Must-Read: Doing Business With the Castro Family in Cuba

Wednesday, September 30, 2015
Bloomberg Business has a lengthy story, which takes a close look at Castro, Inc.

It's entitled, "Want to Do Business in Cuba? All Roads Lead to Raúl Castro’s Son-in-Law."

The Obama Administration and its supporters should read this carefully -- for it underscores how doing business with Cuba means partnering and empowering the Castro family's monopolies, operated by Raul's son-in-law, General Luis Alberto Rodriguez Lopez-Callejas.

This is when all of the "theories" about Obama's Cuba policy collide with the stubborn facts.

It's this gatekeeper of all business in Cuba, whom Assistant Secretary of State Roberta Jacobson -- shockingly and irresponsibly -- pretended to be unaware of during a Senate Foreign Relations Committee hearing earlier this year. (Click here to watch the exchange.)

It's for this reason that the Senate and the House have introduced the Cuban Military Transparency Act, which seeks to prevent the Obama Administration's regulatory concessions from being funneled by Castro, Inc.

A similar provision was included in the House's Commerce, Justice Appropriations bill and passed by a 120-vote margin.

Read the entire story here.

Below are some important excerpts:

[A] few steps from the port in Old Havana, I see the city’s redevelopment in progress. Near El Floridita, where Ernest Hemingway once knocked back daiquiris, the hulking Manzana de Gómez building is being transformed into a five-star hotel. Stylish boutiques sell perfume and stereos. Inside an old warehouse is a microbrewery teeming with people drinking lager made in huge steel tanks imported from Austria.

What isn’t immediately apparent to a person taking a walk on a warm Caribbean night is that all of this—and anything else that stands to make money in Old Havana, and much of the rest of the country—is run by a man who is little known outside the opaque circles of Cuba’s authoritarian regime. A quiet general in the Revolutionary Armed Forces, Cuba’s multibranch military, he has spent his life around the communist elite that served Fidel Castro’s revolution. Yet he is chairman of the largest business empire in Cuba, a conglomerate that comprises at least 57 companies owned by the Revolutionary Armed Forces and operated under a rigid set of financial benchmarks developed over decades. It’s a decidedly capitalist element deeply embedded within socialist Cuba.

This is Luis Alberto Rodriguez. For the better part of three decades, Rodriguez has worked directly for Raúl Castro. He’s the gatekeeper for most foreign investors, requiring them to do business with his organization if they wish to set up shop on the island. If and when the U.S. finally removes its half-century embargo on Cuba, it will be this man who decides which investors get the best deals.

Rodriguez doesn’t just count Castro as a longtime boss. He’s family. More than 20 years ago, Rodriguez, a stocky, square-jawed son of a general, married Deborah Castro, Raúl’s daughter. In the past five years, Castro has vastly increased the size of Rodriguez’s business empire, making him one of the most powerful men in Cuba. Rodriguez’s life is veiled in secrecy. He’s rarely been photographed or quoted in the media, and his age isn’t publicly known. (He’s thought to be 55.) Rodriguez and the other Cuban government officials in this story declined multiple requests for comment [...]

Castro has kept the big-money industries in the hands of the state, and much of it is managed by his son-in-law. (Or former son-in-law; there are rumors, difficult to confirm, that Rodriguez and Deborah Castro have divorced.)

GAESA, as it’s called (it’s pronounced guy-A-suh), owns almost all of the retail chains in Cuba and 57 of the mainly foreign-run hotels from Havana to the country’s finest Caribbean beaches. GAESA has restaurant and gasoline station chains, rental car fleets, and companies that import everything from cooking oil to telephone equipment. Rodriguez is also in charge of Cuba’s most important base for global trade and foreign investment: a new container ship terminal and 465-square-kilometer (180-square-mile) foreign trade zone in Mariel [...]

[With the collapse of the Soviet Union in 1991], big change came to GAESA as well. Its tourism arm, Grupo de Turismo Gaviota, cut deals with international chains, most notably Spain’s Meliá Hotels International and Iberostar Hotels & Resorts, to build and run hotels and resorts in Varadero, a 20-kilometer stretch of white, sandy beach two hours east of Havana by car [...]

So much has changed in Cuba, but so much hasn’t. In August alone, the month the flag was raised over the U.S. embassy, security forces made 913 politically motivated arrests, according to the Cuban Human Rights Observatory. Castro’s government represses dissent, routinely harasses independent journalists and activists, and restricts access to the Internet for the vast majority of Cubans, Human Rights Watch says.

Foreign businesspeople are not immune. Sarkis Yacoubian, a 55-year-old Canadian, made his home in Cuba for two decades, building a company called Tri-Star Caribbean. He sold cars, trucks, and industrial equipment, mainly to GAESA-owned companies. On July 13, 2011, armed internal security troops—Cuba’s secret police—swarmed Yacoubian’s office. He was held for more than two years as police interrogators leveled allegations of tax evasion, corruption, and, ultimately, espionage [...]

Castro moved Cuba’s most profitable state companies under GAESA and Luis Alberto Rodriguez. The biggest addition to GAESA was Cimex, which had been run for three decades by military commanders chosen by Fidel Castro. Adding the Cimex companies more than doubled the size of GAESA. More recently, Rodriguez was given the green light to take over Habaguanex, the state company that owns the best commercial real estate in Old Havana, including 37 restaurants and 21 hotels.

Rodriguez rarely deals with clients, apparently preferring to delegate to the managers who run GAESA’s collection of companies. He seemed to be more hands-on in Mariel, where he was entrusted with building the $1 billion megaport and surrounding free-trade zone. As the vast ship terminal rose atop an abandoned U.S. air base by the old Mariel port, where Fidel Castro allowed 125,000 people to flee to the U.S. in 1980, Rodriguez regularly assembled his engineers for progress reports. Rodriguez liked to listen more than talk, according to people who dealt with him in these meetings. But when he spoke, Rodriguez was concise, specific, and crystal clear. The government saw the port and the surrounding special development zone as a gateway for a new economy for Cuba, Rodriguez explained. It would anchor a wave of international trade, factories, and economic growth.

On Jan. 27, 2014, the port was ready, and dignitaries took their seats under a brilliant sun for the formal opening. On the stage was Castro, Venezuelan leader Nicolás Maduro, and Brazilian President Dilma Rousseff. The port, a collection of more than a dozen big cranes, a 700-meter-long pier designed to handle the world’s biggest container ships, a highway, and a rail line to Havana, had been built by Brazil’s mightiest construction company, Odebrecht SA. It was financed at subsidized rates by Brazil’s state development bank in a deal negotiated directly between Castro and Lula, the former Brazilian president.

Rousseff, smiling, walked up to the podium and started her speech with the customary naming of dignitaries in the crowd. She thanked Castro and unnamed Cuban ministers, foreign executives, and leaders. And just before she leaned into her short address, she thanked one more person by name: GAESA Chairman Luis Alberto Rodriguez.

Image below: General Lopez-Callejas, in the white shirt, seated between Raul Castro and Miguel Diaz-Canel.