Transcripts For CSPAN3 Tourism In Cuba 20170426 : vimarsana.

My name is frank mora, the director of the kimberly green Latin American Caribbean Center here at Florida International university. We are, for our friends in cspan, we are here located at the biscayne bay campus of Florida International university here in miami. We have another campus in west dade. The center that i direct is one of the institutes and programs or centers at the steven j. Green school of public and international affairs, again at Florida International university. Were just absolutely delighted to be hosting or cohosting this event. I want to thank our dean here, the dean of the Chaplin School of hospitality and tourism management, mike hampton. Thank you, dean, for supporting this. And this is a great event to have here on your campus, right . Also i want to thank another cohost, the Cuban Research institute. The director is here with us today and will be joining the panel in a second. A little bit about why were here and how we got here. Last year, the Brookings Institution, and specifically the Foreign Policy team and group, and ted picone in the Latin American Initiative team, reached out to me to see if we were interested in cosponsoring a study, a study on, as you all know, one of the more Dynamic Industries or sectors of the cuban economy. And all this of course was in the context of december 17th, 2014. The many different changes that have occurred in the relationship between the United States and cuba since then. And so ted reached out to see if the center was interested in helping and funding this study. And of course we reached out and agreed immediately. And so were very delighted to be very much a part of this. The study was first launched in washington, dc. I think it was december 2nd of last year. And so were doing a kind of miami launch, if you will, of the study with the two authors who are joining us, and youll hear from here very soon. So let me tell you how were going to proceed. So here ill introduce the two coauthors here in a second. Theyll present their study. There are coaches the study back in the lobby of the auditorium. Please make sure to take one. Theyll do their presentation for about 20, 25 minutes. And then ill ask a panel of experts here from Florida International university and st. Thomas university to sort of give their remarks, reactions to the study. We will have a kind of conversation up here onstage before we turn it over to you for your questions and your comments. So and then well go from about now until 6 00, when we will end the session. So let me introduce the two coauthors of this important study. First, let me introduce richard feinberg. Hes the gentleman right there that you see. Dr. Feinberg is a nonresident senior fellow in the Latin American Institution at brookings and professor of International Economy in the school of Global Policy and strategy of the university of california in san diego. Previously dr. Feinberg served as special assistant to president clinton for National Security affairs and senior director of the National Security Councils Office of Interamerican Affairs back during, again, the clinton administration. He is the author of numerous books and works, too many to mention here. But there is one that i want to mention. Its really his most recent book. Open for Business Building the new cuban economy. Here it is. Its available both of course on amazon as well as the Brookings Institution website, bookstore website. Its getting the some really wonderful reviews. And i hope you get a chance to read it. Also richard has, and this is sort of a plug for a new magazine, a new magazine, cuba trade. Richard has a piece based on this exact study, where he lays out the basic guidelines and elements of the study. And so cuban trade, thats the name of the magazine for trade investment in cuba. The other richard, the author of this important study, works with the International Growth center as the country director for rawanda, uganda, and south sudan. The iuc is a joint venture of Oxford University and the London School of economics. It provides the institute provides independent researchbased analysis at the request of governments of selected countries in asia and africa. He is a senior fellow, nonresident, at the World Trade Institute in berne, switzerland, and the northsouth institute in canada. He consults with the world bank, the organization of Economic Cooperation and development, and the International Trade center. Were very, very fortunate to have these two scholars with us today to present their work that spanned a number of months. Its pretty detailed, and it makes an important contribution in terms of the challenges that cuba faces in expanding tourism in cuba as well as some of the opportunities. So with that, i turn it over to our two coauthors who will come up and present their work. [ applause ] thank you very much, frank, for the wonderful introduction. Also thank you to dean hampton for the welcome to the Chaplin School. It really is a pleasure for us to be here. You know youre in the right place when the school of management that youre dealing with is located over a wine bar. Richard and i are just humble development economists. We came to tourism sort of through the lens of growth and distribution and those kinds of issues. If we had only known what you guys have figured out, we would have started much earlier in our confess to understand the Tourism Industry. Richard and i are going to do a bit of a tag team here. And so bear with us as we pass the baton and discuss this study. Just a couple of points. Let me give you the headlines first. First of all, if i can get this thing to work, one of the reasons we wanted to go to study tourism was the industry was booming. We wanted to ask the question who benefits. That question is important, has become important politically in the United States, because of the recent election, and now we see the prospect of the possible reversals of some of the obama issues. And there has been the assertion that in fact tourism really doesnt benefit the economy, it benefits mainly the military. And so therefore we ought to shut down what has been happening already. The question we were also interested in is how can the industry be structured so it drives growth. We didnt want it just to be an enclave industry which benefitted only a few people, but actually had growth complications that would allow cubans incomes to rise much more actively than the anemic performance it had in the past. The short answer to both those questions is the industry in fact is benefiting a wide swath of cuban society. And indeed it has the potential to drive a Sustainable Development into the future. That said, the industry in cuba operates well short of its potential, in our view. One reason is the combination of state sector ownership and regulations that have created obstacles, particularly for support industries and lynch an industries, to help the industry grow. So well elaborate a bit on that in the course of this discussion. We think the way this is proven, in fact, is that even modest changes in regulation that occurred over the last four or notify years have unleashed a torrent of private sector activities, bed and breakfasts, restaurants, taxicabs and so forth. That private sector cluster now counts for more than 30 of the industrys earnings. The government does in fact have ambitious plans for the industry. It would like to accommodate some 10 million visitors by 2030. Thats a big increase. One of the things we wanted to do was look at the realism of that estimate. Could they do this . Our estimate suggests that its possible, but its unlikely unless cuba changes a number of its policies. And well elaborate on what some of those policy changes might be to promote growth. Of course finally the industry has important implications, if i can get the last point to boot up here, for the United States. And in its own National Interests, the United States should move forward with the normalization process that mr. Obama has launched already. So let me elaborate on these points together with richard. First of all, cuba of course has abundant Tourist Attractions that could be a driver of growth and prosperity. I dont need to tell this audience that. This was the tough assignment that fell to us when we went there. This is just a photo of santa maria in the north coast of cuba. And of course cuba has extensive beaches like this that can be developed further. Thats not the only important point. It has a rich culture inland that also merits consideration and development. So the opportunity is for the industry to grow are really vast and enormous. In fact already of course cuba is booming. Cuba tourism is booming. This graph shows the number of arrivals over the period 1995 to 2015. And you can see there are a number of arrivals that have increased with a steady stream, save for a blip in the mid2000s. And of course this graph only goes up to 2015. They asked me to do a projection of 2017 based on recent numbers. That would allow i think for the number of tourists to reach almost 4 million by the end of 2016. If you look, however, at the earnings, the pattern is much more varied. The earnings per tourist varies quite widely from year to year and responds to domestic policies, among other things. But here too, in 201415, you see an important upswing in earnings. In 2015, its likely to be even greater, simply because the industry is operating in a much higher capacity, in part due to the normalization efforts of the United States and cubans together. The benefits of the industry, as i asserted at the beginning, are actually quite widespread. This is one of the major sources of growth in the economy, perhaps in fact you could argue it is the principal source of growth in the economy. Its a major source of Foreign Exchange and foreign earnings. Tourist revenues are some twothirds or threequarters of all merchandise earnings. So cuba is a Service Sector exporter as an economy, and tourism plays an important role. Some 70 of tourists earnings stay in the country, which is a pretty good number. Through spending on wages, agricultural products, cultural activities, transport and the like. And it is a major force actually linking cuba to the global economy, exposing cubans on a daily basis to the international environment. This graph shows the fact that the cuban industry has ample opportunity to grow. If you think about i dont like this term carrying capacity, but this graph simply shows the number of visitors as a share of the population. Indeed, relative to the Dominican Republic, here almost at. 5 of the total population, its about twice what cuba is today. There is considerable upside potentially if you just use this measure. And i would argue there are many other measures we could use that would show the same thing. The industry has not contributed to cubas growth, however, as much as it could otherwise occur, as much as it otherwise could. In fact there are signs its kind of falling behind. This graph simply shows the contribution to the economy. On the far left you see in blue the direct contribution to the economy in cuba. Its about 2. 5 of gdp. If you use the world Tourism Councils numbers, that number expands to 10 total contribution to the economy. That is substantial to what we see in the Dominican Republic or costa rica, countries we think are pretty about comparisons to cuba. There is for that cuba could be doing. This graph shows two things. The bottom line there is an index. In 1995, sort of putting all the economies in exact lit same level and saying lets look at revenue per visitor over the long sweep of things. This is kind of an indication of the efficiency and the infectiveness of the industry in growth. And as you can see, theyre doing rather poorly relative to the other compare tore countries, costa rica, Dominican Republic and other developing countries. The other point about this is cuba doing relatively poorly compared to the restst caribbean, the caribbean itself is doing relatively poorly to the compared troest of the world. The caribbean is losing market share to other destinations. Why is this . Well over the last 20 years, major new destinations have opened up in china, in southeast asia, in africa. And as a result, the tourist dollars are getting spread over a much wider array of countries. Which means that industry is really has to be competitive in order to survive and to actually prosper. Cuba has more to do in this regard if they want to upgrade its industries. One of the reasons, of course, is that if you talk to some tourists, one thing they typically complain about are poor maintenance, the Service Quality or the fact that the internet is virtually nonexist enlt or very expensive and of course waurd. These are things cuba is working on. We have some suggestions about this and we think part of the reason for these particular factors has to do with the nature of the organization of the industry and the incentives that are the industry trans mitts its workers and management. Let me turn it over to richard. Hell talk about the organization of the industry and its future that way. Thank you very much. So the industry in cuba of tourism is dominate bid state owned enterprises. There are three Main Enterprises in the Tourism Sector, two of them are under mentor, the ministry of tourism. But we also see that under the military, youll have gabiota, the third named state oenld enterprise. Only one of the three is the military. As gabiota of these three, they account for about 40 of the rooms in the Tourism Sector. You may have heard, its often said rhetorically that tourist money is all going to the cuban military. It s. That what this graft says . Or is actually only 40 going to gabiota which is the military owned state owned enterprise one of the three . Plus, as ill explain in a minute, weve had a boom in the purely private sector tourism. People opening up their homes, remodelling rooms and creating houses in which travelers can stay at a bed breakfast. That accounts for another 25 of room, 16,000 rooms. Ed that to the total tourism capacity and gabiota is 20 5 t 30 of international rooms, four and five star quality that you might consider staying if you twor visit cuba. The main point here is it is simply not true that all of these traveler revenues are going into the could havieiffeu cuban armed forces. The other point here is that as can you see 45 of the named hotels have some foreign partnership. Not with u. S. Companies but a little bit of starwood recently and marriott but mostly spanish, canadian and other iment National Hotel operators that are active now in cuba. So most of the hotels that you would stay at, there is some international presence. There are endless beaches. Thats where the growth is. You dont see many cranes operating in havana. But if you travel to the beach resorts, youll see a lot of cranes. Seems odd, doesnt it . Why arent they building more capacity in havana . There are various reasons having to do with insentive structures. Bust the 44,000 rooms of four to five star quality, only 6,000 are in havana. Thats why if you want to stay in a good hotel, youre going to pay 300 to 400 a night. And there are only three important new hotel sites currently under construction in havana. For various reasons, its easier to build boxes on the beach than to do an Interesting Hotel in havana and there are also questions of profitability. Thats one problem. Overemphasis on beach resorts as opposed to urban side savannah and elsewhere and spreading the investment around the country to eco tourism, et cetera. Second problem, the cuban Tourism Sector needs to be better intergrated into the entire economy. There are no numbers published on what percentage of food and beverage is provide domestically versus imported. They dont have the counts that look at it in those categories. There are twothirds of food and beverage is provided domestically. But certainly it could be a higher per sent. And that has to do with the sluggishness and the Agriculture Sector. They need a profound reform in agriculture providing much better insentive to farmers so there is better integration of the compo, rural sector into the overall Tourism Sector. Those of you study the cuban economy know the interNational Hotels do not directly hire labor. Labor is hired through something called Human Resource entities that are government. Not directly higher by the hotels. The average cuban employee has two bosses, Hotel Management but also this employment agency. That is confusing. Its not productive. It is part of the reason why there underinvestment in training and in workforce. Onl