Published Tuesday, June 8, 1999, in the Miami Herald

Scandal in Cuba's economy

Arrests, dismissals reported in tourism

By JUAN O. TAMAYO
Herald Staff Writer

A crackdown on corruption within Cuba's tourism and other dollar industries has led to several arrests and many more dismissals at government-run enterprises, according to reports coming out of Havana.

Government officials have made no public comment on the scandal, though Havana has been swept for the past week by murmurs of significant shake-ups at the top of Cuba's $1.8-billion-a-year tourism industry.

Named in the reports were the government-controlled Cubanacan, CIMEX, Rumbos and Cubalse firms, administrators at several free-trade zones around Havana and a handful of foreign companies doing business in Cuba.

Cuba's worst corruption scandal in four years reflects its difficulty curbing the dark side of reforms it has been forced to adopt, from letting in foreign tourists and investors to creating state-controlled ``private'' firms.

A dozen Western business people and diplomats and other foreigners living in Havana told The Herald they had been able to confirm some but not all of the many reports circulating in the Cuban capital.

``We have persistent reports, better than rumors but unconfirmed, of people arrested, fired and about to be fired,'' said one foreigner living in Havana, who asked for anonymity out of fear of Cuban retaliation.

Details reported

Among the officials of government-owned enterprises reported by the foreigners in Havana to have been arrested or fired were:

  •  Several national and provincial-level executives of Rumbos, an agency that operates dollar-priced tourist tours and entertainment spectacles, golf courses and cafeterias around the island.

  •  The head of the hotel division at Cubanacan, Cuba's largest tourism firm, operating dozens of hotels and tour companies on the island and several offices abroad.

  •  The manager of a large warehouse run by Cubalse, the firm that rents housing and sells dollar-priced goods to foreigners living in Cuba, such as cars, furniture, office supplies and foodstuffs.

  •  The director of the Valle de Berroa free-trade zone on the outskirts of Havana, operated by CIMEX, a government-run firm that handles much of Cuba's hard-currency imports.

  •  One foreign travel agency operating in Cuba and several of the firms based in the free-trade zones, established in recent years to allow foreign investors to operate factories and other businesses virtually tax-free.

    Security fallout

    Havana residents said they had also heard, but could not confirm, reports that several officers at the Interior Ministry, in charge of domestic security, were arrested for failing to spot or permitting the corruption.

    The government has assigned scores of retired or laid-off Interior and Armed Forces Ministry officers to tourism enterprises in recent years, partly to keep an eye on business and partly to provide them with good salaries.

    Government figures put the average salary in Cuba at 217 pesos -- about $9. Housing and basic services are dirt cheap, but a gallon of cooking oil costs $2.

    President Fidel Castro and the Communist Party newspaper Granma are expected to announce details of the corruption scandal soon, two of the foreigners living in Havana said.

    ``This is being seen in Havana as an exemplary Castro crackdown, a harsh signal that things have gotten out of hand and he wants it stopped,'' said a foreign businessman with close contacts in the Cuban government.

    Previous scandal

    Cuba's last major corruption scandal was in 1995, when then-Cubanacan chief Abraham Maciques was dismissed amid reports that he had failed to spot widespread thievery in the enterprise's dollar-priced operations.

    Business people and diplomats in Cuba say cases of large-scale corruption remain relatively rare but have been growing as more dollars flow through the hands of local officials whose salaries are not enough to feed their families.

    ``Remember that everyone in Cuba has to do something illegal to survive,'' said a U.S. analyst who monitors foreign investments in Cuba.

    Most of the corruption has been reported in the tourism industry because that's where the dollars are -- from bribes paid by foreign investors to restaurant meals paid for but never put on the books.

    Cuba grossed $1.8 billion in tourism income in 1997, when 1.2 million foreigners visited. It is projecting 1.7 million visitors this year.

    Agencies spun off

    But opportunities for corruption also grew as Cuba spun off government agencies into semi-private enterprises, such as Rumbos, so they could more easily negotiate joint ventures with foreign investors.

    Some of the government officials designated as executives in the new enterprises now appear to be trying to position themselves to profit if Castro's government ever collapses, Western diplomats in Havana said.

    ``This seems to be part of a slow-motion piñata,'' said one. ``They may be trying to slide in under the wire, and are getting caught.''

    ``Piñata,'' a reference to the candy-filled papier-mache figure that Latin American children smash at birthday parties, was the nickname Nicaraguans gave the Sandinista Front's wholesale seizure of homes, farms and factories for its own officials after its 1990 election defeat.
    e-mail: jtamayo@herald.com

    Copyright 1999 Miami Herald