An Information Service of the Cuba Transition Project
Institute for Cuban and Cuban-American Studies
University of Miami

 
Issue 46
August 11, 2003

 

 

Staff Report, Cuba Transition Project

Sources: Domingo Amuchastegui, "The Military in Cuba," unpublished manuscript, and, "FAR: Mastering Reforms," Cuba in Transition, Vol. 10 (Washington, DC: Association for the Study of the Cuban Economy, 2000); Brian Latell, The Cuban Military and Transition Dynamics (University of Miami: Cuba Transition Project, 2003); Juan Carlos Espinosa, "Vanguard of the State: The Cuban Armed Forces in Transition," in I. L. Horowitz and J. Suchlicki, eds., Cuban Communism, 11th ed. (New Brunswick, NJ: Transaction Publishers, 2003); Frank O. Mora, "Raul Castro and the FAR: Potential Future Roles in a Post-Fidel Cuba," rough draft of paper presented at the Pell Center (Salve Regina Univ., Newport, Rhode Island), March 2002, and, "A Comparative Study of Civil-Military Relations in Cuba and China: The Effects of Bingshang," Armed Forces & Society (Winter 2002); Armando F. Mastrapa, III, "Soldiers and Businessmen: The FAR during the Special Period," Cuba in Transition, Vol. 10 (Washington, DC: Association for the Study of the Cuban Economy, 2000); "Buenos resultados para Gaviota," Opciones, (Cuba), 6 July 2003; Minera Hernandez Basso, "Grupo Cubanacan: Dieciseis anos fundado," Opciones, 2 August 2003; G. Fernandez and M. A. Menendez, "El poder economico de los hermanos Castro," Diario 16 (Madrid), 24 June 2001; Philip Peters, State Enterprise Reform in Cuba: An Early Snapshot (Arlington, VA: Lexington Institute, July 2001); Tania Quintero, "Shoppings por doquier," Cuba Free Press, Havana, 20 August 1999; "Cuba's Raul Castro said on "learning" trip in China," Reuters, Beijing, November 19, 1997

THE CUBAN MILITARY IN THE ECONOMY

     When foreign tourists bask in the sun at a Sol Melia or Club Med beach resort in Cuba, get away to one of the island's remote pristine keys on commuter airline Aerogaviota, visit Havana's famed Morro Castle, enjoy typical Cuban cuisine at a restaurant, or indulge in a Cohiba cigar after dinner (1), they are also unwittingly contributing to the bottom line of the Cuban military's diverse business ventures that bring in an estimated US$1 billion a year. (2)

     The armed forces are involved not only in the international tourist industry but in the lucrative domestic economy as well. The military-owned retail chain TRD Caribe S.A. operates more than 400 locations throughout the island and caters to Cubans with U.S. dollars. "TRD" is an acronym for "Tiendas de Recuperacion de Divisas," or foreign currency recovery stores. Employing a Wal-Mart-like strategy, TRD Caribe distinguishes itself from other state-owned competitors by "continuously offering discounts" on Chinese-sourced consumer goods that it reportedly "buys cheap and makes a resale kill" on. (3)

     GAESA, or Grupo de Administracion Empresarial S.A. (Enterprise Management Group Inc.), is the holding company for the Cuban Defense Ministry's vast economic interests. Among its more visible subsidiaries are Gaviota S.A., which directly controls 20-25 percent of Cuba's hotel rooms in partnership with foreign hoteliers, and Aerogaviota, a domestic airline that carries tourists on refurbished Soviet military aircraft flown by Cuban air force pilots. Under GAESA's management team, Cuba's military-industrial complex -- the Union de la Industria Militar (Defense Industry Group) -- provides outsourcing services, such as rental car maintenance and tour bus repairs, to foreign companies and joint ventures on the island.

     The man behind the transformation of Cuba's Fuerzas Armadas Revolucionarias (FAR) into a major economic force is Gen. Raul Castro, Cuba's defense minister and designated successor to elder brother Fidel. Beginning in the late 1980s, as materiel and subsidies from Moscow progressively dwindled, Raul Castro introduced the "Sistema de perfeccionamiento empresarial (SPE)," or enterprise management improvement system, that streamlined the Cuban military's operations. With the disappearance of the Soviet bloc by 1991 and the ensuing severe economic crisis that threatened the regime's survival, the younger Castro went further and established state corporations like the Gaviota tourism group for joint ventures with foreign capital. Today, the military is not only a largely self-financing institution but a major player in the overall Cuban economy.

     Raul Castro entrusts a military managerial elite for the day-to-day oversight of the FAR's business empire. Vice minister of defense, General Julio Casas Regueiro, and Maj. Luis Alberto Rodriguez Lopez-Callejas, son-in-law to Raul Castro, serve as GAESA's chairman and CEO, respectively. Key money-making enterprises are also headed by high-ranking officers, as in the case of Gaviota whose CEO is Brig. Gen. Luis Perez Rospide.

     The military managerial elite surrounding Raul Castro extends its reach far beyond GAESA's direct holdings. An increasing number of senior military leaders have taken over civilian-run ministries and industries. Former Interior Ministry (state security) head and newly-appointed member of Fidel Castro's ruling Council of State, Comandante Ramiro Valdes Menendez, has been at the helm of the electronics industry since becoming president of the Grupo de la Electronica in 1996. General Ulises Rosales del Toro was assigned to the strategic Sugar Ministry (MINAZ) in 1997. A second civilian ministry with close ties to the military is Basic Industries (MINBAS). Led by engineer Marcos Portal Leon, another of Raul Castro's confidants, MINBAS oversees state energy, mining, and pharmaceutical sectors that are second only to tourism in foreign exchange earnings.

     Given Fidel Castro's rapprochement with Beijing since the demise of Soviet communism, several Cuba analysts see parallels between Cuba's FAR and China's People's Liberation Army (PLA), particularly with the PLA's "bingshang," or military officers turned businessmen, and their pivotal role in the Chinese authoritarian transition to a limited market-oriented economy. "China offers an interesting case," argues professor Frank Mora, "because it is comparable to Cuba in terms of revolutionary experience and government and as a model of party/civil-military relations, economic reform...and institutional involvement in the civilian economy." (4)

     In November 1997, Raul Castro went to China "to learn more about China's experience in economic construction." (5) According to Domingo Amuchastegui, formerly with Havana's Higher Institute of International Relations, "when Raul Castro went to China [in 1997], he spent long hours talking to Zhu [Rongji, Chinese premier and architect of economic reforms under Jiang Zemin] and invited [Zhu's] main adviser to Cuba. This famous adviser went to Cuba, caused a tremendous impact, talked to [military] leaders and executives for many hours and days..." However, adds Amuchastegui, "there was one person who refused to [listen to Zhu's economic adviser]: Fidel Castro." (6)

     While supporting the militarization of the Cuban economy, Fidel Castro is opposed to any economic liberalization in the island. The elder Castro, on his recent visit to China in February 2003, seemed bewildered by the capitalistic changes in the People's Republic: "I can't really be sure just what kind of a China I am visiting," confessed Castro, "because the first time I visited [in 1995], your country appeared one way and now when I visit it appears another way." (7)

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     MAJOR MILITARY MANAGED ENTERPRISES AND INDUSTRIES

· Gaviota S.A. [Hotels]
· Aerogaviota S.A. [Domestic tourist airline]
· TRD Caribe S.A. [Retail chain store]
· Union de la Industria Militar [Defense industries]

· Grupo de la Electronica [Electronics and IT hardware/services]
· Habanos S.A. [Cigars]

· Sugar Ministry [Sugar industry]

· Cuban Civil Aviation Corp. [Cubana and Aerocaribbean airlines, airport services]

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     MANAGERIAL ELITE IN UNIFORM

· Gen. Raul Castro [Defense Minister and designated successor to Fidel Castro]
· Gen. Julio Casas Regueiro [Deputy Defense Minister and Chairman, GAESA]
· Maj. Luis Alberto Rodriguez Lopez-Callejas [CEO, GAESA]
· Col. Armando Perez Betancourt [Head, Enterprise Management Improvement Commission]
· Gen. Luis Perez Rospide [CEO, Gaviota S.A.]
· Comandante Ramiro Valdes Menendez [CEO, Electronics Group]
· Gen. Ulises Rosales del Toro [Minister, Sugar Industry]

· Col. Luis Bernal Leon [CEO, Defense Industries Group]

· Col. Oscar Basulto Torres [Co-President, Habanos S.A.]
· Gen. Rogelio Acevedo Gonzalez
[President, Cuban Civil Aviation Corp.]

___________________________________________________________________

     

Notes

1. A) Spain's Sol Melia and France's Club Mediterranee are among Gaviota S.A.'s venture partners in joint management and marketing of Gaviota-owned hotels and resorts throughout Cuba. According to the most recent data from official Cuban sources, Gaviota controls 8,539 of the island's roughly 40,000 hotel rooms. Aerogaviota S.A. is a military owned and operated domestic airline for tourists. It employs Cuban air force pilots and mostly converted and refurbished Soviet transport aircraft. Havana's Morro Castle tourist site forms part of the military's holding company for museums, the Morro-Cabana Historical and Military Complex run by Col. Herman Washington. El Aljibe, by all accounts one of Havana's best and most lucrative restaurants, belongs to Palmares S.A., a subsidiary of Grupo Cubanacan S.A., a Cuban state-owned tourism conglomerate affiliated with the Interior Ministry (state security apparatus) under FAR General Abelardo Colome Ibarra. Cohiba is a registered Cuban cigar brand of Habanos S.A., a joint venture between Cuba's state-owned TabaCuba and the Franco-Spanish firm Altadis S.A. The Cuban management team is led by FAR Col. Oscar Basulto Torres.

2. CEO Maj. Luis A. Rodriguez Lopez-Callejas reported total revenue for Cuban military enterprises under holding company GAESA at US$970 million in 1997. See G. Fernandez and and M. A. Menendez, "El poder economico de los hermanos Castro," Diario 16 (Madrid), 24 June 2001.

3. The comment on TRD Caribe's discount policy comes from a consumer's, and independent journalist's, perspective. See Tania Quintero, "Shoppings por doquier," Havana, Cuba Free Press, 20 August 1999. The comment on the retailer's high profit margins comes from a former insider. See G. Fernandez and M. A. Menendez, "El poder economico de los hermanos Castro," Diario 16 (Madrid), 24 June 2001. TRD Caribe's annual revenue estimated by authors' sources at over US$100 million in the late 1990s.

4. See Frank O. Mora, "A Comparative Study of Civil-Military Relations in Cuba and China: The Effects of Bingshang," Armed Forces & Society, Winter 2002 (Vol. 28, Issue 2).

5. Raul Castro, quoted in, "Cuba's Raul Catro said on "learning" trip in China," Reuters, Beijing, November 19, 1997.

6. See Domingo Amuchastegui, "FAR: Mastering Reforms," in Cuba in Transition, Vol. 10 (Washington, DC: Association for the Study of the Cuban Economy, 2000).

7. Fidel Castro, quoted in Christopher Bodeen, "China's Changes Astonish Fidel Castro," Beijing, Associated Press, February 27, 2003.