Ban on U.S. cruise trips to Cuba will hurt private sector on the island, experts say

A classic car drives by a U.S. cruise ship at the port in Old Havana, Cuba, in November 2018.
A classic car drives by a U.S. cruise ship at the port in Old Havana, Cuba, in November 2018.

The Trump administration sent a strong message to the Cuban government by abruptly suspending cruise ship visits and eliminating group people-to-people tours, but experts and entrepreneurs are questioning the impact of the measures.

New U.S. sanctions were slapped on Cuba Tuesday for its support of the regimes of Nicolás Maduro in Venezuela and Daniel Ortega in Nicaragua.

“These actions will help to keep U.S. dollars out of the reach of the Cuban military and the intelligence and security services,” said Treasury Secretary Steven Mnuchin.

But experts say that the Cuban government’s income from the cruise visits is not significant, and that the new restrictions will instead affect a vulnerable sector of private entrepreneurs that the Trump administration claims to support.

“What Cuba earns from the cruise ships is insignificant,” said Emilio Morales, president of the Havana consulting Group, which tracks the island’s economy. “Most of the profits go to the cruise company.”

Cruise ship visits to Cuba soared in recent years, especially from the United States, after the Obama administration allowed such trips in 2015. Official Cuban news media reported that about 380,000 cruise passengers visited the island in 2017, and more than 800,000 in 2018. Industry sources caution, however, that those numbers were probably manipulated to try to cover up a drop of more than five percent in airplane arrivals in 2018.

Even with those figures, the government’s income from the cruise industry is much less than the money spent by travelers who stay in hotels or private homes.

John Kavulich, president of the U.S.-Cuba Trade and Economic Council, estimates that the cruise ships generated from $63 million to $107 million for the Cuban government, a tiny fraction of the $2.5 billion in income reported by the Tourism Ministry that year.

Cruise companies pay the government a tax of about $8 per visitor, according to several sources linked to the cruise industry. The companies also contract Cuban companies for some local services, such as cleaning.

Tourist companies owned by the government, such as Havanatour and Cubanacan, also offer land excursions to the historic heart of Havana and the Tropicana cabaret.

Although the Cuban government planned to expand the port of Havana by 2024, the island’s armed forces, which control most of the tourism industry, did not favor the expansion of cruise ship arrivals, arguing that the ships were taking money away from the hotels they run, according to one cruise industry source who asked to remain anonymous because the source was not authorized to comment on the issue.

Suspending the cruise visits, the source added, “will directly benefit the armed forces because now the Americans who continue coming in groups will stay in hotels and will hire government-owned transportation.

The elimination of the group educational visits known as people-to-people contacts or contacts between the people, announced Tuesday, could also diminish the number of U.S. visitors, even though travel agencies argue that it is still possible to visit Cuba because the Trump administration left in place other permitted categories for travel to Cuba, such as “supporting the Cuban people.”

It’s very likely, however, that the new restrictions and the general climate of tension between Washington and Havana will dash Havana’s expectations of about 5 million foreign visitors in 2019, Morales said.

Although the government and the military, which operates hotels, taxi services and travel agencies, receive the lion’s share of the income from tourism, a drop in that industry would especially affect an emerging private sector that depends on the dollars of U.S. visitors to survive.

“The new Cuba regulations imposed by the Trump administration represents another step backward that will only undermine U.S. business interests, further divide the Cuban family and create difficulties for the Cuban people, especially the Cuban business class that the (U.S.) government has repeatedly said it wants to support,” said Emily Mendrala, executive director of the Center for Democracy in the Americas.

Nearly half a million Cubans work for themselves or own private businesses, allowing them to gain independence from the state and increase their income. The official average monthly salary in Cuba stands at about $30. A survey by the travel agency Cuba Educational Travel of about 200 self-employed Cubans showed that 96 percent said that a drop in U.S. visitors to the island would hurt their businesses.

Cruise ship visitors had become a lifeline for Cubans such as handicraft makers, drivers of classic American cars from the 1950s and waiters in private restaurants near the ports of Havana, Santiago de Cuba and other cities.

The measures adopted by the Trump administration “will directly affect the Cuban people, especially in port communities outside Havana that no one talks about but which have improved with the arrival of the U.S. cruise ships,” said Cuban businessman Camilo Condis. “The self-employed sector today represents a little more than 12 percent of the working class, and we are the economic support of our families, in the majority of cases.”

“I´m devastated for the people in Havana,” said Greg Shapiro, who worked as a tour guide for Carnival’s Fathom line and was aboard the first U.S. cruise ship that arrived in Cuba in 2016. “Obviously the government is not perfect, but cruise passengers coming for the day injected much needed tourism into the economy, where high paying opportunities are scarce.”

Although the Cuban government pocketed most of the income, the most popular land tours included private restaurants, farms and other businesses, said the source familiar with cruise ship visits to the island.

“The economy is one,” said Condis, “and it’s impossible to adopt a measure that affects the Cuban government and not the people.”

Miami Herald staff writer Taylor Dolven contributed to this report.

Follow Nora Gámez Torres on Twitter: @ngameztorres