2/2018 – Give Cuba a ‘cuba’, it’s well worth it
by Tan Thiam Hock
Cuba Cuba. In Malay language, it means trying trying, really trying, and if put in the form of a a question, it means would you like to try?
Cuba CUBA. Try Cuba, the country. Which I have just done.
CUBA cuba. Cuba, the country is really trying. While the younger generation are trying to get out of the communist/socialist state- controlled economic malaise, the older generation are reasonably happy that the state still provides 4kg of rice and 2kg of sugar (1kg white, 1kg brown) free on a monthly basis via redeemable coupons.
Lazaro Ricardo Gonzalez Ribeiro, our tour guide, majored in English literature at the University of Havana, which is the only university in Cuba but with many branch campuses across the island. Ricardo was named after Saint Lazarus, father Gonzalez and mother Ribeiro. Quite a mouthful so I called him Ronaldo instead. No, he is not the dark tall muscular Cuban man that the ladies are crazy about.
Ricardo is actually a nice, unassuming, helpful and eloquent man. Always philosophical about life, he is both pragmatic and hopeful.
He speaks perfect English and he studied Shakespeare, Caribbean and American literature.
Ricardo is extremely proud of the Cuban education system where it has produced the best medical students and the whole population receives a minimum of 12 years of education from kindergarten at age five right through to our equivalent Form 5. So they export doctors instead of maids.
The problem with Cuba is that is has very few industries and almost everyone works for the state or the state enterprise.
Its top exports are raw sugar, rolled tobacco – cigars, refined petroleum, hard liquor – rum and nickel mattes. Cuba imports most of its food, especially poultry and milk concentrates.
The country’s main foreign exchange earners are tourism and worker’s remittances from overseas.
Not to mention the population of over two million Cubans in Miami, Florida (which is just about 100 miles away by speedboat) who send money back to their families on a regular basis.
Compared to our population of 32 million (plus or minus a few million of legal and illegal naturalised immigrants), Cuba has a population of 11.6 million and it’s shrinking since there is a continuous exodus of emigrants from the country. In 2015, their total exports amount to only US$1.5bil which is puny compared to our Prime Minister Office’s budget of US$4bil alone.
There are two official currencies in Cuba – Cuban convertible Peso (CUC) and Cuban Peso (CUP). One CUC is equivalent to 25 CUP. One CUC is pegged against one US dollar but since the US has a continuous trade embargo on Cuba, you are advised to bring euros and sterling pounds as there is a 10% discount on US dollars.
My Maybank Visa credit cards could not be used and only CIMB MasterCard could function. We assumed Visa (via USA?) is barred and only Mastercard is allowed. No point talking about American Express Card.
There are also two economies in Cuba – actual and parallel economy.
The CUP economy and the CUC economy. CUP is a state-run economy, where salaries and cost of goods are kept artificially low whereas the CUC economy is reflective of the imported inflation on cost of living.
Since imports are five times more than their exports, the state uses the tourism (plus workers’ remittance) forex to finance the national trade deficit.
There are hardly any big entrepreneurs in Cuba. You are allowed to own a single business. Full stop. If you own a restaurant, you are not allowed to run another business, like own another pub.
The transition from a state-run economy to an entrepreneur-driven economy like China will be tough for the Castro dynasty to adopt. Opening up the economy has been slow and befuddling, maybe they should bring in some consultants and investors from China, their Communist compatriot.
Andreas Vogiatzakis, my travelling mate, was excited about the advertising and media space in Cuba.
Except for a few Che Guevara small billboards along some roads, he was already placing imaginary 20’ by 40’ billboards along certain vantage points in Havana city. Since the Internet is limited to hotels and certain homes, maybe our newspaper publishers might want to consider relocating their state of the art printing plants to Cuba.
Peter Tham, my other travelling mate, feels the country’s tourism industry has potential.
I think the agricultural industry is in need of poultry-breeding for import substitution of meats and milk. So much agri-based potential, like what Malaysia was 40 years ago.
The biggest obstacle to entrepreneurs is the state-run economy where the government wants to control everything. Rolled tobacco is probably the best run industry in Cuba.
The tobacco plantations are privately and state-run. Each plantation has to follow strict guidelines on what they can grow and how they should grow it.
For privately run plantations, they have to sell 90% of their tobacco leaves to the state enterprise who will then store and allocate to about 28 factories to produce cigars for all their Cuban brands.
Cuban factories export an estimated 100 million of their best cigars to the world market via state enterprise Habanos SA which has some foreign shareholders since its inception.
These foreign shareholders, like Imperial Tobacco from UK, its existing partner, offers supply chain and brand management expertise.
Local consumption of cheap cigars are three times the export quantities so the tobacco manufacturing industry has tremendous potential and offers much needed employment to the local population.
But entrepreneurial competitors from Nicaragua and Dominican Republic are catching up fast.
Fuelled by the needs of the US market, these two countries have been improving their quality by leaps and bounds over the years.
The premium pricing policy for Cuban cigars is actually very well managed and its main threats are from fake cigars and online sales.
The country’s potential growth will eventually come from the opening up of the US market.
But first the Cubans have to worry about Trump, who does not smoke cigars.
But his son-in-law does.
So maybe there’s hope for the Cuban people.
We really enjoyed our visit to Cuba. The people are genuinely nice, easy and laid-back. Just like us 40 years ago. Cuba CUBA. Viva Cuba!