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Sunday, March 7, 1993 - Page updated at 12:00 AM

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Capitalism In Cuba Likened To `Tourist Apartheid'

Boston Globe

HAVANA - Good economic news is scarce in post-Soviet Cuba, so when Luciano Benetton flew in recently to open six of his splashy boutiques, Havana feted the Italian fashion tycoon like a visiting head of state.

There was a red-carpet airport reception, television coverage of his bike ride through Havana and a lobster-and-champagne sit-down supper with Fidel Castro.

Then came the reality check.

In Cuba's dual economy, Benetton's gaudy sweaters and T-shirts are available only to tourists with hard currency. Cubans themselves cannot buy the outfits that Benetton flogs as a uniting one-world symbol.

"I'm aware that most Cubans cannot own what I sell," Benetton said during his tour of Cuba, which was notable for its detours around the island's threadbare department stores. "But there is change here, and I would rather be invited in to sell my united colors to tourists than not be here at all."

Has Benetton tapped a promising market, one that drew 500,000 tourists last year and is luring hotel builders, liquor distributors and dozens of other international investors? Or is he abetting "tourist apartheid," a system that denies Castro's people the consumer fruits of their communist labors?

Those who follow Cuban affairs say the answer is yes to both questions.

"Cuba is changing," said Philip Brenner, a specialist at American College in Washington. "They have joint ventures with major industrial nations and are moving toward a mixed economy. It makes sense to get in on the ground floor. As they achieve gains I'm confident that they'll return them to the people."

Brenner sees promise in Cuba's economy and says the United States is foolish to embargo the island. He says Castro is knee-deep in capitalism and American corporations should lobby for access to a fertile market of 11 million people. The Cuban entrepreneurs who welcomed Benetton push the same view. PUFF OF CAPITALISM

But others say Castro is tolerating a puff of capitalism while stifling the free-market whirlwind that felled his counterparts in Eastern Europe. And the more militant among Castro's detractors say he has returned the island to the bad old days when foreigners enjoyed luxuries while Cubans went hungry.

At an air-conditioned Benetton's in a hotel concourse in western Havana, a saleswoman named Sara Pinto said Cubans would accept the trade-off. "This store brings in the hard currency that supports our medical-care system," she said. "It helps ensure a vital part of Cuba's revolution."

But Cubans on the street bridle at the second-class status. "It is the single greatest aggravation we now face," said Rafael Perez, a photographer who works for Cuban publications. "And yet we must suffer it in silence."

SETTLING THE DEBT

What is irritating to the people is profitable to foreigners and generating curiosity among Americans. Lazard Freres & Co., the New York investment house, recently published a paper examining how Cuba could resolve its $7 billion foreign debt by selling off many state-run enterprises.

And foreign nations are cutting deals with Cuban capitalists such as Abraham Maciques, who runs Cubanacan, a private corporation that funnels investments into tourism.

Maciques said any joint-venture idea was on the table, including majority outside ownership in Cuba's steel and oil sectors.

"Cuba is open for business," he said. "But we won't give away the store."

Foreign businesses stepping in include Total, the French oil conglomerate; Sherritt Gordon of Canada, which has invested $70 million in Cuba's nickel industry; and Italy's state telecommunications giant, which holds a contract for satellite phone service out of Havana that is valued in the billions.

Even Moscow is back doing business with Cuba after the fall of the Soviet Union. Agreements signed in December have led to the barter of sugar for oil.

"The Cuban economy is basically at the bottom," said Andrew Zimbalist, a professor at Smith College in Wellesley, Mass. He said the island's gross domestic product had shrunk by 45 percent, to about $21 billion, since 1989.

"European business people are sitting there with agreements," Zimbalist said. "If we don't get in and make some joint-ventures decisions we're going to be cut off for good. But U.S. business people can't get down there to negotiate and issue letters of intent because of the U.S. trade embargo."

The embargo was hardened last year with passage of the Cuban Democracy Act. It punishes other countries for doing business in Cuba by denying their cargo vessels access to U.S. ports for six months after a delivery to Cuba.

Although the act is supported by the most vocal Cuban Americans, who say it is needed to squeeze Castro into submission, others insist it gives Castro an excuse to crack down politically even as he opens his economy.

"Nobody knows today what Cuba would do if left on its own," said Arlene Alligood, president of CaribExport, which examines the potential for U.S. trade with Cuba. "Their hard-line condition is strictly a result of the economic situation. If we opened up and gave Cubans a taste of the free market, we'd find profits for U.S. corporations and wind up killing Castro with kindness."

Dario Jose Saez Mendez, the commercial attache at the Spanish Embassy in Havana, agreed. "Doing business here is getting easier because they are receptive to any idea," he said, noting that the Spanish hotel conglomerate Grupo Sol was now competing with Mexican and German companies for a piece of the $600 million-a-year tourist industry.

"Imagine what an American hotel operator could do offering a weeklong Caribbean package for $500," he said.

MEDICAL BARGAINS

Another Cuban innovation is medical tourism, in which patients from South America and Europe fly in for procedures such as hip replacements or CAT scans. Patients say the care is excellent and the prices ($292 for a CAT scan, or a third of the average cost in the United States) are remarkably cheap.

Cuban officials say they are making purely capitalistic use of one of their most notable achievements: universal health care. "We are competing on a capitalist footing with the best hospitals in the world," Maciques said.

Americans might argue that the cost of the care is subsidized by low wages to doctors and technicians. And Cubans complain that tourists enjoy premier medical care while they must line up deep into the night for basic procedures.

At Havana's Central Hospital, the quality of care has deteriorated as Cuba suffers through shortages of 229 medicines, including antibiotics. A midnight tour with a dispirited hospital technician uncovered dirty wards, broken gurneys and a turn to basic techniques. A woman had her stomach pumped by a doctor using a plastic syringe to force air down her esophagus.

"Much of the modern equipment is in the tourist side," the doctor said.

Copyright (c) 1993 Seattle Times Company, All Rights Reserved.

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