Friday, May 24, 2013

A new course

Business in Cuba

A new course
A tale of politics, corruption and golf
May 25th 2013 | HAVANA

AFTER the 1959 revolution Fidel Castro declared that golf was a
"bourgeois" hobby, unsuitable for communists. Most of the island's
courses were built on, and no new ones have been developed since. But
the government has just given the go-ahead to a new golf resort, in what
it claims is "the start of a whole new policy to increase the presence
of golf in Cuba". In the same week it pressed ahead with the
prosecutions of several foreign businessmen for corruption. The
developments, which seem to be linked, show how Cuba is changing its
attitude to business.

The $350m Carbonera Club, near the beach resort of Varadero, is to be
developed by Esencia, a British company. A few days before the project
was approved, Esencia had staged a golf tournament which was won by Mr
Castro's son Antonio. The development will include residential
properties available for purchase by foreigners. Other big tourism
projects are under way. The government has given the go-ahead to the
construction of a 1,300 berth marina, also in Varadero, which would be
the largest in the Caribbean. The island's airports are to be upgraded
too, with help from Brazil's development bank.
In this section

Raúl Castro, Fidel's brother, has slowly begun to open Cuba's economy
since becoming president in 2008. Cubans may now buy homes and cars, and
small businesses such as restaurants and bars have proliferated. But
Raúl has been at pains to stress that his intention is to "update"
Cuba's socialist model, rather than reintroduce full-blown capitalism.
Perhaps to make that clear, foreign businessmen on the island have had a
particularly hard time under his watch. Several have been held without
charge for almost two years, ostensibly for corrupt practices. Now, in a
move which could be a precursor to their release, they are about to go
on trial.

Sarkis Yacoubian, a Canadian of Armenian origin who ran a transport and
trading company, will probably be first in court. In July 2011 state
security officers raided his office and took him to Havana's notorious
detention centre, Villa Marista, where he apparently admitted paying
bribes to state employees (all of whom, from labourers to managers, earn
about $20 a month). Some officials were slipped a few ten-dollar notes,
or a dinner. At least one was given $50,000.

Mr Yacoubian's confession soon triggered further arrests. In September
2011 authorities detained his business partner turned rival, Cy
Tokmakjian, a fellow Canadian-Armenian. His company, Tokmakjian, had the
lucrative sole concession to import Hyundai vehicles to Cuba, and also
supplied heavy machinery to the nickel industry.

A month later Amado Fahkre, a managing partner of Coral Capital, a
British fund with property and art investments on the island, was
arrested. The following year Coral's chief operating officer, Stephen
Purvis, was taken into custody, too. Many other foreign investors fled
following the crackdown. Those who stayed complained that it had become
much harder to meet Cuban officials.

By announcing the new golf investments at the same time as ending the
legal limbo of the jailed foreigners, Raúl may be signalling that once
again the island is open for business. The trials and the more relaxed
attitude to investment are part of the same process, says one Western
diplomat: "After two years of indecision, something is happening."

Something has to. Cuba's economy has long been propped up by Venezuela,
which provides most of Cuba's oil in return for tens of thousands of
Cuban doctors and security advisers. Nicolás Maduro, Venezuela's new
president, has pledged loyalty to Cuba. But his narrow, disputed
election victory last month, and Venezuela's nosediving economy, mean
that Cuba needs other options. Much as Fidel may disapprove, it seems
that the sport of stockbrokers is part of the plan.

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