Air China

America’s been caught napping in its own backyard.

If the US government thought their 55-year trade and financial embargo against Cuba would preserve Cuba for the United States of America they couldn’t be more wrong.

China has quietly been establishing a foothold and the long march of the Chinese into Cuba is underway.  Trade between the two countries reached $1.5 Billion between January and September 2015.  And at the start of 2016 Air China started direct Beijing to Havana flights, with Chinese state media proudly trumpeting that this will “boost China Cuba ties in several areas, especially tourism.” 

Three fully-loaded Boeing 777s from Beijing to Cuba each week means over one thousand tourists, business people, and politicians.  Tourists with cash to spend.  And businesspeople with money to invest.

US investment has been slow in materialising, despite last year’s historic announcement of intent by the US and Cuba to ‘normalize’ relations.

The US embargo is still in place.  It’s enshrined in US law, repeal is not a straightforward process, and significant opposition remains in Congress.   Cuba was only taken off the US list of state sponsors of terrorism last May, and even now non-US banks are petrified of dealing with Cuba, thanks to a combination of risk aversion and the long arm of the US Treasury’s OFAC sanctions programme.

Over the past decade OFAC has collected millions of dollars for violations of the Cuba embargo. At one point it had ten times more agents assigned to tracking Cuba financial activities than to Osama Bin Laden.  So it’s no wonder the the majority of banks are proceeding with caution.

China does not care two hoots about OFAC and the implicit threat by the US towards non-US banks dealing with Cuba.

Does the USA really want to engage with Cuba?  Should they?  This is a geopolitical issue relating to US power and influence.  During the 1962 Cuban missile crisis Kennedy and McNamara understood geopolitics and took decisive steps to protect US interests.  In the coming years Cuba is set to become one the fastest growing economies, and it’s a mere 90 miles from the US coast.  It’s madness that the US is not moving to secure this economic miracle for itself, with both hands.

Cuba already had 28,000 Chinese tourists visiting a year. I’ve been to Barrio Chino – Havana’s Chinatown – and it’s not much to speak of these days, even though it was the biggest Chinatown in Latin America in its heyday. But 80,000 Chinese visitors in 2016 will change Barrio Chino faster than a Shanghai noodle maker making 2 minute noodles.

Cuban tourism authorities say they plan to have at least 85,000 hotel rooms available for tourists by 2020. They are going to need every one of these and more. Watch China lead the charge on this. They are already building Cuba’s second 18 hole golf course and resort.

I predict tourists to Cuba could grow faster than people predict from 3 million in 2015 to 10 million by 2025.  China has just raised the game. That will certainly help Cuba’s already successful economy, which runs with a surplus.  The Economist Intelligence Unit predicts GDP growth to exceed 4% out to 2019.

Communist China has been a friend to Cuba for decades and is now set to fill the gap left by the Russians. The Cuban Government is seeking $2.6Billion in foreign investment in 2016, a drop in the ocean for China Inc. The Chinese already have over 13 resort projects worth over US$460 million underway on the Island.

The Chinese play the ‘100-year’ game. I’ve seen time and time again in Africa.  Whilst the world ignored Africa, the Chinese became the Dark Continent’s largest investor over the last decade with direct investment in Africa expected to increase to $100Billion by 2020.

China excels at infrastructure, hotels and everything else a country like Cuba needs. Internet in Cuba is almost non existent and Cuba is about to come online with a bang.  Will Cuba’s broadband and WI-FI be ‘Made in China’?

The Chinese are going to use Cuba as their access hub into Latin America. New airport facilities, not a problem. Hotel rooms, how many do you want?  One of my companies is in discussions with cruise shipping groups to park ships in Havana Harbour whilst new hotel rooms get built.

Here’s another thought. Maybe the Chinese would consider taking over Guantanamo when the US decide to leave?  It’s a deep water port ripe for development in a part of Cuba crying out for infrastructure investment.

I support the Chinese tourist storm that is about to hit Cuba, just as I fully support the increasing amount of US tourists planning to head to Cuba. There is plenty of space for everybody, just not the rooms yet, but infrastructure investment is what is needed. The Europeans and the Chinese are going to steal the US’s thunder if they are not careful.

The US, with its embargo and its stance towards foreign banks dealing with Cuba, has left the door wide open for others to properly engage with Cuba.  Other countries, not least China, are on track to change Cuba’s destiny.

And the US does not seem to be doing a thing about it.

Written by David Lenigas