HAVANA, Oct. 5 (Bloomberg) HAVANA’s redevelopment is in progress. Near El Floridita, where Ernest Hemingway once knocked back daiquiris, the hulking Manzana de Gómez building is being transformed into a five-star hotel.
Stylish boutiques sell perfume and stereos. Inside an old warehouse is a microbrewery teeming with people drinking lager made in huge steel tanks imported from Austria.
What isn’t immediately apparent is that all of this — and anything else that stands to make money in Cuba — is run by a man little known outside the opaque circles of Cuba’s authoritarian regime.
He is chairman of the largest business empire in Cuba, a conglomerate that comprises at least 57 companies owned by the Revolutionary Armed Forces and operated under a rigid set of financial benchmarks developed over decades. It’s a decidedly capitalist element deeply embedded within socialist Cuba.
This is Luis Alberto Rodriguez. For the better part of three decades, Rodriguez has worked directly for now Cuban President Raúl Castro. He’s the gatekeeper for most foreign investors, requiring them to do business with his organisation if they wish to set up shop on the island.
IF AND when the US removes its half-century embargo on Cuba, it will be this man who decides which investors get the best deals.
Rodriguez doesn’t just count Castro as a longtime boss. He’s family. More than 20 years ago, Rodriguez, a stocky, square-jawed son of a general, married Deborah Castro, Raúl’s daughter.
Rodriguez’s life is veiled in secrecy. He’s rarely been photographed or quoted in the media. He and the other Cuban officials in this story declined multiple requests for comment.
In a country where capitalism was treated as a subversive enemy force for a half-century, Castro has been cautiously opening the island to private enterprise since he effectively succeeded his brother Fidel Castro as president of the country in 2006.
There are now 201 permitted types of private businesses (restaurants and bed and breakfasts are the biggest categories), employing a million people, or a fifth of the Cuban workforce, according to Omar Pérez, a professor at the University of Havana and a researcher at the influential Centre for the Study of the Cuban Economy.
Castro has legalised the sale of homes and cars, scrapped travel restrictions, and allowed private farming and co-operative businesses. It’s now legal for Cubans to stay in hotels, and 2.6-million people own cellphones, up from close to zero a decade ago.
But Castro has kept the big-money industries in the hands of the state, and much of it is managed by his son-in-law.
Rodriguez’s Grupo de Administración Empresarial (Gaesa) runs firms that account for about half the business revenue in Cuba, says Peréz. Other economists say it may be closer to 80%.
Gaesa owns almost all of the retail chains in Cuba and 57 of the mainly foreign-run hotels from Havana to the country’s finest Caribbean beaches. It has restaurant and petrol station chains, rental car fleets and companies that import everything from cooking oil to telephone equipment.
Rodriguez is also in charge of Cuba’s most important base for global trade and foreign investment: a new container ship terminal and 465km² foreign trade zone in Mariel.
Cubans talk constantly about the changes they’ve seen. But for a majority of people, Castro’s reforms haven’t delivered that most basic thing: a living wage.
Monthly salaries average just 584 pesos, or about $24, government figures show. That’s what it costs to buy 2kg of chicken breasts, a couple of bags of rice and beans, and four rolls of toilet paper in one of Gaesa’s Panamericana supermarkets.
Families still receive food rations: 250g of chicken, 10 eggs, one pack of spaghetti, 500g of black beans and 250ml of cooking oil per person per month.
Since December 17, when Castro and US President Barack Obama announced plans to normalise US-Cuban relations, the country has been abuzz with talk of money.
Alcibiades Hidalgo, 70, who spent decades working in Cuban state media and government posts, is part of a network of Cuban defectors and self-described exiles in Miami engaged in a cottage industry of sorts — that of forecasting Castro’s next move.
In April 1981, Castro called Hidalgo into his sprawling office on the fourth floor of the headquarters of the Revolutionary Armed Forces. He directed Hidalgo to join a handful of powerful advisers who, among other things, were going to overhaul the economy.
One of the most powerful advisers was Julio Casas, an accountant who fought under Castro’s command during the revolution. Castro put Casas to work building what would become Gaesa.
Casas’s top aide was Rodriguez, who would sit quietly in meetings with Castro, talking only when addressed, Hidalgo recalls.
Casas built Gaesa around wringing revenue from the military’s properties and assets. Soldiers planted crops at bases. Work brigades built tourist hotels. Military planes were refitted for domestic passenger flights for Gaesa’s ad hoc civilian airline, Aerogaviota.
As Casas started new businesses, he put Rodriguez in as manager.
“Luis Alberto was not very sophisticated,” says Hidalgo, who rose to become Castro’s chief of staff. “But he was an efficient manager who was cold and calculated in his pursuit of power.”
In 2002, Hidalgo fled Cuba at night in a speedboat after being sidelined and then blacklisted for almost a decade in one of the regime’s political purges.
WITH the collapse of the Soviet Union in 1991, Cuba lost its economic patron, and the country was plunged into a crushing four-year contraction known as the Special Period.
Cubans endured shortages of food and medicine. Jobs disappeared. The sugar industry, which had long supplied the Soviets at inflated prices, fell apart. In 1993, Cuba’s gross domestic product shrank 14.9%, according to the World Bank.
Fidel Castro responded with schemes to lure foreign money into Cuba. He legalised the possession of hard currency. He allowed people to start private businesses, including family restaurants.
Big change came to Gaesa as well. Its tourism arm, Grupo de Turismo Gaviota, cut deals with international chains, most notably Spain’s Meliá Hotels International and Iberostar Hotels & Resorts, to build and run hotels in Varadero, a 20km stretch of white, sandy beach two hours east of Havana by car.
By the late 1990s, the Castros had found their saviour in Hugo Chávez, who was elected president of Venezuela on promises to emulate Cuban-style socialism. He flooded Cuba with free oil — up to 115,000 barrels a day.
Cuba also cut lucrative deals with other leftist leaders, including Brazil’s Luiz Inácio Lula da Silva, to send tens of thousands of medical doctors to work abroad. Under the terms of those deals, many of which are still in place, the Cuban government kept up to 90% of the doctors’ wages.
After Chávez died of cancer in March 2013, Venezuela slid into an economic crisis. The country slashed oil shipments to Cuba — some estimates say by a third or more. Cuba once again needed cash.
“Raúl Castro has to open Cuba up to the world, to the capitalist, free-market world. He has no choice,” says Emilio Morales, a former marketing executive at Cimex, a big conglomerate later folded into Gaesa. Morales, too, now lives in Miami, where he runs the Havana Consulting Group.
According to his research, people made 650,000 trips to Cuba from the US last year, taking advantage of Obama’s and Castro’s relaxed travel restrictions.
“They brought $3.5bn of goods with them in their suitcases,” he says. And Cuban-Americans sent $3.1bn to relatives in Cuba. “It’s a huge impact.”
CUBA is a place both frozen in time and moving swiftly towards a future in which private enterprise will be a bigger part of life. Vast areas of Havana are little changed from 1959, when Fidel Castro’s bearded guerrilla fighters marched into town.
As for the fast-arriving future, there are Afro-Cuban jazz clubs, swanky private restaurants, and boutique hotels.
In April 2011, the Cuban Communist Party’s Sixth Congress approved 313 economic and social policy guidelines of the party and the revolution. By then, Castro had already moved Cuba’s most profitable state companies under Gaesa and Rodriguez.
More recently, Rodriguez was given the green light to take over Habaguanex, the state company that owns the best commercial properties in Old Havana, including 37 restaurants and 21 hotels.
Rodriguez rarely deals with clients, apparently preferring to delegate to the managers who run Gaesa’s collection of companies.
He seemed to be more hands-on in Mariel, where he was entrusted with building the $1bn megaport and surrounding free-trade zone. He regularly assembled his engineers for progress reports.
On January 27 last year, the port was ready, and dignitaries took their seats under a brilliant sun for the formal opening.
On the stage was Castro, Venezuelan leader Nicolás Maduro, and Brazilian President Dilma Rousseff. The port, a collection of more than a dozen big cranes, a 700m-long pier designed to handle the world’s biggest container ships, a highway and a rail line to Havana, had been built by Brazilian construction company Odebrecht. It was financed at subsidised rates by Brazil’s state development bank.
Rousseff, smiling, walked up to the podium and started her speech with the customary naming of dignitaries in the crowd.
She thanked Castro and unnamed Cuban ministers, foreign executives and leaders.
And just before she leaned into her short address, she thanked one more person by name: Gaesa chairman Luis Alberto Rodriguez.