1159 Luxner 10/29/02 9:45 AM Page 1 Vol. 10, No. 10 November 2002 www.cubanews.com In the News Meliá to invest millions in 2 new resorts; chain already manages 22 Cuban hotels Cohiba confrontation Cuba sues General Cigar over ownership BY LARRY LUXNER vestments in places where tomorrow there will of the famous name .......................Page 3 pain’s Grupo Sol Meliá will sink at least $15 be an adequate return, and in hotels where an million into two huge beach resorts being American tourist would really want to stay when Sugar restructuring S developed in separate ventures with the he comes to Cuba,” Cánaves told CubaNews by Cuban government and various investor groups. phone from his Canary Islands headquarters. CubaNews map shows which of 156 sugar The first project is an 800-room hotel on Cayo At present, Meliá manages 8,321 rooms in 22 mills will close, which won’t .........Page 4 Largo, a resort island off Cuba’s southern coast. hotels across the island, making it the leading Tentatively known as the Meliá Paradisus Cayo player in Cuba’s rapidly growing tourism sector. Where’s the Party? Largo, this $80 million property is the brainchild Cánaves confirmed that Meliá also has equity of Leisure Canada Inc. (LCI), a Vancouver-based in four of those hotels: the Meliá Habana, the Doubts plague Cuban Communist Party’s company that has at least three other Cuban Meliá Varadero, the Meliá Las Américas and the upcoming Congress ......................Page 5 beach resorts on the drawing board. Sol Club Palmeras. The second Meliá-related project is a tourist The Cayo Largo project, however, represents Real estate in limbo complex at Bacunayagua, halfway between Hav- the largest single Cuban investment to date by ana and Varadero, that could ultimately grow to Meliá, which manages 350 hotels worldwide and Despite legal tug-of-war, investors see a five hotels with a combined 1,200 rooms. had sales of just over $1 billion last year. gold mine in real estate ................Page 7 Gabriel Cánaves, director of Sol Meliá’s Cuba “We’re negotiating with Meliá right now,” said division, said his company, along with other Marcelo Montenegro, president of Wilton Pro- Newsmakers Spanish investors, is negotiating with LCI to buy perties Ltd., a wholly owned subsidiary of LCI. a 30% stake in the Cayo Largo development. “It’s quite possible they’ll end up with 30% of the Politician and author Enrique Oltuski dis- “We think it’s important to make strategic in- See Melia´, page 2 cusses the revolution, the U.S. embargo and Cuba’s future after Fidel .......Page 8 Once-proud coffee industry falls victim Predicting the future Academics analyze a range of post-Castro to drought, theft and mismanagement transition scenarios .....................Page 10 BY LARRY LUXNER that when it comes to putting Cuba on the world Business briefs hen José Gavinia was a boy, his family coffee map, the Marxists have really blown it. owned a farm just south of Tope de Co- “The industry is completely destroyed,” Gavi- Cuba exempts tourists from baggage fee; W llantes in the old province of Las Villas. nia said by phone from Los Angeles. “The only Canada chicken exports fall .......Page 12 About a third of the Gavinias’ 390 acres was good coffee coming out of Cuba these days is planted with coffee, and the operation had both being exported to Europe. Before the revolu- Videos for rent a dry and a wet mill. Cuban coffee was highly tion, most of the good coffee stayed in Cuba. Today there isn’t even enough to go around.” A look at how Havana’s clandestine video sought after, and the family business flourished. “Whatever we exported would get a premium According to the official daily newspaper outlets stay in business ...............Page 13 over the world market, and most of our coffee Granma, Cuba’s 2002-03 coffee crop will be 11% went to Holland and Germany,” Gavinia said. smaller than the previous one — mainly be- Provinces: Pinar del Río “We didn’t sell to the U.S., because the Ameri- cause a prolonged drought has made some pro- Cuba’s westernmost province, recently cans wouldn’t pay the price at the time. It was cessing centers inoperative. much better to sell the coffee domestically.” And a mid-level official in eastern Cuba told ravaged by hurricanes, is still the island’s Then disaster struck in 1960, when the farm Reuters that “there was some rainfall at the start top tobacco producer ..................Page 14 was confiscated and the Gavinia family — along of the year, but this summer was exceptionally with thousands of other landowners — fled the dry. An 11% decline might be a bit optimistic.” CubaNews (ISSN 1073-7715) is published monthly island, eventually settling in the United States. Assuming it isn’t, the 2002-03 harvest now by Luxner News Inc. © 2002. All rights reserved. And the Cuban coffee industry has never underway will produce around 13.4 million to Subscriptions: $429/year. For subscription or edito- been the same. 14.4 million kg, based on a Reuters estimate of rial inquiries, call toll-free (800) 365-1997, send a fax 15 million to 16 million kg for the 2001-02 crop. to (301) 365-1829 or e-mail us at [email protected]. Interviews with government officials, diplo- mats and industry experts all to the conclusion See Coffee, page 6 1159 Luxner 10/29/02 9:45 AM Page 2 2 CubaNews ❖ November 2002 “featuring a swimming pool that meanders in equally huge 2,400-room tourist resort on 5.5 Meliá — FROM PAGE 1 and around the restaurant complex.” Set back square kilometers of beachfront property. total project, but it hasn’t been finalized yet.” from this central area will be rooms housed in When finished, LCI’s resort could boast six He said that if Meliá and the other two-story structures built in groups of eight. hotels, a marina and two 18-hole champion- Spaniards take 30%, LCI would be left with a Second-floor units will have ocean views. ship golf courses, as well as retail shops, ten- 20% share of the project. The remaining 50% Finally, the far west corner of the Cayo nis facilities, equestrian trails and more. Total would remain in the hands of Gran Caribe, a Largo development, accessible only by silent investment could reach $240 million. division of Cuba’s Ministry of Tourism. electric carts, will conceal 14 luxury villas hid- Cánaves said this coastal area, which is rel- Montenegro told CubaNews that his team den in an exclusive area of the resort. atively undeveloped, has become popular chose Meliá to manage the Cayo Largo ven- with foreign investors because “there’s practi- ture because of the chain’s 11 years of experi- UNRELATED MELIÁ RESORT AT BACUNAYAGUA cally no more room in Varadero,” where Sol ence in the Cuban tourism sector. The second hotel project in which Meliá Meliá now runs seven hotels under the Meliá, “We had lots of offers from other interna- plans to invest is along Cuba’s north coast at Sol, Tryp and Paradisus brand names. tional companies, but we selected Meliá Bacunayagua, located halfway between Vara- Cuban tourism authorities are said to be because it’s a very prestigious company, and dero and Havana in the province of Matanzas. very interested in the Bacunayagua project, it’s well-established in Cuba,” he said. Last year, a Spanish-Cuban joint venture which would mean new jobs and a new source According to a slick, full-color investor was signed in the presence of Cuba’s vice- of dollars for the cash-strapped government. brochure published by LCI, the resort — to president, Carlos Lage Dávila. The venture, WAITING FOR THE AMERICANS begin construction in late 2003 — is situated known as Desarrollo Turístico Bacunayagua on the underdeveloped west end of Cayo S.A., is comprised of Cuban state tourism enti- It wouldn’t be a moment too soon for Meliá, Largo, on “breathtaking beachfront proper- ty Cubanacán (50%) and Valle Yumurí S.A. either. At present, the hotel chain — which ty.” Three hotels are to be constructed here, (50%), which itself is made up of Meliá and at employs 8,000 people at its 22 properties — each targeting a particular market and linked least 10 other Spanish investors. says Cuba generates $190 million in annual by natural landscaping and gardens. Under the 2001 agreement, investors will revenues. But Cánaves says the average “The most spectacular rooms at Cayo spend $50 million in the first phase to build occupancy rate is only 64% this year, due to a Largo will rise above the surface of a tranquil two hotels and an 18-hole golf course, in addi- 20% drop in tourist arrivals compared to 2001. lagoon — accessible by raised wooden walk- tion to a small shopping mall. Within a de- Even worse is a 34.7% drop in Cuban man- ways strung with handmade railings of twined cade, the Bacunayagua tourist complex could agement fees during the first half of 2002 compared with the same period a year ago. rope reminiscent of pirate days,” says the bro- have two championship golf courses, a mari- “The slowdown of the Canadian market is chure. “Each unit has its own small jetty and na and as many as five hotels with a total of strongly affecting business, especially in the private sailboat. Inside, modern features will 1,200 rooms, representing an overall invest- Varadero region,” according to Meliá’s 2nd- deliver guests into a world of unique luxury.” ment of more than $200 million.