rare leak of GAESA’s internal financial records
reveals how much the military has diverted the country’s badly needed
hard currency to its enterprises. GAESA keeps this financial
information secret and even guards its accounts from government
comptrollers, making what the documents reveal even more significant.
The documents challenge the government’s claims that it lacks the money
to alleviate Cuba’s growing humanitarian crisis.
A terrible year
In 2024, Cuba’s economy hit rock bottom.
The electrical grid collapsed several times, leaving the entire island
in the dark. Gas shortages were so severe that a man in Güines, a town
near Havana, Cuba, posted a video of himself on social media carrying
the body of a dead friend in a three-wheeled bicycle to a funeral home
because no cars were available.
Other videos on social media show people picking up food scraps from
the garbage. Laments by people mourning relatives who died for lack of
medication and essential supplies at Cuban hospitals are now
commonplace. Mountains of trash engulf even Havana tourist hotspots
like El Vedado.
During a Communist Party meeting earlier this month, Cuban leader
Miguel Díaz-Canel blamed U.S. sanctions — the government’s favorite
whipping boy — for the crisis.
Experts on the Cuban economy don’t dismiss the impact of the
decades-old U.S. embargo on the island’s economy. But they say the
blame also lies with the decades of government mismanagement, an
obsolete centrally planned economy, shrinking aid from political
allies, botched monetary policies and a slow recovery from the COVID
pandemic.
That analysis, however, misses the crucial role of the Cuban
Revolutionary Armed Forces in the country’s abrupt impoverishment.
In recent years, GAESA — short for Grupo de Administración Empresarial
S.A.— has expanded its control of the island’s most profitable
businesses, including tourism, retail, telecommunications and money
sent to Cubans by families abroad. GAESA has made the crisis worse by
siphoning billions of dollars from the country’s foreign currency
revenues to relentlessly build new hotels despite the deteriorating
situation.
And it keeps its money separate from government coffers.
That has effectively stripped other ministries of the resources to pay
for healthcare, education, garbage collection, and even repairing the
country’s creaking electrical grid.
“There are many factors that have led to the current crisis but this is
one of the most notable and explains the blackouts,” said Pavel Vidal,
a Cuban economist who teaches at the Pontificia Javeriana University in
Colombia.
To Vidal, spending vast amounts on building hotels while the rest of
the economy “is falling apart” undermines the premise that Cuba works
under a centrally planned economy and “is evidence that for a long
time, there have been two parallel governments.”
Financial statements
One balance sheet from July shows that two GAESA-owned companies —
Almest, which invests in hotels, and Gaviota, which manages hotels and
other tourism-related businesses — had a net worth of 22,7 billion
Cuban pesos.
That’s almost 13 times what the government invested in its public
health system and social assistance programs in 2023, according to
figures from the National Office for Statistics and Information.
The 22.7 billion-peso figure would amount to just short of $1 billion
in dollars if using the government’s exchange rate for state
enterprises, currently set at 24 pesos to the dollar.
Notably, the document states that Gaviota, the tourism holding company
that manages 115 hotels and other businesses like car rentals and a
travel agency, had $4.3 billion in its bank accounts as of July. The
money was readily available because it was recorded as “assets on
hand.” The figure is one of the few listed in dollars.
Gaviota’s financial records show the company has 88.6 billion pesos in
assets, including 51 billion in “long-term or permanent investments.”
The company declared 16.6 billion pesos in “net worth.”
Gaviota also reported having 1.7 billion pesos’ worth of food in its
inventory.
The figures are significant because in a recent report to the United
Nations, the Cuban Foreign Ministry blamed the U.S. embargo for
depriving the government of the $250 million it needs each year to
maintain the electrical grid and the $129 million it needs to provide
medical supplies annually to its hospitals.
And yet the documents obtained by the Herald show the Cuban military
has more than enough money on hand to cover both dire needs.
Loans and public money
Cuba’s military created Almest in 1994 to “provide real estate and
leasing services to entities of the Ministry of the Revolutionary Armed
Forces” and act as “principal investor” for GAESA’s hotels, according
to a 2020 University of Matanzas study. Almest is also responsible for
maintaining Gaviota’s hotels.
The financial statements reviewed by the Herald show Almest has spent
significant public money to build hotels while giving back little in
taxes and other contributions, despite Cuban officials’ claims that
tourism investments ultimately benefit the population.
Almest’s July balance sheet shows the company received 668 million
pesos from the state’s budget. The company also reported 4.7 billion
pesos from “state investments/public sector” as part of its capital.
However, it only reported two million pesos in taxes and contributions
to the national budget.
While Cuban authorities frequently blame the lack of credit from
foreign banks for some of the country’s acute shortages, the leaked
documents reveal that Almest likely received a loan from foreign
sources to build hotels. However, the documents do not specify who
extended the credit.
The July balance sheet shows the company is repaying a long-term loan
of 45 billion Cuban pesos, which is about $1.9 billion using the
24-pesos-per-dollar exchange rate.
It is unclear if the Armed Forces also uses Almest as the ultimate
owner of the land and hotels. The company reported assets worth 56.5
billion pesos, including 20 billion in permanent investments in
“buildings and constructions,” and 50 billion pesos in liabilities.
A building frenzy
Sanctions imposed by the U.S. in recent years, mainly during the Trump
era, were designed to stop the military from plundering the country’s
resources and hit many of its revenue streams, including remittances
from abroad and tourism.
The Trump administration halted cruises to Cuba and travel by Americans
to the island for “people to people” exchanges that it argued was akin
to tourism. And the Biden administration eliminated visa waivers to
enter the United States for travelers visiting Cuba, following the
island’s designation in 2021 as a state sponsor of terrorism.
GAESA and several of its companies, including Almest, have been
blacklisted by the U.S. Treasury and the State Department.
Despite the sanctions, the company has remained busy.
Between 2021 and 2023, even as the COVID pandemic was devastating the
health system and shuttering tourism, 36% of all government investments
went to building hotels and the tourism industry, according to
estimates using official figures by Mauricio de Miranda Parrondo, a
Cuban economist who teaches at the Pontificia Javeriana University.
In comparison, only 2.9% of investments went to agriculture, 1.9% to
healthcare and social assistance programs and 1.3% to education.
This year through September, the National Office for Statistics and
Information reported another 17 billion pesos were invested in
“business services, real estate and rental activities” and about seven
billion pesos in hotels and restaurants. In the same period, the
government only invested 1.2 billion pesos in public health and social
assistance programs.
Based on Cuban official data, Emilio Morales, a Miami consultant who
has closely tracked GAESA’s dealings, estimates that hotel investments
could have been as high as $24 billion between 2008 and 2022.
Cuban economists long ago started questioning that strategy, which
began after Americans flocked to Havana during the Obama
administration’s brief warming of relations with the island, and the
government realized it didn’t have enough hotels to cater to
high-spending tourists.
However, the construction spree to add 23,000 hotel rooms by 2030
continued — even when it became the country had more pressing needs and
already had many more hotel rooms than it was filling with tourists.
In 2023, tourism revenue fell about 62% compared to 2019, according to
data published by the National Office of Statistics and Information.
During the first semester of 2023, 7 out of 10 rooms in hotels run by
the government were empty.
As of October, the country received 1.8 million international visitors
this year, well short of the 4.2 million that traveled to the island in
2018.
Military expansion
The accounting documents seen by the Herald offer only a glimpse of
GAESA’s true reach, since they only include data for two of its many
companies.
Since 2008, coinciding with Raúl Castro first term as Cuba’s president,
GAESA has taken control over several companies, including CIMEX, which
operates stores, gas stations and other businesses; Habaguanex, an Old
Havana hotel and store chain; ETECSA, the state telecommunications
company; Grupo Palco, which offers events services, handles real estate
and provides maintenance to foreign embassies, and Almacenes Universal,
a logistics company that operates the Mariel Special Development Zone,
which was established to attract foreign investment.
GAESA’s finances are even more opaque because several of its companies
are registered abroad.
Morales said GAESA controls most foreign currency entering the island
through its Banco Financiero Internacional, which it has managed since
at least 2016. Money from remittances and from the salaries foreign
governments pay for Cuban medical missions go to that bank. Cuban state
enterprises and many foreign companies on the island must open accounts
with the bank if they want to operate in dollars, he added.
The Herald has also reported on secret documents that show GAESA taps
into remittances from abroad through its companies, Fincimex and Orbit.
The result is a parallel economy, Morales said, that operates with no
oversight and is under the control of few people— likely trusted
generals and members of the Castro family — who profit from resources
that are supposed to belong “to the people.”
“The most significant thing here is the transformation of a system of
governance in Cuba from what was — if it ever was — a socialist or
communist country to a mafia,” he said. “They got the money, and the
government has to knock on their door to ask for it.”
©2024 Miami Herald.
Visit at [1]miamiherald.com.
Distributed by [2]Tribune Content Agency, LLC.
References
1.
https://miamiherald.com/
2.
https://tribunecontentagency.com/
