8/29/2010

REAL ESTATE INVESTMENT IN CUBA

Cuba Hotel Investment

HAVANA (AP) — Cuba has begun allowing foreign investors to lease government land for up to 99 years, a step toward a future that could be filled with golf courses ringed by luxury villas, beachfront timeshares and vacation homes for well-heeled tourists.

But while overseas developers are cheering, some caution that the communist island has been down this road before, embracing foreign ownership with an eye toward bolstering tourism revenues — only to scrap those reforms when the economy improved and profit margins no longer seemed as important as maintaining state control of commerce.

A decree that was published as law Thursday loosened property laws enough to allow 99-year leases for foreigners. A measure appearing the following day expanded self-employment, letting Cubans grow and sell small amounts of farm products out of their homes or special kiosks.

Large agricultural holdings are state-controlled, but small farmers were already allowed to work their own land. The law will allow more Cubans to do so and let them sell what they produce, but will also make them pay taxes on their profits.

The moves are significant as President Raul Castro promises to scale back the state's near-total dominance of the economy while attempting to generate new revenue for a government short on cash.

Still, it's too early to herald a new Cuba, said John Kavulich, a senior policy adviser for the U.S.-Cuba Trade and Economic Council in New York.

"I don't think it's going to open a floodgate. I think it may turn on a tap so that people know there's water," he said.

Far more optimistic was Robin Conners, president and CEO of Vancover-based Leisure Canada, which wants to build hotels, villas and two golf courses on a stretch of beach in Jibacoa, 40 miles (64 kilometers) east of Havana.

"We see the times are changing, so to speak," Conners said.

Cuba already allowed leases of state land for up to 50 years with the option to extend them for an additional 25, but foreign investors had long pressed tourism officials to endorse 99-year lease deals to provide additional peace of mind to investors.

The longer leases also mean lower interest rates on international banking mortgages, Conners said.

"I think this is huge," he said by phone while vacationing in Paris.

Conners' company hopes to begin construction on a luxury hotel in the Havana neighborhood of Miramar next year — with the project at Jibacoa and another plan for development on Cayo Largo, a cay off Cuba's southern coast, "not far off."

Investors in Canada, Europe and Asia have been waiting to crack the market for long-term tourism in Cuba, built on visitors who could live part-time on the island instead of just hitting the beach for a few days. The U.S. bars its companies from doing business with Cuba.

The change may also help Cuba embrace golf. Investment firms have for decades proposed building lavish 18-hole courses with luxury housing for foreigners.

Despite years of grand plans, however, Cuba has just two golf courses and has yet to approve construction of any new ones — though the tourism Ministry says it would like to build 10 more.

Andrew Macdonald, CEO of Britain's Esencia Hotels and Resorts, said his company had planned to start construction last year on the Carbonera Country Club, a $300 million development outside the resort of Varadero, but is still waiting for government approval. In addition to an 18-hole golf course, Macdonald's plan calls for 800 luxury apartments and 100 villas.

"It's exceedingly good news," Macdonald said of the new rule. "It's been a long road. But having said that, it's very important for the country that they get each step right, and this is a very big step for them."


NEW CUBA REAL ESTATE LAWS
The new law makes it clear Cuba is looking to boost profits, saying the step is necessary "for the sustainable development of the country and the international economy."

While the longer-term leases could reshape international investment in Cuba, meanwhile, allowing more production and sales of agriculture products will likely have far greater impact on ordinary Cubans.

The law marks the first major expansion of self-employment since Castro said in an address to parliament Aug. 1 that his government would reduce state controls on small businesses and private enterprise — a big deal in a country where about 95 percent of people work for the state.

Cubans already sell fruit, pork, cheese and other items on the sides of highways across the country, fleeing whenever the police happen past. The new measure legalizes such practices by letting Cubans grow whatever they wish and sell it, while bolstering state coffers with new taxes on their earnings.

Oscar Espinosa Chepe, a state-trained economist who became a dissident anti-communist and was jailed for his political beliefs in 2003 before being paroled for health reasons, called the decree "an intelligent move."

"It's good, though still something very limited," Espinosa Chepe said.

8/19/2010

OBAMA WANTS TO LIFT TRAVEL BAN TO CUBA

AMERICANS SOON WILL TRAVEL TO CUBA
US President Barrack Obama is considering easing travel restrictions to Cuba, raising the prospect of what lifting the half-century-old U.S. trade embargo against the Communist regime might mean for both countries.
Imagine American tourists bronzing on Cuban beaches and Cuban tomatoes glowing in the produce sections of U.S. supermarkets. Or Cuban baseball teams playing in American ballparks, while U.S. ballerinas twirl on a Havana stage.
Could it mean young Cuban-Americans returning to the island to invest or revisit the culture from which their families were exiled?
Cuba Investment from America will Increase
Cuba watcher Bruce M. Bagley says there could be many advantages for both countries. "There could be closer cooperation on [interdicting] drugs. More academic contacts would be great. American agriculture wants to sell more to Cuba, and the Cubans need it," says Bagley, chairman of department of international studies at the University of Miami.
He says sanctions haven't worked and that it is time to try something else.
American Opposition To Cuba
The administration apparently isn't considering sweeping changes. Any substantive lifting of the trade embargo would require congressional action in any case, especially the repeal of the 1996 Helms-Burton Act, which extended and strengthened the sanctions.
But the changes the administration are reportedly considering now would make it possible for more Americans to travel to Cuba, including sports, cultural and educational groups, and it could expand direct flights from the U.S. to Cuba.
Obama loosened some of the restrictions last year, when he made it easier for Cuban-Americans to visit the island and send money to their relatives there.
The administration reportedly plans to announce the next round as early as next week. The proposed changes were first reported in a story by The Miami Herald earlier this month. The White House and the State Department have declined to comment on the details.
If the administration goes ahead with the reported easing, it would basically restore contacts that were allowed under the Clinton administration, but prohibited under President George W. Bush.
But Ninoska Perez-Castellon, a director of the Miami-based Cuban Liberty Council, says now is "the worst time to lift any type of sanctions against Cuba's regime," because the Castro government has shown no real inclination to change.
Perez-Castellon says there is an economic incentive to ease some sanctions against the regime coming from foreign investors who put money into Cuba's tourist industry and were left holding the bag when the island's tourist business stagnated.
USA Promoting Tourism To Cuba
"There are a lot of economic interests that would like to promote the tourism industry in Cuba, which has basically failed," Perez-Castellon says. Among them, she says, are Spanish companies that put a lot of money into hotels in Cuba, but got little return from their investments.
Tourism has been a major source of revenue for Cuba, a popular destination for visitors from Canada and Europe.
Charles Suddaby, vice president for hospitality consulting at the global real estate company Cushman & Wakefield, says Cuba attracted more than 2.4 million visitors last year and seems on track to do slightly better this year.
Suddaby says a lifting of travel restrictions for U.S. tourists could generate a huge wave of interest, but he says it would probably be better to have that process take place gradually.
"There's a lot of hotel capacity down there," he says, "But it's not all of a quality that U.S. tourists might expect."
Cubans line up to buy produce at a market in Havana in May.
Cubans line up to buy produce at a market in Havana in May.
Charles Suddaby says much of Cuba's tourist market came from cheap, all-inclusive packages, but that the government is now looking at a broader market, including sports tourism and luxury resorts.
Cuban Food For Cash
Agriculture is another sector where Cuba and the U.S. could cooperate if sanctions were lifted. Cuba already buys food and agricultural products from the U.S., more than $690 million worth in 2008.
The sales were authorized by the Clinton administration in 2000, under a measure that specifies that trade can only be one-way, with Cuba buying from the U.S., and only in cash.
William Messina, an agricultural economist at the University of Florida, says Cuba's food purchases from the U.S. have dipped in the past two years, in part because countries such as China, Vietnam and Thailand have offered the Cuban government better credit terms.
But Messina says further easing of restrictions could potentially stir a lot of agricultural trade between the two countries. For instance, Cuba could become a supplier of winter vegetables, such as tomatoes and cucumbers, which are currently grown mainly in Florida.
Other potential crops could be citrus and sugar for ethanol fuel.
Messina says Cuba could be a stronger market for American agriculture products, including fertilizers, pesticides and farm equipment.
All of this would be far in the future, even if the Obama administration were to make far more sweeping changes than it is currently planning. The administration has repeatedly said that it will not lift the embargo unless and until there are political and economic reforms on the island.
But Bagley says the proposed easing of sanctions is the best way "to ease the political transition in Cuba, which is inevitable, given the ages of the Castros." Bagley says that by engaging with Cuba, the U.S. could influence that transition in a positive way, rather than leaving the island with another generation of anti-American rulers.
http://Calls2Cuba.com