Es Complicado

Spend enough time in Cuba and you’ll notice a few phrases that often pop up in conversation: Es complicado (it’s complicated), Resolver (to resolve; to get by), and Asi es Cuba (that’s Cuba; just accept the idiosyncrasy for what it is). As much as their frequency may border on overuse, these phrases’ ubiquity serves as a constant reminder of the many daily frictions in Cuban life.

Take communications, for example. Nothing quite sums up es complicado as trying to access the internet. Much like any other good or service in this country, the government controls access. Students receive free internet at universities, but the average Cuban citizen needs to follow a few steps before being able to log on. First is the half-hour queue at the local telecommunications office where one can purchase a maximum of 3 internet access cards – good for one hour each. Whether using the state-provided WiFi in public parks or a personal router at home, everyone needs a card. No card, no internet. Fortunately for tourists, select hotels provide their guests with enough internet hours to last the duration of their stay. Sadly, this connection is fairly unreliable and has proven quite the challenge to posting as a traveling blogger.

With such restrictive measures placed around traditional internet access, it might come as a surprise that 3G cellular data is available in Cuba. Introduced in late 2018, 3G has served as an inflection point in Cubans’ access to the outside world and their overall level of connectivity. Many Cubans, however, cannot pay for a SIM card and can still be found at all hours of the day and night using the internet in public parks.

1 hour of internet = 1 CUC (I interpret the image as a critique of modern overconnectedness)

Another facet of life in Cuba is its currency system. Cuban citizens purchasing goods and services within domestic sectors use the Cuban Peso (currency code: CUP). Tourists, foreign investors, and those operating in the international sector use the Cuban Convertible Peso (CUC). That’s pronounced “kook” – a source of constant amusement when divvying up our dinner/bar bills. While officially 1 USD = 1 CUC = ~25 CUP, things are – of course – a bit more complicado.

The FX conversion process for foreigners isn’t exactly straightforward. A 10% “embargo tax” is added to all USD transactions so, also taking into account the bid-ask spread, 100 USD will get you roughly 86 CUC. Our group applied a little resolver to this situation and tried to bring as much non-USD currency as possible. All those spare Euro, Swiss Francs, and Canadian dollars we had lying around helped save 10% on conversion. Cuba’s a cash economy and, if you’re American, ATMs are of no use here due to OFAC restrictions. So plan ahead and convert with care if you expect to spend time on the island.

Pesos vs. Convertible Pesos
Note the reverse faces of the bills: locals see armed uprisings while foreigners see energy innovation

As mentioned, 1 CUC = ~25 CUP. Other than an enterprising taxi driver who chooses to give you change in CUP rather than CUC (as happened to someone in our party; in his defense, the bills look quite similar in the dark), the two currency systems did not interact very often. Until very recently, private companies operating under the CUC did not interact with state-run enterprises no the CUP. While this disconnect might not seem meaningful at first, it ultimately serves as an impediment to comprehensive analysis of the Cuban economy. Results are further obscured by official books and records that consolidate the Cuban economy at a 1:1 ratio for CUC:CUP. Cuba’s two currencies have a very clear disconnect between official records and reality, but the situation gets even murkier when one considers exchange from CUC to foreign currency.

Foreign investors in Cuban enterprises are not always free to convert their CUC profits back to the currency of their choosing – the Cuban government may limit the amount or timing of the conversions. While this is technically a restriction on access to and repatriation of profits, it can also be understood as an implied devaluation of the CUC. By running a dual currency system split along domestic / international economic lines and by limiting the convertibility of a “convertible” currency, it becomes very challenging to evaluate Cuba’s economy relative to the rest of the world. Due to this lack of meaningful data, Cuba ultimately has trouble planning for the future.

Whether it’s getting on Instagram or paying cash for a cortado, Cuban life can get complicado. Moreover, what may seem to be a minor issue from a tourist’s perspective often signals a broader issue with potentially major implications. We’re seeing good progress on the internet front with the introduction of 3G and – hopefully – 4G in the coming years. The currency system is a known issue that we can only hope will be rectified in the near future. As for now, we will continue to enjoy our brief respite from the demands of cell phone notifications (those of us who didn’t buy a SIM card, at least) and we will happily spend our CUCs on coffee and mojitos. Things might be complicado now, but we’re hopeful for what tomorrow holds.

Casey Buckley is a 2020 MBA Candidate at Columbia Business School

A Cuba!

Every week since late January, our group of 30 has gathered on the fourth floor of Warren Hall to discuss Cuba – its culture, its history, and its future. Led by the inimitable Professor Bruce Kogut (and his fearless sidekick, Lodovico), we have been fortunate to have been exposed to a wide range of literature and numerous distinguished guest speakers – including Provost John Coatsworth and Dr. Margaret Crahan of SIPA.

The core focus of our course – and the lens through which we have viewed Cuba – is that of an economy in transition. Our holistic approach to the subject has allowed us to explore a wide range of topics: the legacy of Spanish colonialism, the decline of the Castro regime, and a Russian case study in privatization of state-owned real estate – to name a few. We hope that a thorough understanding of Cuba’s past and the transitions of its formerly communist peers will allow us to better contextualize and assess the promise of economic reforms today.

And with that, we’re off to Havana!

Some of the questions we hope to answer over the course of the next week are:

  • How do the Cuban people view their neighbors? The U.S.? Venezuela?
  • How has life changed since the introduction of 3G cellular service on the island? What has stayed the same?
  • How do private citizens view themselves in the context of broader economic reforms? Is it a “reform or out” mentality? Or is there a “third way” between capitalism and Cuba’s communist past?

On a slightly more whimsical note, we’re also looking forward to jazz clubs, salsa dancing, and riding in classic cars. And of course, we wouldn’t be MBA candidates if we weren’t interested in any potential business opportunities down the line…

Stay tuned for answers to the above questions and more!

Casey Buckley is a 2020 MBA Candidate at Columbia Business School

Tips for CBS Capitalists Coming to Cuba

Cuba: the land of cigars, rum, and pre-conceived notions.

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A group of 28 CBS students are venturing to Havana this Saturday. Despite what many Americans may think, Cuba is a “low” travel risk country, and you can still visit despite President Trump’s travel restrictions. If you don’t know the first thing about actually living in a communist nation (or perhaps if you’ve just heard Camila Cabello’s song “Havana” and are feeling particularly inspired), I’m here to give you a few pointers we learned in our pre-class sessions prior to departing for Cuba.

  1. Cuba has two currencies. If you’re not Cuban, you have to bring cash. There are two currencies, the CUC (Cuban Convertible Peso, or “kook”) and the CUP (monida nacional, 1.00 CUC = 25.00 CUP). The CUC is not traded internationally and is used in all the enterprises that use hard currencies such as: stores, hotels, privates and state restaurants, bars, cafeterias, taxis and car rental agencies. You can only access CUC as a non-Cuban citizen, and the official exchange rate for dollars is $0.873. If you’re changing money, expect to pay a 10% tax on USD that Euros, CAS and other currencies don’t have. The US credit cards and ATM cards will not work. fullsizerender-3-copy
  2. Don’t expect your iPhone to work. Though telecom in Cuba has vastly improved, it is still at times slow and unreliable. Internet is limited to hotel lobbies and public Wi-Fi hotspots scattered throughout major cities. You can roam in Cuba with your cell phone, but rates are very high. Try downloading Maps.me or OSMAND for functional offline map apps of Cuba.
  3. Don’t forget your papers! The US currently has a comprehensive set of trade and travel restrictions in place with Cuba (the “Cuban Embargo”). Under this embargo, only certain types of travel is authorized to Cuba. Entities are granted permission to organize educational tours, business trips, research delegations, and conferences. We are visiting under the educational visa, through Cuba Educational Travel. The Cuban government and citizens open their arms to visitors, but at times we may receive questioning about why we are visiting (especially at US customs when coming back).
  4. Tipping well is a social good. Cuba is a communist country. Doctors and engineers sometimes are motivated to work as hotel attendants or taxi drivers, because they have contact with hard currency. If they worked in their normal professions, they could be paid $20 a month – versus $100+ a day that can be earned from foreign tips! tippingincuba04
  5. You don’t need to worry about getting ill when you’re in Havana. Well – to some extent! It’s never good to get ill, but Cuban doctors are best in class. Cuba infant mortality rate is lower, at an estimated 4.76 deaths per 1,000 live births in 2013, compared to 5.90 for the United States. The life expectancy in Cuba about the same if not greater than the US. The Pan American Health Organization found in 2012 that life expectancy was 79.2 years in Cuba, compared to 78.8 years in the U.S.

Now, onto packing… looking forward to this forecast!

-Jill Wang, 18

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Mounting Anticipation…

Adam Norris ‘17

¡Bienvenidos!

So begins a multi-post blog on the Global Immersion Program (GIP) trip to Cuba. For some background, Professor Kogut’s GIP Cuba course consisted of six 90-minute classroom sessions filled with guest speakers, relevant readings, and student presentations aimed at answering the question: Is Cuba the next transformation economy? After examining nations who have previously gone through similar transitions and evaluating Cuban business and political progress in the post-revolution era, the course culminates in a week-long trip to the Caribbean Island in an attempt to answer this question. By visiting Cuba, we will better understand what the future will look like, and what influence and opportunities foreign investors might have.

As a self-proclaimed travel junkie, I have never been so unsure what to expect from visiting a different country. Sure, there will be amazing food, a rich and vibrant culture, and vintage cars from the mid-20th century, but what else will I encounter? I have been told that there will be limited internet (if any), no cell phones, no use of credit cards, a 10% fee when exchanging USD to Cuban Convertible Pesos (CUC)…but how will we be welcomed by Cuban professionals and government officials after over 50 years of travel sanctions? How will our ability to experience Cuba be molded by a country whose government is deeply involved in everything from real estate to healthcare to tourism?

While I don’t know the answers to these questions yet, I can’t begin to tell you how excited I am to find out; how excited I am to enjoy Cuban food and cigars, to interact with the locals, to learn from business owners, to immerse myself in this time capsule of a place before its transformation occurs.

And before I signoff, I wanted to pass along a few travel tips for anyone out there who’s looking to go to Cuba in the near future. This is what I know from research so far, but I look forward to passing along ‘pro’ tips from the island.

  1. Visa: While CBS helped me get an Educational Visa, you’ll need to get one of the 12 approved categories for Visa before you go (and a supporting itinerary). Full list here.
  2. Hotel: Had CBS not booked the Hotel Melia Cohiba for this trip, I would have used Airbnb or Four Points By Sheraton Havana to book a vacation rental.
  3. Money: Stick with CUCs over the Cuba Pesos (CUP) because CUPs have government controlled prices and are not intended for tourists (not to mention CUCs are 25x more valuable than CUPs). In case you get confused. CUCs have monuments on them, while Cuban Pesos feature the faces of local heroes (or check the links I provided above. Also, your best bet at exchanging money is at the airport, so to avoid the 10% tax on converting USD to CUC, bring Canadian dollars, British pounds, or Euros. Additionally, as noted above, credit cards probably won’t work yet so bring enough cash to cover your entire trip. Finally, there is a 25 CUC exit fee to leave Cuba, so don’t forget to store this money in your passport to ensure you don’t miss your departing flight.
  4. Internet and Cell Phones: You should be able to buy internet cards from your hotel’s reception desk, but understand that the speed will be slow (good luck streaming video) and the front desk may be closed or out of these cards when you need them (unless you stay at Hotel Melia Cohib, which offers free internet). While other providers may have plan options, AT&T did not for me, so I’m planning to be mostly incommunicado during my trip.
  5. Souvenirs: Previously, you could only bring back $400 worth of souvenirs, of which $100 could be Cuban cigars, rum, or other alcohol. However, as of October 2016, those limits have been lifted, so just don’t bring back enough to seem like you’re planning to sell them when you return.
  6. Health: Upon arrival at the Havana airport, you may be asked to show proof of insurance, so don’t forget your insurance card (even though it probably won’t cover any care you’d need in Cuba). If you do forget, you can buy a policy through the airport for a few CUCs per day. Once through customs, Cuba is fairly safe in terms of food, but I would recommend avoiding tap water and being careful when trying new foods. To be safe, check the CDC website.

 #CBSChazen #CBSChazenCuba #GIPCuba

Reflections on Cuba at a Point of Inflection

We’ve been back in New York for a few days, and Cuba is dominating the news cycle. That, of course, is due to President Obama’s historic visit to the island nation (and thankfully not to any of our shenanigans), which drew significant attention to the cooling of relations between the U.S. and our island neighbor. After a few days of reflection on our experiences in Cuba, I can’t help but be hopeful that we are on the precipice of a new era of American-Cuban relations.

Cuba faces many challenges beyond the U.S. embargo, but its economic liberalization is no doubt hamstrung by an inability to conduct commerce with the largest economy in not only its region, but also by many measures the world. It was discouraging to see time and again last week how an outdated relic of Cold War of foreign policy affects so many people on a daily basis. True, some industries seem just fine without the U.S. market, such as we saw in a very sharp and professional presentation from Havana Club rum, but others very much struggle to find a foothold. Hotels grapple with supply chain and logistics, foreign direct investment grows slowly, and a huge, modern port has tremendous excess capacity.

Given recent events, it seems that momentum may be swinging against the embargo. Yet, having lived most of my adult life in Miami, my Facebook newsfeed saw no shortage of vitriol from friends (and more often friends of friends) of Cuban descent as President Obama made his rounds in Havana. The wounds of the revolution still fester for many Cuban-Americans, and I wonder if any progress can possibly be made towards repeal as long as a Castro remains in power. Raul has announced plans to step down in 2018, and the uncertainty that follows may hold the key to the shackles tying U.S.-Cuba relations to a bygone era.

Still, as we walked the streets of Havana last week, enjoying the burgeoning restaurant and nightlife scene, perhaps the most common sentiment we heard from the many locals who welcomed us on the streets was that “we can separate the policies of the American government from the American people.” The mass of tourists on the street was met not with angst but exuberance. Most Cubans with whom we interacted seemed genuinely excited to see Americans among them once again. So, while the lessons of history will surely affect the future of American-Cuban relations, and many sticking points may exist between and within our two governments, there is no doubt that the American and Cuban peoples are neighbors. Perhaps in the coming years we will finally be able to interact as friendly neighbors again.

 

Mark Adelman ’16

Cuba aims to knock it out of the port

Our visits with company and government officials have progressed over the past few days in Cuba with a range of opinions from a variety of industries, perhaps most intriguingly, from management at the new port at Mariel and officials from the Cuban baseball federation.

While the intricacies of shipping containerization are not my expertise, our host, the British-born port GM employed by a Singaporean company that manages the port, shared both the fundamentals of the industry as well as why he believes Cuba’s Mariel is well-positioned to be a tremendous player in global shipping. As a quick overview: a soon-to-be completed updating of the Panama Canal will allow for larger ships to pass through the canal bound for various ports in the Southeastern U.S. and Eastern Seaboard, some of which cannot accommodate the largest modern container ships. Positioned essentially along the way to the U.S. from Panama, Mariel seeks to become a hub and spoke of sorts for receiving these ships and transferring to smaller vessels to maximize time and fuel efficiencies.

The port is glistening and modern, with plenty of excess capacity for growth and tremendously ample room to expand if and when the embargo is lifted. Yet with an embargo restriction called the Toricelli Act preventing ships that dock in Cuba from visiting the United States for six months, the payoff of this investment ultimately lies with embargo repeal. This port has been a major investment for the government and carries a potentially high payoff, but until trade with the U.S. normalizes, it quite a risky upfront capital investment.

Cuban baseball, meanwhile, faces vastly different challenges from the embargo. The island is baseball crazy, and due in part to its well-organized federation produces a wealth of talent worthy of handsome sums of money from American Major League Baseball teams (Google Yoenis Cespedes cars if you don’t believe me). Yet, due to embargo restrictions, Cuban players must defect and establish residence in a third country before being eligible to sign in the United States. This has led players to seek help from questionable sources to smuggle themselves out the country. A lifted embargo would allow a structured system to be put in place, perhaps like the posting system used by Japanese baseball. Yet there are also fears that a proud Cuban baseball league might become little more than a farm system for Major League Baseball, though many would argue defections have made that the case already.

The embargo remains the primary lens through which business is seen in this country. As our trip winds down, the remaining views will undoubtedly reflect similar challenges.

Beaches and embargoes fight for perspective on our first days in Cuba

On Sunday afternoon, I looked up to the sky as I stepped onto the fine, pillow-soft sand at the beach in the Varedero region of Cuba. Not a cloud to be found in any direction above the shimmering sun-drenched waters on this pristine spring day. I walk to the edge of the sand where, nestled in the sawgrass, is a bar. As I wade out mojito in hand to meet friends in the water, I know authoritatively that this is the single greatest day of class in my academic career.

Of course, the week has largely not been spent relaxing with a beverage in hand. Our first few days on the island have included a variety of views on the unique political and economic situations in which Cuba finds itself. We’ve heard from a range of speakers including a historian, a hotel manager, a former diplomat, and the former Finance Minister. The viewpoints have quite honestly been more candid than many of us expected. There is no blind eye turned to the troubling trade deficit, nor do they shy away from the looming demographic crisis of Cuba’s ageing population that, while educated, may not have the most marketable skill sets for the modern global economy. Each speaker is cognizant of and acknowledges many of the challenges Cuba faces in its economic transformation.

However, the role of the American economic embargo sews a common thread through most opinions. Many objective observers would agree that the embargo policy ultimately was unsuccessful and has greatly hindered the Cuba’s economic development, but there is sentiment among our speakers that once the embargo is lifted Cuba will blast off into economic revival. While this is a certain possibility, the other issues facing this nation are powerful, and must be confronted with new solutions and a continued liberalization of economic policies. As the trip moves forward, opinions on the embargo as it affects each industry will no doubt be top of mind among our class as it is top of mind for this nation.

A Cuba Visit 15 Years in the Making

When I was 13, a Cuban café opened near my house. Despite living just more than 200 miles from Havana in Southwest Florida, those Saturday lunches of ropa vieja and maduros were my first real exposure to Cuban culture. Nonetheless, I’m ultimately a simple man with a pathway to my heart that runs directly through my stomach, so my interest in Cuban culture was piqued.

While food drove this interest for the next few years (colada was the first coffee I ever enjoyed), living in Miami from age 17-25 provided ample opportunity to deepen my connection to Cuban culture. From formal study of Cuban Cold War history as an undergraduate to casual learning about my friends’ experiences as Cuban American children of expats over cigars and dominoes, those nine years in Miami created an ever-growing desire to visit the island just a few miles to the south.

So on the eve of this long-awaited trip to Cuba, my anticipation is matched only by my consternation as to what comes next for the homeland of many of my Miami neighbors. While much has been made of Cuban-American détente over the past 15 months, it remains unclear if we are on the cusp of a new era of Cuban prosperity or a gradual slide into a one-dimensional, tourism-centric economy like that of too many of Cuba’s neighbors.

Over the past six weeks our class has heard from a variety of experts whose expectations range from nearly unbridled optimism to dejected acceptance of a dismal future for the Cuban economy. Now, we will learn first-hand over the next week from those on ground who can offer another perspective. We will meet with government officials, restauranteurs, hoteliers, and (of course) cigar producers among other segments of industry to learn about commerce in Cuba as it is and what the future might hold. Internet access allowing, I will post updates along the way.

While tourists across the world scramble to visit Cuba before it changes, I can’t help but feel lucky to visit as it changes. No one can say when the embargo might be lifted, or how a country steeped in nearly three generations of communism can compete in a global economy, but the opportunity to see this unfold in a country with such potential is undoubtedly exciting. And of course the fresh pastelitos won’t hurt.

 

-Mark Adelman ’16

Cuba in Review

Adam Justin, MBA ’15

After a few days being back in New York, Havana still seems like a world apart. A place trapped in time, to be sure. The most striking feature was definitely the cars. The streets were full of colorful, Chevys, Pontiacs, Oldsmobiles, and more. The reviews are in, and we all had an incredible trip.

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The Cubans, everyday people, are eager and excited for more opportunities to open up to the United States. It feels like we are at the beginning of an exciting stage in our countries’ relations. To that end, our class was extremely poignant. We met with government officials and business people, in a range of industries. Cuba is clearly in need of massive amounts of investment. Investment is needed in housing, transportation, telecom, hospitals, hotels, retail – almost everything. The classes were super interesting and relevant, with our class full of questions, many were digging at where could we, foreigners, possibly do business in Cuba.

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For me that was the highlight. Talking at the end of the presentations with the presenters, our tour guides, restaurateurs, anyone, was focused on the future. Everyone had ideas for the future and how to make it better. The Cubans, as advertised, are impoverished. But they are also well-educated, smart, and hard working. This is a powerful blend and certainly gives me a lot of optimism for the future of Cuba.

Cuba Nueva

Greetings from Havana! Global Immersion Cuba is on. In our first couple of days here in sunny and warm Havana, our group of 40 students has attended thought-provoking presentations covering the Cuban economy, international trade, the financial and banking system, famed Cuban cigars, the rich historical heritage of Havana, and attended an energetic (to say the least!) baseball game.

We have more questions than answers. Every answer leads to more questions. This is Cuba in 2015. We cannot escape discussion of the embargo or the recent decisions made by the Obama administration to loosen restrictions and seek to restore ties between the United States and Cuba. The United States looms large in the Cuban psyche; it’s obvious from every presentation, our interactions with local people on the streets, and signs are everywhere.

It’s hard to understand how it works here. And by it, I mean, everything. Cuban socialism is its own system, that affects everything about the economy to personal values and priorities. Cuban socialism has qualities of the Soviet system, but at the same time feels like a small island culture. As capitalists from an American business school, it’s hard to think without reference to a “market” because we are so accustomed to concepts of “profit” and “ownership” but in reality those concepts are more complex than the words imply when used here in Cuba.

You also can’t escape the charm. The classic cars, national pride and the sense of the former wealth of Havana. It’s a beautiful city filled with polite and welcoming people.

There’s a lot to see and do, and so much to learn! This is Cuba in 2015, and the beginning of a new chapter in Cuban history. #cubanueva

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