Today I’d like to do one of those ‘close your eyes and imagine’ exercises. I’d like to think of some of the consequences and the challenges that the bilateral changes between the United States and Cuba mean. I’m going to start with one that is nearly a done deal: the establishment of regular flights.
What does at least 10 daily flights landing at Havana Airport mean?
First of all it will mean more income from ground operations and for landing permission, it will also impact revenue from airport taxes. Without a doubt our taxi drivers will earn more. The increase in American visitors will cause a rise in the demand for rooms in hotels, hostels, and private rental houses, and a greater demand on services of all types, particularly restaurants and car rentals…
And, as in essence tourism is first and foremost and adventure, even the everyday “boteros” will benefit from the tourists. How much will this mean in terms of revenue? No idea, but it’s not an insignificant amount.
The other side of the airport coin is the challenge it presents from an operational point of view. Those who travel often know how far the Cuban terminals are from international standards, in infrastructure, in quality, and in the variety of services provided.
Our airports, particularly our Havana airport, had to withstand an abrupt increase in air traffic and passenger numbers over the last year, and their workers soon felt almost overwhelmed. Well, this year, something similar, or worse, is going to happen.
The good part of this is that from a growth perspective the demand for airport services can serve as a base from which to negotiate resources that will allow us to put our airports in line with the rest of the world.
I still think there’s more. The existence of regular flights between Cuba and the United States, could turn Havana into a passenger and cargo transport hub for different destinations to the USA and vice versa.
We could almost begin to compete with Panama, we would just have to be as efficient as the “Omar Torrijos” Airport and have airport terminals of more or less the same quality. Do you think that’s too big a challenge?
It might seem farfetched, but when regular flights begin, this will be a real possibility and for the first time in five decades we will not be excluded from this game of flight connections through Cuba because of the blockade. Taking advantage of it depends on us. How much revenue could something like this generate? I don’t know either, but thinking of the “Omar Torrijos” Airport, I think that it’s a considerable sum.
Let’s leave the airport, and let’s think of the benefits of being able to use the dollar in transactions with international businesses and entities. The OFAC has specialised in detecting the use of the dollar in transactions with Cuba to punish businesses around the world. In fact, the Obama administration is the one that has fined the most businesses in the last 56 years. What a paradox!
The possibility to use the dollar in transactions with the rest of the world would help our financial costs to go down. First, because our country risk would go down significantly and we could pay lower interest rates; or that is, money we are loaned would cost less.
Secondly, because the threat of sanctions would disappear and then many other organisations and businesses would be amenable to working with Cuba, and participating in financing and investment operations. How much would this mean in terms of revenue? I don’t know, but it is also not inconsequential, and I’m sure of that.
Now let’s think in what it means for the citizens of both countries. Obviously for the American citizens it means the ability to use credit and debit cards. Of course, for this we would have to have more ATMs and equipment to process the cards everywhere, in hotels, restaurants, rental houses, etc. And then we would need better digital connections…but that’s another story.
Moreover, we would avoid handing hard currency and logically that would cause more to come to Cuba. And on our side? First, more tourists with more options to spend their money and a bank that supports these transactions. If nothing else, it will improve traceability of operations, something very healthy for the functioning of the economic system. How much additional revenue will that mean? I don’t know either, but I insist, it’s not trivial.
Another of the possible measures is to allow American citizens to enjoy travelling to Cuba with greater ease.
In 2015 70% more American visitors – it’s important to understand that they are not tourists, they are visitors – came to Cuba. And all, or nearly all of them, travelled in groups that fall into the 12 famous categories that are allowed by the US administration. Having to travel in these conditions is a very particular way of traveling and is far removed from the way that Americans are accustomed to usually traveling.
Obviously anything that contributes to making this more normal should have a positive impact on the increase in visitors from the USA but also beyond. Last year the total number of arrivals from all over the world grew over 17 percent and today the hotels in the capital are all overbooked, the same with private rental houses.
Cuba today has 64,000 hotel rooms – not all ready to be used – and over 23,000 rooms in private rental houses. Both figures are concentrated in certain poles and cities. In Havana there are some 12,000 rooms and around 9,000 private rental rooms. Of the latter, around half are rentable in CUC.
The growth of arrivals over the last year has meant that the current room offering is practically insufficient. It has also had an effect on prices and today the prices of some hotels have grown significantly. The same has happened in the private sector, in particular in territories such as Old Havana, Miramar, Vedado, and away from Havana in areas such as Viñales and Trinidad.
The effects have not been long in coming. If we walk down Prado we will see an unusual amount of construction activity. In St. Lazaro and Prado a new hotel is beginning to appear. Or a couple of blocks away, the Hotel Packard is beginning to show itself, just in front of Parque Central, the hotel Manzana, possibly the first six star hotel in Cuba (in the well-known Gómez block) promises, along with the repairs to Capitolio, the Great Theatre of Havana, and the Saratoga Hotel, to revalorize the whole zone.
But the impact on the private sector is also significant. An important aspect of all the credits today that are awarded to the domestic sector is that they are destined for housing reconstruction and modernisation, the final aim of which for some of them is sale or private rental. This means improvements, not only in Cubans’ purchasing capacities but also in prospects, in neighbourhoods and even in the way of doing things.
If we bring these three things together, put them in a mixer and add a bit of flexibility and imagination, I’m sure that the synergy produced will exceed the sum of the three separate entities. How much will that mean in terms of revenue? I can’t calculate, but I’m sure it will be hefty.
Some time ago, the sustained affirmation that the blockade was the largest external obstacle to the country’s development was sometimes questioned by different sectors inside and outside of Cuba. However, what has happened since 17 December 2014 seems to show the weight of that argument.
With good management, all of the possibilities that would open up Obamas new measures could have a real impact on the Cuban production system. They could also contribute to improving equality, if with our policy we manage to make a part of these revenues, through taxes, reach the majority of the country’s population, now that localities can have a percentage of the revenue generated by these forms of production and service.
How much more, in terms of revenue, could taking the momentum for flexibility and using it as leverage for our development mean? I don’t have a figure for that either, because there are intangible effects that are difficult to estimate.