find out mor more about it at c-span.org/classroom. >> travel restrictions by the obama administration has opened up cuba to american tourists. a panel at florida international university looked at the future of cuban tourism and how the trump administration policy changes might affect our u.s. citizens travel to the island nation. this is two hours. >> good afternoon everyone. thank you all for being here. a special thanks to our audience in the c-span world for joining us as this event is being recorded by c-span, so thank you for the c-span team for being here and for the audience for

joining us. my name is frank mora. i am the director of the kimberly green latin america and caribbean center here at florida international university. we are, for our friends in c-span, we are here located at the biscayne bay campus of florida international university here in miami. we have another campus where the center is located in west dade. the center that i direct is one of the institutes of programs or centers at the stephen j green school of public and international affairs, again at florida international university. we are just absolutely delighted to be posting or cohosting these events. i want to thank our dean here, the dean of the chaplain school of hospitality and tourism management, mike hampton. [applause]

thank you for supporting this, and thi this is a great if it to adhere on your campus, right? also i want to thank another cohost, the cuban research institute. the director is here with us today and will be joining in a second. a little bit about why we're here and how we got here. last year the brookings institution, specifically the foreign-policy team and group, and ted picone, in the latin america initiative game, reached out to me to see if we are interested in cosponsoring a study, a study on as you all know one of the more dynamic industries or sectors of the cuban economy. and all this of course was in the context of december 17, 2014, that many different changes that have occurred in

the relationship between the united states and cuba since it then. and so ted reached out to see this and was interested in helping us funding this study and, of course, we reached out and agreed immediately. and so we are very delighted to be pretty much a part of this. the study was first launched in washington d.c., i think december 2 of last year. and so we're doing a kind of miami launch, if you will, of the study with the two authors who are joining us and you will hear from here very soon. so let me tell you how we are going to proceed. here i will introduce the two co-authors here in the second. they will present their study. there are copies of the study, by the way, in the back in the lobby of the auditorium. so please make sure to take one. they will do the presentation

for about 20-25 minutes and then i will ask a panel of experts here from florida international university and st. thomas university to sort of give the remarks, reactions to the study. we will have a kind of conversation up here on stage before we turn it over to you for your questions and your comments. and then we'll go from about now until 6:00 when we will end the session. so let me introduce the two co-authors of this important study. first, let me introduce richard feinberg. he's the gentlemen right there that you see. dr. feinberg is a nonresident senior fellow in the latin american initiative at brookings and a professor of international political economy in the school of global policy and strategy of the university of california in san diego.

previously, dr. feinberg served as special assistant to president clinton for national security affairs and senior director of the national security council office of inter-american affairs back during again in the clinton administration. he is the author of numerous books and works, too many to mention here, but there is one daughter want to mention. it's really his most recent book, open for business, building the new cuban economy. here it is. it's available both of course at amazon as well as the brookings institution website bookstore website. and it's getting some really wonderful reviews. and hope you get a chance to read it. also richard has got this a sort of the plug for a new magazine, new magazine, cuba trade. richard has a piece, a piece based on this exact study.

where he lays out the basic guidelines of the study so cuban trade, that's the name of the magazine for trade and investment in cuba. the other richard that is author of this important study works with the international growth center as the country director for rwanda, uganda and south sudan. the idc is a joint venture of oxford university at the london school of economics. it provides the institute provides independent research based analysis at the request of selected countries in asia and africa. he is a senior fellow, nonresident, at the world trade institute in bern, switzerland, and a distinguished research, researcher at the north south institute in canada. he consults with a number of

international organizations including the world bank, the organization of economic cooperation development and the international trade center. where very, very fortunate to have these two scholars with us today to present their work that span and number of months, and it's pretty detailed editing it makes an important contribution in terms of the challenges that cuba faces and expanding tourism in cuba as well as some of the opportunities. so with that i turn it over to our two co-authors who will come up and present their work. [applause] >> well, thank you very much, frank, for the wonderful introduction. also thank you to dean hampton for the welcome to the chaplain school. it really is a pleasure us to be here. you know you're in the right place when the school of management that you're dealing

with is located over a wine bar. richard and i are just humble development economists, and we came to tourism sorted through the lens of growth and distribution in those kinds of issues. and if we had only known what you guys have already figured out, we would've started much earlier in our quest to understand the tourism industry. richard and i are going to do a bit of a tagteam here. so bear with us as we passed the baton and discuss this study. just a couple of points. let me give you the headlines first. first of all, if i can get this thing to work, one of the reasons we wanted to go to study tourism was the industry was booming. we wanted to ask the question, who benefits. that question is important, has become important politically into united states because of the recent election. and now we see the prospect of possible reversals of some of

the obama issues, and there's been the assertion that, in fact, tourism or doesn't benefit the economy. it benefits mainly the military and so therefore we ought to shut down what's been happening already. the question would also interested in was how can the industry be structured so that it drives growth? we didn't want it to be an enclave industry which benefited only a few people, had growth implications that would allow cuban incomes to rise much more rapidly than the rather anemic performance it had in the past. short answer to both of those questions is that the industry in fact, is benefiting and wide swath of cuban society and indeed it has the potential to drive a sustainable development into the future. that said, the industry, cuba has fallen behind the other caribbean countries. it operates well short of its potential in our view. one reason is the combination of state sector ownership and regulations that have created obstacles particularly for

course industries and linkage industries to help the industry grow. so we'll elaborate a bit on that of course in this discussion. we think the way this is proven in fact, is that even modest changes in regulation that occurred over the last four or five years have unleashed a torrent of private sector activities in britain breakfast, and restaurants, in transportation, taxicabs and so forth. that cluster, that private sector cluster now counts for more than 30% of the industries earnings. the government does in fact, have ambitious plans for the industry. you would like to accommodate some 10 million visitors by 2030. that's a big increase. what are are the things we wanted to do was look at the realism of that estimate. could he do this? rs met suggests it's possible but it's unlikely unless cuba changes a number of its policies and we will elaborate on what

some of those also changes might be to promote growth. and, of course, finally the industry has important applications, if i can get the last point to boot up, for the training. we think in its own national interest the united states should move forward with normalization process that mr. obama has launched already. let me elaborate on these points together with richard. first of all cuba has abundant tourism attractions that could be a driver of growth and prosperity. i don't need to tell the audience that. this was at the top assignment that felt to us when we went there but this is just a photo of santa maria in the north coast of cuba. and, of course, cuba has extensive beaches like this that can be developed further but that's not the only important reason. it has a rich culture and one that also merits consideration and develo developing. so the opportunities for the industry to grow are really fast

and enormous. in fact, already of course cuba is booming. there is a graph the number of arrivals over the period 1995 1995-2015, and you can see there's a number of -- a steady stream save for a little blip in the mid-2000. and, of course, this graph only goes up to 2015. sally asked me to do projection 2016 based on more recent numbers, and, of course, that would allow i think for the number of tourists to reach almost 4 million by the end of 2016. if you look however at the earnings, the pattern is much more varied. the earnings for tourist varies quite widely from year-to-year, and response to domestic policies among other things, but in 2014-15 you see an important upswing in earnings.

in 201 2015 it's likely to be en greater simply because the industry is operating in a much higher capacity in part due to the normalization efforts of the united states and cuba together. the benefits of the industry as i asserted at the beginning are actually quite widespread. it is one of the major sources of growth in the economy and perhaps you could argue it is the principal growth in economy. it's a major source of foreign exchange and earnings. tourist revenues are two-thirds or three-quarters of all merchandise earnings. cuba is a service sector exporter as an economy, and tourism plays an important role. some 70% of tourist earnings stay in the country, which is a pretty good number. spending on wages, agriculture products, cultural activities, transport and the like. and it is a major force linking

cuba to the global economy, exposing cubans on a daily basis to the international environment. this graph shows the fact that the cuban industry has ample opportunity to grow. if you think about, i don't like this term carrying capacity, but this simply shows the number of visitors as a share of the population. and indeed relative to the dominican republic here almost .5% of the total population, it's about twice what cuba is today. so there is considerable upside potential he if he just used this measure, and i would argue there are many other measures we could use that would show the same thing. the industry has not contributed to cuba's growth as much as it could otherwise occur, as much as it otherwise could. in fact, that our site it is kind of falling behind. this graph simply shows the contribution to the economy on

the far left you see in blue the direct contribution to the economy of cuba, it's about 2.5% of gdp. of gdp. if you use the world travel and tourism councils numbers, that number expands some 10% total contribution to the economy, atd this includes induced spending as well as indirect spending. that's substantially less than what we see in either the dominican republic or costa rica, compared to countries that we think are pretty good comparators for cuba. there's more that cuba could be doing. this graph shows two things. the first is that the bottom line is, this is an index in 1995, sort of putting all economies in exactly the same level and saying let's look at revenue per visitor over the long sweep of things. this is an indication of the efficiency and effectiveness of the industry in growth.

and as you can see, cuba is doing rather poorly relative to the other comparator countries, costa rica, the dominican republic. this is average for all developing countries. an important point about this is not only cuba doing relatively poorly compared to the rest of the caribbean, the caribbean itself is doing relatively poorly compared to the rest of the world. the caribbean is losing market share to other destinations. why? over the last 20 years major new destination have opened up in china and southeast asia, and africa, and as a result the tourist dollars are getting spread over a much wider array of countries, which means that the industry really has to be competitive in order to survive and actually to prosper. cuba has more to do with this is this isa once to upgrade its industries. one of the reasons of course is

that if you talk to some of tourists, one of the things they typically complain about our poor maintenance, the service quality or the fact that the internet is virtually nonexistent or very expensive and awkward. these are things cuba is working on. we have some suggestions about this everything part of the reason for this particular factors has to do with the nature of the organization, the industry, and the incentives that industry transmits to its workers and its management. let me turn over to richard at this point and he will talk about the organization of the industry and its future that way. >> richard, thanks very much. so the industry in cuba tourism is dominated by state-owned enterprises. of course it is still a statist

economy. there are three main state-owned enterprises in the tourism sector. two of them are under mentor, the ministry of tourism. we also see that under the military, we have the third main state-owned enterprise. some of these three state-owned enterprises, only one of the three is the military. of these three, one accounts for about 40% of the rooms in the tourism sector. you may have heard, it's often said rhetorically that tourist money is all going to the cuban military. is that what this graph says?

or is actually only 40% going to the military owned state-owned enterprise, one of the three? plus as i will explain him and you had a boom in the purely private-sector tourism. people opening up their homes, remodeling rooms and creating places where travelers can stay in the bed-and-breakfast. that accounts for about another 25% of rooms, about 16,000 rooms. add that to the total tourism capacity and gaviota is only 25-30% of total international rooms, four or five star quality where you might consider staying if you were to visit cuba. the main point is, it is simply not true that all of these traveler revenues are going into the coffers of the far of the cuban armed forces, okay?

the other point here is that as you can see, 45% of the main hotels, the four and five stars, have some foreign partnership. of course not with u.s. companies except a little bit of marriott but mostly with spanish, canadian and other international hotel operators that are active now in cuba. so most of the hotels that you would stay at there is some international presence. however, we .24 main problems with the way the tourism sector has operated. one is a lot, there are endless beaches. that's with a growth is you don't see many cranes operating in havana. but if you travel to these beach resorts you'll see a lot of cranes. it seems odd, doesn't it? why i did not build them a capacity in havana? that are various reasons which are reported flames had to do with incentive structures. of the 44,000 rooms of four to

five star quality, only 6000 are in havana. if you want us to indigo to tell you will pay three to $400 a night. there are only three and four new hotel sites currently under construction in havana. there should be a dozen. for various reasons it's easy to build boxes on the beach than it is to do an interesting hotel in havana, and there are also questions of profitability. so that's one problem. over emphasis on beach resorts as opposed to urban sites, havana and elsewhere, and spreading the investment around the country, for example, to ecotourism, et cetera. second problem, the tourism sector needs to be better integrated into the entire economy. there are no numbers published actually on what percentage of food and beverage is provided to domestically versus imported. it'll have accounts that look at in those categories.

we roughly estimate that two-thirds of food and beverage is provided domestically, but certainly it could be a higher percent and that has to do with the sluggishness and agricultural sector. basically they need a profound reform in agriculture providing much better incentive farmers so that there would be better integration of the rural sector into the overall tourism sector. second issue -- thirtyish has to do with various organizational issues and labor. those of you study the cuban economy no international hotels did not directly hire labor. labor is hired to something called human resource entities that are government. not directly hired by the hotels. so the average cuban employee has two bosses, hotel management and also this employment agency. that's confusing. it's not productive. as part of the reason why there's underinvestment in

training and in workforce. and then the other problem we want to point out is why not more direct investment ducks international participation, not just in management contracts, but in joint ventures. only about 6000 rooms right now include joint ventures. the government has rejected other 110,000 rooms and want to add over the next 15 years, only about 30,000 of those rooms or under 30% will have foreign investment, would be joint ventures. in othe.in other words, 70% of w investment going in into the tourism sector is projected to be paid for with domestic capital. we will explain why we think that is a mistake. i mentioned the private sector. growing dramatically. bed-and-breakfast. anybody who has a house, 15-$25,000 investment, you put up a new realm, you go on airbnb

-- room. you get very high rates of occupancy. we estimate that roughly one-third of money flowing into the economy is going to the private sector in cuba. we cannot emphasize this more, and this goes to policy recommendations we will make in a bit but why cutting down u.s. visitors, trying to close off would only destroy growth of this private sector which would seem to be very counterproductive intransitive u.s. interests. the private sector still operates under various disincentives. they are outlined in the report. i'm not going to go into detail now but there are lot of reforms that could be made which would

provide yet more dynamism in the private sector in cuba. these are two places where it eventually there will be plaques. these are private homes renting out, bed and breakfasts. there will be plaques eventually which will say here slept new farmer and feinberg. richard, do you want to continue? >> i'm not sure it warranted that, although these were lovely place to. what is also interesting about this picture by the way, the one on your left, this is a private bed-and-breakfast in trinidad. and you can see that the site or advertising is english, and i thought it was kind of revealing

of the new clientele that their tailoring to internationally. at one point, just to scroll back for a moment, should be mentioned here is that airbnb has now set up a program with more than 4000 listings in cuba. this to me augurs a new impetus to growth, because a person can go online, look at the myriad of offerings in havana, get testimonials from people have stayed in those areas, and see what the price is, pay with a credit card in dollars and go show up in cuba with your piece of paper and happily stay in that place as well. airbnb solved the trust problem that links individual ottawa doors with the global marketplace. and they case of cuba as

elsewhere. because particularly in havana this is really important, it's worth emphasizing. but cuba has big plans for the industry, and so richard and i thought it would be worthwhile to analyze those plans and think through some of the implications of them. this basically, the government would like to expand the current level of participation in industry of tourism up to some 10 million from 4 million at the end of december of last year. that's a big increase. to do that they plan to build 108,000 new rooms onto a stock of about 54,000 rooms of international quality. three to four star hotels in the state-owned enterprises. and it advertises sites to prospective investors from all over the world including golf courses, marinas, and other

tourist potential developments. we met with when we were in havana earlier this week, we met with the head of the port authority. they are talking about doing any number of investments, including things like as strange as a theme park in cuba. there is really a lot of broad thinking looking to the future. that said, we want to look also at its feasibility. what are some of the economic applications? in the plans that you get, very frankly you don't find very much information about what are the economic investment requirements and the like. because we know that if these numbers were actually realized it would really give an impetus to growth, and it could be, the industry could become a real locomotive of the economy into the future. so for purposes of our calculations we wanted to project investment over 15 years at about the steady state of 7% a year to get at 108,000 additional rent that we talk

about, including in the normal refurbishing, depreciation, hookup charges and other things. those of you who are in the business school in the tourism industry will immediately recognize the complexity of this, but bear with me for just a moment. we put all together in a table which you can find in the report. i will just highlight a couple of numbers coming out of this rather complex table. the first is 108,000, the number of rooms they seek to add over the next 15 years or so. the second number is the cost arroom. we talked to industry sources both in the united states and in europe, as well as in cuba, to find it, give us an estimate of what it costs to build a hotel room. we came up with a number of $200,000 per room. by the way, we went back and talked to some industry sources earlier this week to verify that number and we were quite pleased to hear that number happened to be spot on in terms of this

informants view. the total acquisition when you add end of the things we put in your, depreciation, restoration of some of the rooms are out of order because many of the hotels in fact, have a large number of rooms which for whatever reason have not been able to be refurbished. you add i in the first refurbisd those rooms, had a normal depreciation and normal remodeling costs that should occur over every five years, and what you end up with is $33 billion of total investment will be required over the next 15 years to realize this objective. that's a big number. does anybody know what the gdp of cube is? gdp is probably $86 billion according to their statistics. if you were to apply depreciation to the currency or some sort of market-based formulation, it would be substantially less. the point is thi this is a very great big number relative to

this rather small economy. in fact, if you look at it as a share of gdp, today the numbers in 2016 would not look to be very big, 1.3%. that will more than triple over the next 15 years if this number holds correct, and if cuba doesn't go any faster than it has for the last four. if we assume it grossed over the next 15 years at 2.8%, basically these numbers would have to double. more importantly they would have to more than, or almost triple as a share of total investment. this is clearly unrealistic. it's not realistic to assume that cuba is going to be able to invest some 33% of its, sorry, 33% of its total investment in the tourist industry alone. why? it's cut education needs come in his highways, power and, of course, needs renovation of the major cities.

this led us to conclude that under the current circumstances, if i can get this to work agai, under the current circumstances the industry is unlikely to be a driver of rising incomes without major internal policy changes. the internal policy changes have to focus on two or three things. one is it has to focus on increasing domestic savings. that is, all savings but to begin with domestic savings. how can it do this? one way is to accelerate the development of the bmps, the restaurants and so forth. these already represent a barely tap potential for future growth. similarly it has to begin to also think about ways to tap into foreign savings more efficiently than it already has. this can include foreign direct investment which are really very important but also more and poorly might be the saving from the diaspora, saving some the cuban community in florida that

is already financed much of the bnp developer. we had some ideas by the way i wasted structure financial intermediation so that investment coming in from a transition period into housing and expanded development might be undertaken without alienating property in cuba, cuban ownership, something we think is particularly important during the transition period. but you make all this happen, to increase savings to finance investment. let me turn it back to richard to talk about policy in cuba and in the united states. >> so we conclude our study with some policy recommendations for the cuban government pickup of course they will make their own decisions, but in all humility and without arrogance

we put forward some suggestions for them. and then also course of the u.s. government. we hope that you find that these policy recommendations below organically from our analysis. more foreign investment is clearly needed. cuban government officials have said they want to .5 billion in capital inflows per year. they are not even close. recently president castro as well as senior official chastised the cuban government proxy for not approving more foreign investment but you might ask why has more foreign investment in fact, been improved? that has to do with an clear signals from the top, misaligned incentives for bureaucrats, and decision-making is still way too centralized. all that has to be solved and those are profound problems if they're going to be able to bring in enough for investment which they clearly need to do.

the booming bed-and-breakfast sector, one of the most exciting developments in this private sector tourism cluster that is emerging that eschewing the entrepreneur capacity of cubans when market forces are unleashed. cubans can still only own legally one house and one beach property. you can't really build a chain legally a bed and breakfasts. you can't really expand the entrepreneurial sector in the private enterprise sector. those overly strict rules should be modified. cubans should be allowed to own more than one home, particularly if they're going to be renting some of it out for income that comes from abroad and foreign exchange. cuba has to start almost from ground zero to build a modern tax system. many options, value-added tax, tax on personal incomes,

property taxes eventually as cuba moves towards a more market-based system. as a way to extract resources from the booming tourism sector, so that those in capital inflows can finance the rest of the economy, infrastructure, higher-quality, social services, growth in agriculture, et cetera. pricing system is dramatically out of line. the distortions are mind-boggling. they have so much work to do in that sector. prices that reflect scarcity, they have to reflect market conditions, supply and demand. there has to be incentives to export. these things obvious to anyone who is taken econ one oh one. the cubans need to learn all of that. within the tourism sector itself, essentially the current cuban model particularly in the

beaches is loan value tourism bring in essentially blue-collar tourists from québec, from russia, other areas of europe. it's good value but it's the optimal from the point of view of island tourism. they need to move from a model of tourism-based on value, on low-cost to higher value, higher-quality. and that means more income certainly per room but it also means they must provide higher-quality services. means among other things more investment in training. that affects all labor market. and it needs more employees per visitor, per client. that's what quality tours is all about the need to move in that direction. of course better internet service pick any of you have been there know how frustrating that is. that's important for the entire economy, of course, but it's

also very important for tourists whether they are in the business sector or even looking for a higher-quality tourism in the luxury tourism market. and then the issue of sustainability. that is a critical issue. cuba is such a beautiful island. they cannot comment many more tourists but they don't want to ruin the beauty that will attract the tourist in the first place. we have a number of recommendations in that regard. one thing transparency we do our very best in putting together some numbers to analyze the tourism sector. i have to tell you, it's been a heroic effort insofar as the amount of published data by the cuban government is very thin. these large state-owned enterprises i talked about earlier, where's their annual report with their financials? there are none. the whole idea is the state has

some responsibility to the population and they need to publish data so that people can analyze and make decisions on public policy. all that needs to be put in place so that analysts like ourselves and most importantly the cubans can have a better set of data for critical discussion. our main reason we published this paper is precisely to help the cubans themselves begin to think in terms of numbers and strategy so that they can drive a more rational, transparent, and productive and efficient tourism sector moving forward. we also suggest that perhaps when one talks about sustainability and beauty and aesthetics, that's about coastal areas, it's about coral reefs but it's also about a cityscape or la habana look like? what will look like in 20 years? are they bringing to bear the best possible quality of architects in city planners? nudges from cuba from around the

world. what high-quality, top-notch architect living anywhere in the world would not want to be able to advise what's going to be the new havana? why not draw in that talent and set up an advisory committee that would still have rules that would be set by the cuban government, of course, but that would provide top level, high quality state-of-the-art advice to the cubans. we also suggest that u.s. firms going into cuba ought to be encouraged to abide by high-quality corporate responsibility standards. so then finally, the united states where we set today. of course we fully realize that there's about to be an important event tomorrow in washington and not all of the internet was a neanew administration may be fuy in agreement with our point of view.

we were encouraged when the probable next secretary of state said and the dean asked about future cuba policy, of course we don't know where that might land. land. our different tendencies it seems within the incoming administration. but the probable future secretary of state said he thought first on cuba policy we should undertake a careful review. that seems to me to be always a good starting point in making public policy. so what we suggest first and foremost, and some of you may have seen the open letter published just two days ago by a number of business groups, including the cuba study group, also the council of american society. my name was on that as well. suggested it would be counterproductive to try to fully reverse course and once again revert to a policy of cutting off relations and just trying to squeeze the cuban economy. from among other reasons besides

the mentored aspect of that, the incipient private sector. the united states on a worldwide basis has always had as a policy try to support a private sector for its own reasons, its own right but also private sector will tend to promote a more open economy, and more from economy to use business interests as well as a more pluralistic and diverse policy internally. so for us to cut relations, try to completely eliminate the flows of travel and remain its -- remittances, et cetera, would kill this in cuba. it was his sole counter productive i could imagine why we want to do that. it would be so counter to use national interest. we can help them with connectivity as have been doing to some degree. we suggest that if you're going to allow u.s. visitors, doesn't not make sense to allow u.s. firms to help them provide the infrastructure necessary to

support those visitors? i've argued, some of you made seen a paper i publish with brookings back in 2011, suggesting that cuba, the only country in the world other than north korea that's not a member of the international financial institutions, imf, is cuba. don't want to but economists that the best advice on how to build an open market driven economy with the experience of so many other countries that also undergone a transition from a highly centralized economy to a more market driven globalized economy? of course that's what we would want. the cubans may or may not accept the device list of it here, have an opportunity to dialogue with all those washington d.c. based experts. the cuban government has to take the step that we should certainly not stand in the way. and then finally finally with

regard to sustainable development to a lot of ngos, the largest government organizations, some of which are already involved in the island and we should continue to promote dedication. the overall as a wrap up we suggest a policy of engagement at the governmental level, the level of high the sector in, at the level of the d asper and cubans on the island, the non-governmental sector, the non-government sector it is in the u.s. national interest to continue that connectivity and communications. so thank you all very much. [applause] >> thank you, richard feinberg, richard for newfarmer. if i could ask the other panelists to join me now on stage and as they come up let me briefly introduce them.

first maria espino, a professor at st. thomas university here in miami florida. she's been at st. thomas since 1999. she was actually on the faculty in the department of economics at florida international university. from 1985-1994. she was a fulbright scholar in colombia and visit several other appointments here in the united states and outside. she is an activist, on of our mental issues and minority issues, and something that i admire and respect that she does on a consistent basis. john thomas. john is assistant professor at the school of hospitality and tourism management. john is a lawyer, practiced, practicing attorney for 30 years, and then he saw the light and became an academic. and now he is full-time here at

fiu. he was a partner at several law offices during his long career practicing both transactions and litigation. he as earned a board certification in maritime law by the florida bar and assert as chair of the florida bar law committee. and then least but, least but not least is my colleagues over at the main campus, jorge duany, who i introduced at the beginning. he is director of the cuban research institute, a professor of anthropology at florida international university. he came to us a few years ago from the university of puerto rico and his work on migration i think is known by many of you. he has taught and out research position in a number of universities in the united states. so than thank you, panelists, fr joining us. as i mentioned at the beginning what i would like to do is to

have each of them, and we will start with maria espino, five to seven minutes, then lab sort of brief discussion before we turn it over. >> let me start by thinking fiu. this is a wonderful report. there's many things that i like in it. i pretty much agree with all the conclusions, but i'm going to start with some of the disagreement or some the things that i see problematic a little bit. one of the things i thought that the report should not have used is the comparison of tourist revenue, tourist receipts from country to country. so that's number one. and let me tell you why. because it's really,

methodologies are so different from country to country, and not only the methodology but the capability of collecting data from country to country. the comparisons are really meaningless, or meaningless, okay? this is especially true when you're talking about the cuban economy, vis-à-vis other caribbean economies. most countries use what we call the direct approach to estimate tourist receipts or tourist expenditures. that is, they take surveys and try to determine, you know, they serve a taurus international tourists either entering or leaving, mostly leaving the country. cuba does not do that, okay? to good use what we call the indirect approach. in other words, they try to figure out how much is spent in different entities and then

calculate what portion of those, what portion of that expenditure is attributed to international tourists or to taurus. -- tourists. when we were in a purely enclave economy, this is relatively easy. it's becoming very, very hard. so it's been very hard to determine if we have a consistent series, i don't think it is. and as a matter fact i have identified three different series at a time. even the ones that we have does not really include, includes things that are not usually included in tourist expenditures are not come if you follow international guidelines for it. so that's the first thing that i did. the other part is that you never know if they're giving you nominal, real, or what exchange rate they're using. i've tried to go, i've looked at

the data and gone down to the province level to see if i could get a better sense of how they put it together. it was mind-boggling so i gave up because there's no way. some provinces reported in pesos, others in dollars. so what exchange rate they use, it's really, i don't know. it's a couple of things in there. so anytime you use receipts for anything, including comparison to gdp, i'm not sure if it's overestimated or underestimated. there are things that go either way. what is true is it seems to have been flat for a couple of years. remain flat. i don't think we can argue that that reflects the poor quality of the cuban tourism industry, and i agree with you. the quality and the tourist industry is poor, but i'm not sure that's a measure of it.

we need to come up with a different measure of it, for the reason that i said. it also gets complicated for tourist argument because we have a shift. we've had a shift in the last five, ten years of who are the taurus calming to cuba wax cuba, like the caribbean, lost the european market while the rest of the caribbean that the caribbean were able to substitute the european market with americans. cuba had to substitute it with canadians. so i mean, and cubans living abroad. so that really lowers the per tourist calculation. that's a little technical side just going to leave it out, but that was one concern that he had in this study, okay?

and i can talk to you about it later. my other concern was the using of cuban gdp at all as a measure. cuba has its own methodology. nobody is, i mean, whether it's a better methodology or worse methodology not going to argue, but it's the only one who uses that methodology, therefore, it cannot be compared anyone else, okay? when you use the percentage of, indirect expenditures given the cuban gdp, you have a problem both in the enumerator and the denominator where there's no comparison. i would be wary about that. my other concern is, it's not a concern, my other concern is the idea of how, you know, what's the effect of the revenues that are coming in, the linkages

affect, okay? you estimate only 30% import component. and that to me seems very low. back in the '80s, in the mid-\90{l1}s{l0}\'90{l1}s{l0} there was some cubic publication and i cited in some work that estimate it to be around 70%. i've tried to keep track of what has happened since then and the only thing that has me puzzled is it's got a little bit better. i agree with that. it's gotten better because the private sector is now thriving but i cannot believe it is that much better that went from 70% to 30%. some. some a little bit concerned about that. i just want to make emphasis on the concept of the multiplier. when we start doing that only the direct but the induced effect.

and it here i will maybe agree with you, but talk a little bit what comes first, the chicken or the egg, okay? whenever we have, the constant multiplier really rests on the idea that the man creates his own supply. that if you demand, there's going to be supply forthcoming. as you have pointed out there's incredible restrictions supply in cuba. in all sources. so what we're seeing right now is instead of creating, because of the restrictions, more supply, what we're seeing is an increase in price. increase in food prices which has a negative social effect in the population, increase in housing prices. because there's no way producing more, orders constraints. so it's an idea, you know, for

there to be a successful and sustainable tourism growth and development in cuba, both after work at the same time. the increase in expenditures with newer taurus, more tourists coming in at the same time you have reform in the system that allows for the supply to actually be created. one more thing, i'm little bit concerned about everybody talking about the bed-and-breakfast. i am, too, sort of. but i cannot but remember that cuba has an incredible housing shortage. and we are now having some of the households, okay, instead of being open for multi-generation, you know, they kids come in and living with their parents, are having to get out because you

are, what, renting rooms for tourists. it basically exacerbates a little bit of this, which again could be solved if you were allowed new construction in the housing sector. >> thank you very much. john? >> richard and richard, i think you did a wonderful study paper. but is that all there is? i don't think so. in fact, i hope not since now that i am an academic when you do find more things to study, and so i've got four more, two of which you touched upon, and two of which he did not. so the first i'll talk about is the chinese influence on tourism in cuba. fiu chaplains go hospitality and tourism management has a school in china. so we're familiar with their influence on hospitality and tourism around the world, and we are very connected to chinese

influence. now, there are a few think are more diametrically opposed and the chinese culture and the cuban culture. and you got to wonder why do i think this is anything to do with cuba. it turns out that there is in a van at one time they had a proximally 150,000 chinese living in cuba. now it's down to a couple thousand, and it still exists and there is a great deal of cultural connection between the socialist regime in cuba and the socialist country of mainland china. so is china actually doing anything in cuba now? it turns out they are. present xi jinping visited cuba. that's an up or nothing for the president of china to have visited there a couple years ago. the premier and the vice premier

of china have visited in havana. three chinese navy ships paid a visit to have been picked this is not something they do all over the world. they have used chinese loan money to rebuild the seaport, which is being built by the chinese communications contracting company. they are building infrastructure in cuba, railroads, communications. they are now currently building -- find the correct number here -- 13 chinese hotel resorts are currently under construction by chinese companies. not that they're are going to run hotels, not that they're going to own a hotels, but they building hotels and that exceeds $460 million in chinese money investment. there are also multiple number of golf course being built by the chinese in cuba. there's a direct flight from

beijing to havana. it's a once a week flight now. if i did make it three times tha week. they plan to bring a lot of chinese tourists directly into cuba. there are going to be chinese visitors, tourists coming to cuba. ..

why is this important in the discussion here today. from the u.s. policy but the future of america's tourism and hostility and tourism development and investment will be. i'm just bringing up the possibility that if there is a vacuum that will be the chinese tourism influence that goes in to that vacuum. one other type of tourism that you did mention is the crew ships. crew ships are the easiest type to take into cuba and there are i looked on today's listing of cruises going to cuba, i see six different cruise lines scheduling crew ships going to cuba. they really but it does stop there.

19 ports, not big towards common making take large cruise ships. 19 ports available for stops in cuba. it's right for cruise ship operations. crew ships bring their own rooms. they bring their own food. guesstimate tourists will go assure in visit the cultural places and food and dancing another entity for having cuba. we do have the american restriction against americans traveling us tourists. so even with those restrictions, there's a great deal of possibility for development very quickly in cuba. the cruise lines are looking into this and it deserves more study. medical tourism. cuba has a great deal of medical technology and medical skill.

they in fact export medical devices to the united states. as well as the rest of the world. i'm not so sure what's going to happen with the united states housecleaning. it may be that going to cuba will be a valuable alternative for people looking for health care. just bring the good the fourth topic that you didn't mention, the agriculture sector for growth of cannabis. people are talking about marijuana tourism. i think there is a market. i think there is the possibility for a quick growth of that type of agriculture in cuba -- heard the theories and facts and evidence evidence of cannabis in cuba. their other latin american countries that have decriminalized use of marijuana

and in 30 states that have decriminalized marijuana for medical use. i don't know. but it's another aspect of tourism that i think needs more study. [applause] >> was that an applied for the cannabis or the presentation? >> hopefully the presentation. >> i want to begin with a minor personal comment on the report that refers to morality and i have to say in the little insulted because i study just like frank did and to attribute the relatively cuban resolutions is a little exaggerated. although of course everyone knows -- anyways.

first of all, i want to commend richard for this very serious well-documented report that they think makes a strong effort to analyze the current situation in some future prospects of cuba's main industry since the 1990s. you may recall in the report that this wasn't always this way and that's why they start with the morality story before the revolution because in cuba entered in the 1990s after the disappearance of the soviet union or fall of the berlin wall coming cuba turned to as the main source of currency which remains with remittances from the cuban-american community in the export of medical services to other countries. the authors have done a great job at a source of other information on the structure of opposition. i haven't seen anywhere else

with very detailed observations about the composition of the state owned in private sector in the tourism industry as well as the economic significance of these data. they have official sources information. it's very difficult to compare, but they also went further and interviewed the owners of a private breakfast, visited many of these hotel facilities throughout the island and contacted experts on these topics. they've done a really good job putting it all together in one place and i congratulate you for that. they also provide an up-to-date and balanced perspective on what a beta future growth of the industry and a very strange combination of private public facilities because of course many privately owned restaurants

in bed-and-breakfast days are in fact connected to the government industry, and so many people have thought these are dependent businesses, but in fact very much can get to the rest of the economy and they realized that quite clearly. their analysis suggests for cuba to fulfill its own projections, ill have to raise $33 billion to invest in infrastructure and serve a growing number of tourists in the next decade and a half. the question is where's the money going to come from. they have some suggestions but we at this point it's very difficult to imagine cuba would have access to that kind of credit to finance the expansion of its tourist industry. overall, the report is quite optimistic in its assessment of the present and future of the

industry, but only in terms of the state owned enterprises, but perhaps more importantly the nonstate sector. they have done a great job getting away from political consideration that the very balanced analysis as i said before different policy options. they do go into the possibilities of what the future may bring in terms of u.s. cuba relations, possible transitions in the cuban government and that's not really the report, but of course a year or so from now we do expect major changes in at least the personnel that a pastor has announced he will retire. they remain cautious for the u.s. embargo of cuba which limits the benefits of the potential growth of the tourism industry. i just want to end with three

major areas in which there might be some discussions. first of all precisely the elephant in the room is really the embargo. they do refer to are. i think at this point it is quite clear the embargo will be not listed in the next 40 years for the republican-controlled congress and donald trump in the white house although again i would be the second part of the discussion which is the fact that we do expect changes to cuba although we don't know exactly what that will mean once the administration takes office, it will clearly have an impact on travel to cuba and will mean a restriction, on the number of people based in the u.s. u.s. citizens who can travel legally to cuba although again we don't know exactly what kind of positive measures will. i would imagine the cuban-american sector of the

travel industry will continue to expand. it is difficult to imagine a champ administration will restrict the number of trips cuban-americans might make but that's also a possibility which has already been put in practice by george w. bush. the main problem i want to raise is what exactly will this scenario be for any kind of future potential growth of the tourist industry if the u.s. tourist market is no pain. under those conditions, in other words, if more u.s. citizens who are not cuban-american are not able to travel to cuba, where will they come from and the subtitle of course is that it will. so in that conflict, we should also talk about where the cuban government might do and of

course the numbers are quite difficult to get. the last figures i've seen suggest anywhere between 3000, 4000 cuban-americans have traveled to cuba in the last year. many more that were not of cuban origin. that is where the main sector of any future growth will live. i tried here in my own personal experience for an thin slices of difficult for people who want to visit cuba who are born amanda could use? why is it so expensive to do that and we also saw the controversy about whether cuban-americans would go or not of those crew ships. if cuba is serious about expanding the industry and given the fact that politically speaking, i doubt that they will be able to travel to cuba easily come tomorrow.

the main chunk of the market will be cuban-americans in cuban born people in other countries. reducing the cost of these transactions, not requiring any kind of visa those of us born in cuba. other countries do it and it seems to work quite well in order to attract the kind of tourism as it's been called. that is one area that needs to be discussed. the final point to report also mentioned in the estimates of cuban-american remixes to cuba are difficult to collaborate anywhere from $3 billion to $5 billion have been put out there. the question for me because how can you harness those billions of dollars being sent to cuba so they can be used productively in addition to solving issues which we now are important food and

housing another medicine from the process with a because it's difficult to get the data, a lot of the money is being invested in the bed and breakfast in drivers and so on. what kind of policy measure would be appropriate to reduce more of the money being invested into the tourist, so those are nine. >> thank you very much, jorge. [applause] so if i could ask the authors to briefly respond to anything that our panelists have said, why do we start with you, richard feinberg. >> on behalf of all of us let me thank all three panelists very much for your thoughtful comments. you clearly read the report and

to get the hard and very much appreciate your responses. i will let richard respond on some statistics, but we did what we could with the available stab to amplify on that. but you didn't dispute or basic conclusions so that is hardly. on john's comments -- on the point about the supply restrained, of course 100% in our report emphasized that combat is the link between any set or encoding to raise them sector in reform needed throughout the economy and that's a major thrust of the report that we fully agree to release the supply constraints many reforms are necessary throughout the agricultural sector in the housing sector. on john's comments about china, dear i have to say if i can

advertise again my book open for business, building to the cuban economy, i do have a section on china with many themes that you emphasize. i've met from time to time on the island and they see a tremendous expansion in chinese and other tourism already. i have to say my own view over all is this is not the time to try to pull back in antagonizing the hemisphere when there is obviously another emerging great power of love to fill the vacuum. surely the incoming and ministration understands this and will not make false steps in that regard. so i completely agree. in any case, so if the united

states restricts our tourism, that will slow the growth of the tourism sector. but will it stop it? there's a whole another world out there. you have more european tourists coming from many european countries because other parts of the mediterranean are not a secure and safe as they were and say you have a displacement there. cubans are making a big effort to draw more latin american tourists and wasting some of the upper margin tina, mexico, brazil. asia is the big growth market and that is already happening and will continue to happen as you pointed out. i couldn't agree more about that point. on the issue of medical tourism of course there's something like 40 of the 50,000 cuban medical personnel working abroad is a major income earner. many should have stayed cuba and provide medical assistance on an international basis.

that would require better internet connections and other facilities, but that is the long-term vision of the cuban medical service as you know and eventually that will happen. whether that is going to cannabis tourism would require a dramatic change in cuban policies. cuba is very hard line on use of illegal substances. you don't want to be caught in cuba in any way linked to drug trafficking or use. you will get a very rough prison sentence. i don't think we're likely to see that in the near term. certainly the idea of increasing medical tourism becomes not so heavily and this is a major part of our study. segments are described, but they can dramatically diversify their tourism offerings.

adventure tourism, but also certain medical tourism. finally, jorge, thank you so much for your thoughtful comment . just responding to two of them, richard m. sure has other thoughts. on the issue were part of the 33 billion would come from. our suggestion is direct investment as opposed to commercial credits. we know of many in national hospitality firms that are dying to set up joint ventures in cuba and for reasons that are hard to fully comprehend the cuban bureaucracy is dragging its feet. but yes, rather than taking on sunday, but rather than debt financing direct investment is what we are suggesting to cover part of the 33 billion. the final point i would make

here, yes, absolutely agreed to aspirin makes so much sense as an expert of course i've written so much about it. dare we suggest that some of the restrictions on the investment in the bed-and-breakfast sector or the real estate sector could be modified in ways which should encourage both national investment as well as the aspera investment. thank you for those comments. >> yes, let me echo richards thank you and appreciation for these comments. they are really terrific. just to pick up a couple in order, i couldn't agree with you more the data. we spent many sleepless nights trying to record the number of arrivals which you would've thought would have been fairly basic. richard and i had for a long

time a discussion about how many russians were coming in the cuban economy. he was wildly overestimating by the way. >> in any case the data are difficult to that site, as you yourself said, some of the basic conclusions hold even if you just 20% upper 20% down. i don't think the industry is doing well relative to other countries in the caribbean. they have been upgraded as rapidly as they could. their strategy is at least as richard said in discussing the boxes may be a little underdeveloped because it doesn't recognize at all the private sector and that could be part of this. these things we all agree on. a couple of points i would just pick up. one is the linkage effects. whether or not the industry is so important as it was 20 years ago today i don't know.

i'm somewhat skeptical of that. i think 70% would be extremely high. you've got the economy as a whole we don't know what imports to the total economy are. and the council messed up if you -- i could go on a long time about the inadequacies, but the conclusions are pretty robust. one thing important is the rule for the b&bs and housing shortage in how to think about that. in terms of the competition between the industry for food and domestic clientele for food. the name of the game is changing policy to expand supplies are rapidly including housing as well as an includes domestic food production. the trick for a policy

standpoint is to design a transitional period when you can both expand the supply of the tourist industry in the b&b industry on one hand and expand supply on the other and you certainly can't do it with 10% gdp investment which is what they are now. to do that they have to change policy and the policies we outlined in the report are the way to go to deal with the issue of supply. your point is well taken the transition has to be managed carefully to avoid addressing backlash. let me pick up a couple other points. john thomas is suggesting a number of others. i think we should study the marijuana industry. this will come back to frank with a proposal about this following up on studying beach tourism. this sounds to me to be the logical next step. california is moving big time into the industry.

i say that all in just, please. what would be the effective travel restrictions because that is an interesting question. you have to put this together in combination with speculation and that's only speculation on the future course of u.s. policy would be. if u.s. policy has to do with travel restrictions on the one hand, the combined with a very substantial macroeconomic stimulus which of course the president-elect has promised, you could see a very strong growth impulsiveness is that the markets are telling us will have been to the global economy. when that happens, rising incomes in europe and asia and other parts of the world, all of which will generate more money spent in the tourist industry that will make this audience quite happy but it will also make the cubans happy because there will be more europeans and

chinese tourists coming to the region. one of the things that has amazed me when you look at them or us over the last two or three years is that since trade can you have seen no appreciable rise or fall switch may be a result of early contract to hear beyoncé with depreciation of the european currencies preceding brexit a major downturn coming to cuban economy which is a good sign. what a led stimulus. it goes back to the issue of investment in cuba in tapping into the enormous potential of wealth in the miami community commits united states generally and also europe to invest in the bed-and-breakfast and solve the housing shortage. one thing to cuban? the course of any kind of the

mortgage market. if you were to suddenly liberalize completely the cuban economy, i would expect half of that would be bought up because prices are so low right now in havana. you find a lot of illicit foreign investmeninvestmen t coming at havana. if there were a way to set up a mortgage facility that would take through the miami market or european market and put it into mortgages for the expansion of domestic housing, which would allow those households to borrow an international race, much cheaper than what's available in cuba. they could expand the housing market come to maintain ownership and could be a very high-class debt obligation in the u.s. or foreign markets. i'm sure there's some financial financial engineers out there in the audience that could set up this kind of arrangement and be

extremely valuable. the final point i want to make is all of the discussions we focus on here on u.s. policy are really only a small part of what's going to affect industry over the long run this cuban policy itself. she's a really controls its future in this regard irrespective of what the united states does. sure the united states can improve difficulties for the development, particularly cruise lines and others, but frankly if cuba were to swamp any effects of a administration. >> thank you, gentlemen. [applause] >> so we're not at the stage of question and answers. we've got 31 minutes. we have microphones on the side of both sides, so, to make sure

that our friends and c-span can here. i have just two requests in terms of your question. what if you could identify yourself whichever way you want. and to promote what to make sure everyone has a chance to ask questions and make comments. please make your comment or question as brief as possible. let me in advance apologize for interrupting you if you go a bit too long. sir, you at the microphone. >> estimate thank you very much. nicholas sanchez, professor of economics at the holy cross and i will have three very brief questions. i was surprised, really very surprised that in your presentation, your graphic presentations you do not show the information for puerto rico. and of course, it appears to me to a great extent puerto rico is

the big elephant in the room. the reason for that is i would like to ask my second question, which is to you think it is in the national interest for the united states to support puerto rican tourists on rather than tourism to cuba? you have heard trump talking about america first and a sink even trump knows that puerto rico is part of the united states. so, the idea that this would be of the national interest of the united states when puerto rico is having such difficulties is really difficult for me to grasp. my third and final question has to do with a comment on taxation in cuba.

when i visited cuba a few years ago, i talked to everybody there and i said what are your taxes like? everybody said there are no taxes here in cuba. so they apparently have these huge expenditures and they are not taxes. my own calculations about taxation in cuba, it is from 70% to 80% of personal income. so, are you trying to talk about taxing the cuban people even more? thank you. >> thank you. richard, why don't we start with you. >> these are great questions. why not puerto rico. we decide to pick from a number of other countries. >> you can watch the rest of the program on our website, c-span.org. we are going to leave at this point for today's summit session where lawmakers will continue debate on the nomination of anthony acosta to be labor

secretary to advance the nomination set or the 11 dirty eastern this morning. if confirmed, he would round out president trump's cabinet. all senators are encouraged to attend the closed door briefing on north korea that is happening today at the white house with the intelligence officials. the senate may resize during that time in majority leader mitch mcconnell can provide an update when he speaks this morning. now to live coverage of the senate. n prayer. the chaplain: let us pray. eternal lord, the fountain of wisdom, thank you for your mighty love. give our lawmakers the will and strength they need to meet the challenges of these times. may they bend their ear