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Cuba bets on tourism as new U.S. travel and economic restrictions take hold

Cuba bets on tourism as new U.S. travel and economic restrictions take hold
An old American car drives past the Riviera Hotel on May 7, 2019. Cuba welcomed 1.93 million visitors in the first four months of the year, a 7% increase from 2018. (Yamil Lage / AFP/Getty Images)

The battle for Cuba's economic future is being waged on its beaches. And at its all-inclusive resorts, dive sites and cobblestoned colonial plazas.

As most of Cuba's economy stagnates or declines, the country has launched a full-scale effort to turn virtually the only bright spot — tourism — into an engine that can pull the rest of the communist island out of its worst economic crisis in two decades. In government meetings and propaganda, it has now set a goal of drawing 5 million tourists in 2019 — perhaps the modern-day equivalent of its Soviet-era dependence on the annual sugar-harvest production.

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"In the middle of the hardening of the blockade on Cuba, the activation of Title III of Helms-Burton by the president of the United States, we're assuming responsibility for injecting foreign exchange and developing the economy," said Ivis Fernandez, the top tourism official in Matanzas province, home to the beach resort town of Varadero.

Across the Florida Straits, the Trump administration is intently focused on scaling back tourism to the island as part of a campaign to smother the Cuban economy and force its government to sever ties with President Nicolas Maduro's government in Venezuela.

President Trump recently activated a section of the 1996 U.S. law known as Helms-Burton, allowing lawsuits against foreign companies doing business on properties confiscated after the island's socialist revolution. His administration has also pledged to limit the legal reasons under which Americans can visit Cuba, saying too many people are disguising illegal tourism as educational, religious or other types of travel. The U.S. has also prohibited Americans from patronizing a series of hotels and other facilities run by the military conglomerate that controls many of the most important sectors of the Cuban economy.

But despite the restrictive measures, the Cuban government is only doubling down on its bet that tourism to one of the world's last communist nations will continue to surge.

Cuba began to open the island to tourists after the collapse of the Soviet Union and the subsequent loss of billions of dollars a year in aid. In 1996, Cuba had 30,000 state-owned hotel rooms and about a million tourists a year.

Last year it had about 70,000 rooms, with an additional 24,000 in privately owned bed-and-breakfasts.

In total, Cuba drew 4.7 million tourists in 2018, a 1.3% rise over the previous year that puts its latest goal of 5 million within reach. Visits to the island are already running 7% higher than the same period last year, when about 639,000 U.S. travelers took a trip, the highest of any nationality except Canada.

Official figures show that 257,000 Americans visited Cuba in the first four months of 2019, a 93% increase over the same period last year. Meanwhile, about 142,000 came on cruise ships, a form of travel that remains legal and is largely responsible for the rising number of American travelers to Cuba. Only 40,000 American cruise passengers visited Cuba in the first four months of 2018.

But even so, challenges loom large on an island whose most important business sectors are in varying states of shambles.

In this May 12, 2019, photo, Hotel Royalton staff entertain tourists during a beach party in Varadero, Cuba. The island nation has set a goal of drawing 5 million tourists in 2019.
In this May 12, 2019, photo, Hotel Royalton staff entertain tourists during a beach party in Varadero, Cuba. The island nation has set a goal of drawing 5 million tourists in 2019. (Ismael Francisco / Associated Press)

Cuba is currently trying to revive businesses ranging from agriculture to textiles by turning them into part of the supply chain for the tourism business. State-run factories, warehouses and workshops are largely in disrepair after years of embargo and central planning, and many of the millions earned by hotels and tour buses must be turned around and spent on imported goods ranging from food to bedsheets.

In a country full of mango and guava trees that are laden with rich, plump fruit nearly year round, it's also not unusual to see imported tropical fruits and juices at hotel breakfast buffets as Cuba's decrepit agricultural sector struggles to find a way to move enough produce to satisfy visitors.

"The big problem with tourism as a foreign-exchange earner is the amount of importing that it has to do," said Jose Luis Perello, an economist and expert on tourism. "In order to keep developing tourism we need national industry to become more dynamic."

If the Trump administration is successful, the island might never get the chance.

Along with the collapse of the Venezuelan economy and the reduced amount of cheap oil the Maduro government sends to Cuba, increased U.S. pressure is blamed for a cash crisis that has forced the country to start rationing basic foods such as eggs and chicken and limit power consumption by state-run enterprises.

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"They're going after Cuba's strengths, in this case the tourism sector, and trying to seek out its vulnerabilities," Raul Rodriguez, director of the University of Havana's Center of Hemisphere and U.S. Studies, wrote in a recent article in independent journal Temas. "Boosting sanctions is an attempt to bankrupt the Cuban state."

Still, experts say that the state-run tourism sector brings in $3 billion a year and the private side brings in the same, despite being nearly one-third the size. In a country where food lines are growing, aid from Venezuela is dwindling and industries such as nickel and sugar are mostly stagnant, tourism also might be one of the only ways forward.

On the paradise-like beaches of Varadero, small crabs crawl out of sand dunes and groups of tourists seem to forget their worries as they laze in the sun.

The city has 21,200 hotel rooms and is trying to build 1,000 more a year for at least the next five years, managed in partnership with hospitality giants Melia and Barcelo of Spain and Fiesta Americana of Mexico.

Although Spanish hotel chain Iberostar could be a major potential target of lawsuits under the activation of the Helms-Burton provision, owner Miguel Fluxa did not appear worried at an international tourism fair last week.

"I do not know” what is going to happen with Helms-Burton, he said. "The only thing that I know is that any step we have taken we have taken according to the law."

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