Cuba hopes détente will finally break curse on investment

Twenty years ago, a Canadian developer won the right to build golf courses and condominiums across 2.5 miles of lush green ridgeline and crescent beaches lapped by the emerald waters of the Florida Straits just 65 kilometres from Havana.

Year after year, the plan failed to materialise. Then, the United States and Cuba declared dÈtente, setting off a boom in tourism. Now, Montreal-based developer 360 VOX says it is preparing to break ground on a US$1.4-billion development with 27 holes of golf, four luxury hotels and 2,700 high-end villas and apartments for sale to foreigners.

"Some people will want to go to Eagle's Peak to see the sunrise and have a yoga class where they can salute the sun," project head Guy Chartier said, looking out over miles of beach dotted with pre-revolutionary stone houses and Soviet-era public campgrounds. "Others will want to get a round of golf going."

A short drive west along the coast, a Chinese firm is preparing to build a golf resort in an area once promised to British developers who were driven out of Cuba in a 2011 corruption case. Closer to the beach resort of Varadero, another British firm plans to start work by the end of the year on an 18-hole golf and beach resort with 1,000 apartments and villas.

As Cuba fever seizes investors, communist functionaries and global corporations are hoping to change the island's reputation as a place where investment projects go to die. A year and a half into normalisation with the US, Cuba faces either an exciting new era of foreign investment or another in a string of false starts.

After he seized control of Cuba in 1959 and nationalised the US companies that owned much of the island, Fidel Castro built a centrally planned socialist economy dependent on billions in annual subsidies from the Soviet Union. After the Soviet collapse, Cuba replaced those billions with highly subsidised Venezuelan oil from socialist ally Hugo Ch·vez.

The sinking of the Venezuelan economy has left Cuba looking to fill its budget gap with post-Obama tourism and investment from the profit-driven world of international capitalism.

Projects linger for years

But things are moving slowly.

Despite the December 2014 declaration of dÈtente, the US trade embargo on Cuba prevents most investments from the US and makes it difficult for other countries. Add to that a bureaucracy that can take months to move a single document from one ministry to another, and it's no wonder that projects linger for years, even decades, without much progress.

"They hear about the US normalisation and they get a sense of, 'Wow, maybe Cuba really is now opening up,'" said Richard Feinberg, author of the new book Open for Business: Building the New Cuban Economy. ''Then they visit and they find that many of the same obstacles to actually finalising deals remain in place."

In Jibacoa, privately held 360 VOX hopes to end 20 years of waiting by starting work in the second half of 2017.

"One thing you need to have here is patience," Chartier said. "Companies shouldn't come to Cuba if they don't have a long-term view."

A handful of small firms have begun building projects in the Mariel Economic Development Zone, a low-tax port that Cuba hopes to build into a magnet for foreign investment and trade. Cuban officials have said more than a dozen more face imminent approval. Consumer goods conglomerate Unilever is returning to Cuba after a five-year absence with a US$35-million factory making soap, toothpaste and other personal-care items. Cuba has begun signing deals for foreign investment in clean energy, part of the country's plan to wean itself from dependence on Venezuelan oil.

US President Barack Obama's loosening of the half-century-old embargo is allowing Alabama-based start-up Cleber LLC to build a small tractor factory in the Mariel zone - the first US factory approved in Cuba since the island's 1959 revolution. Despite a warm reception by Cuban officials, the company is still awaiting the paperwork granting initial approval from the communist government.

"It's a tedious process, but it's under a lot of scrutiny and I do understand that they're trying to take the time to do it," company founder Saul Berenthal said.

All told, the new projects appear nowhere near the more than US$2 billion a year in foreign investment Cuba says it needs to drag itself out of a decades-long cycle of anaemic productivity and overdependence on imports.

It's impossible to know how far Cuba is from reaching its target. For one of the world's least transparent governments, even basic information on the annual rate of foreign investment remains a national security secret.

"We have to protect our statistics, our data, with lots of care," said Jose Chaple, director of commercial policy for Latin America and the Caribbean for Cuba's Ministry of Foreign Trade. "This is part of defending ourselves from attacks."

The fastest-moving projects on the island appear to be those built by GAESA, the military-run conglomerate that owns more than a third of Cuba's 50,000 to 60,000 hotel rooms and plans to build more than 30,000 more by 2030, most in all-inclusive beach resorts.

At Cuba's military-run main port, container ship traffic has risen more than 40 per cent since 2014, when operations moved from Havana to Mariel, a gritty industrial town west of the capital.

Ship traffic is expected to rise again by next year as the port finishes, months behind schedule, dredging the harbour entrance to allow in the biggest ships transiting the newly expanded Panama Canal.

"There's nowhere else I'd rather be right now," said Charles Baker, the head of the port for PSA International, a Singapore-based ports operator that runs Mariel on behalf of the military.

Belgian executive Benoit Croonenberghs is investing US$8 million in two new businesses at Mariel: a factory for manufacturing electrical controls and water-filtering equipment and a warehouse for truck and heavy equipment rental.

Croonenberghs' family firm has been operating here for 33 years and makes US$90 million a year in sales to the government.

But his enthusiasm hasn't yet proven infectious.

He says he's hosted nearly two dozen Belgian business people since the declaration of détente but none has moved to invest in the country.

"With the exception of ourselves, nobody is investing," Croonenberghs said. "They need to see something working."

- AP