nation as a member of c-span classroom. it's free and easy to register at c-span.org/classroom. you can request our free classroom-sized american presidents timeline poster, a graphic display of the biographies of all 45 presidents. find out all about it at c-span.org/classroom. now on c-span3, a conversation on the obama administration's opening of diplomatic relations with cuba and what to expect from the trump administration when it comes to that country. from florida international university in miami, this is just under two hours. >> good afternoon, everyone. thank you all for being here. special thanks to our audience in c-span world for joining us. this event is being recorded by the c-span, so thank you for the c-span team for being here and to the audience for joining us.

my name is frank mora, the director of the kimberly green latin american 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 in west dade. the center that i direct is one of the institutes and programs or centers at the steven j. green school of public and international affairs, again at florida international university. we're just absolutely delighted to be hosting or co-hosting this event. i want to thank our dean here, the dean of the chaplin school of hospitality and tourism management, mike hampton. thank you, dean, for supporting

this. and this is a great event to have here on your campus, right? also i want to thank another co-host, the cuban research institute. the director is here with us today and will be joining the panel in a second. a little bit about why we're here and how we got here. last year, the brookings institution, and specifically the foreign policy team and group, and ted picone in the latin american initiative team, reached out to me to see if we were interested in co-sponsoring 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 17th, 2014. the many different changes that have occurred in the relationship between the united

states and cuba since then. and so ted reached out to see if the center was interested in helping and funding this study. and of course we reached out and agreed immediately. and so we're very delighted to be very much a part of this. the study was first launched in washington, dc. i think it was december 2nd 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'll hear from here very soon. so let me tell you how we're going to proceed. so here i'll introduce the two co-authors here in a second. they'll present their study. there are coaches the study back in the lobby of the auditorium. please make sure to take one. they'll do their presentation for about 20, 25 minutes. and then i'll ask a panel of

experts here from florida international university and st. thomas university to sort of give their remarks, reactions to the study. we will have a kind of conversation up here onstage before we turn it over to you for your questions and your comments. so -- 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 gentleman right there that you see. dr. feinberg is a nonresident senior fellow in the latin american institution at brookings and professor of international 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's office of inter-american affairs back during, again, the clinton administration. he is the author of numerous books and works, too many to mention here. but there is one that i 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 on amazon as well as the brookings institution website, bookstore website. it's getting the some really wonderful reviews. and i hope you get a chance to read it. also richard has, and this is sort of a plug for a new magazine, a new magazine, "cuba trade." richard has a piece based on this exact study, where he lays

out the basic guidelines and elements of the study. and so cuban trade, that's the name of the magazine for trade investment in cuba. the other richard, the author of this important study, works with the international growth center as the country director for rawanda, uganda, and south sudan. the iuc is a joint venture of oxford university and the london school of economics. it provides -- the institute provides independent research-based analysis at the request of governments of selected countries in asia and africa. he is a senior fellow, non-resident, at the world trade institute in berne, switzerland, and the north-south institute in

canada. he consults with the world bank, the organization of economic cooperation and development, and the international trade center. we're very, very fortunate to have these two scholars with us today to present their work that spanned a number of months. it's pretty detailed, and it makes an important contribution in terms of the challenges that cuba faces in 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 ] >> thank you very much, frank, for the wonderful introduction. also thank you to dean hampton for the welcome to the chaplin school. it really is a pleasure for 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. we came to tourism sort of through the lens of growth and distribution and those kinds of issues. if we had only known what you guys have figured out, we would have started much earlier in our confess to understand the tourism industry. richard and i are going to do a bit of a tag team here. and so bear with us as we pass 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 in the united states, because of the recent election, and now we see the prospect of the possible reversals of some of the obama issues. and there has been the assertion

that in fact tourism really doesn't benefit the economy, it benefits mainly the military. and so therefore we ought to shut down what has been happening already. the question we were also interested in is how can the industry be structured so it drives growth. we didn't want it just to be an enclave industry which benefitted only a few people, but actually had growth complications that would allow cubans' incomes to rise much more actively than the anemic performance it had in the past. the short answer to both those questions is the industry in fact is benefiting a wide swath of cuban society. and indeed it has the potential to drive a sustainable development into the future. that said, the industry in cuba 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

support industries and lynch an industries, to help the industry grow. so we'll elaborate a bit on that in the course of 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 notify years have unleashed a torrent of private sector activities, bed and breakfasts, restaurants, taxicabs and so forth. that private sector cluster now counts for more than 30% of the industry's earnings. the government does in fact have ambitious plans for the industry. it would like to accommodate some 10 million visitors by 2030. that's a big increase. one of the things we wanted to do was look at the realism of that estimate. could they do this? our estimate suggests that it's possible, but it's unlikely unless cuba changes a number of its policies. and we'll elaborate on what some

of those policy changes might be to promote growth. of course finally the industry has important implications, if i can get the last point to boot up here, for the united states. and in its own national interests, the united states should move forward with the normalization process that mr. obama has launched already. so let me elaborate on these points together with richard. first of all, cuba of course has abundant tourist attractions that could be a driver of growth and prosperity. i don't need to tell this audience that. this was the tough assignment that fell to us when we went there. 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. that's not the only important point. it has a rich culture inland that also merits consideration and development. so the opportunity is for the industry to grow are really vast

and enormous. in fact already of course cuba is booming. cuba tourism is booming. this graph shows the number of arrivals over the period 1995 to 2015. and you can see there are a number of arrivals that have increased with a steady stream, save for a blip in the mid-2000s. and of course this graph only goes up to 2015. they asked me to do a projection of 2017 based on recent numbers. 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 per tourist varies quite widely from year to year and responds to domestic policies, among other things. but here too, in 2014-'15, you see an important upswing in earnings. in 2015, it's likely to be even

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

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 graph simply shows the number of visitors as a share of the population. indeed, relative to the dominican republic, here almost at .5% of the total population, it's about twice what cuba is today. there is considerable upside potentially if you just use 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, however, as much as it could otherwise occur, as much as it otherwise could. in fact there are signs it's 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 in cuba. it's about 2.5% of gdp. if you use the world tourism council's numbers, that number expands to 10% total contribution to the economy. that is substantial to what we see in the dominican republic or costa rica, countries we think are pretty about comparisons to cuba. there is for that cuba could be doing. this graph shows two things. the bottom line -- there is an index. in 1995, sort of putting all the economies in exact lit same level and saying let's look at revenue per visitor over the long sweep of things. this is kind of an indication of the efficiency and the infectiveness of the industry in growth. and as you can see, they're

doing rather poorly relative to the other compare tore countries, costa rica, dominican republic and other developing countries. the other point about this is cuba doing relatively poorly compared to the restst caribbean, the caribbean itself is doing relatively poorly to the compared troest of the world. the caribbean is losing market share to other destinations. why is this? well over the last 20 years, major new destinations have opened up in china, in southeast asia, in africa. and as a result, the tourist dollars are getting spread over a much wider array of countries. which means that industry is really has to be competitive in order to survive and to actually prosper. cuba has more to do in this regard if they want to upgrade its industries. one of the reasons, of course, is that if you talk to some

tourists, one thing they typically complain about are poor maintenance, the service quality or the fact that the internet is virtually nonexist enlt or very expensive and of course waurd. these are things cuba is working on. we have some suggestions about this and we think part of the reason for these particular factors has to do with the nature of the organization of the industry and the incentives that are the industry trans mitts its workers and management. let me turn it over to richard. he'll talk about the organization of the industry and its future that way. >> thank you very much. so the industry in cuba of tourism is dominate bid state owned enterprises.

there are three main enterprises in the tourism sector, two of them are under mentor, the ministry of tourism. but we also see that under the military, you'll have gabiota, the third named state oenld enterprise. only one of the three is the military. as gabiota of these three, they account 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. it s. that what this graft says?

or is actually only 40% going to gabiota which is the military owned state owned enterprise one of the three? plus, as i'll explain in a minute, we've had a boom in the purely private sector tourism. people opening up their homes, remodelling rooms and creating houses in which travelers can stay at a bed & breakfast. that accounts for another 25% of room, 16,000 rooms. ed that to the total tourism capacity and gabiota is 20 5% t 30% of international rooms, four and five star quality that you might consider staying if you twor visit cuba. the main point here is it is simply not true that all of these traveler revenues are going into the could havieiffeu cuban armed forces. the other point here is that as

can you see 45% of the named hotels have some foreign partnership. not with u.s. companies but a little bit of starwood recently and marriott but mostly spanish, canadian and other iment national hotel operators that are active now in cuba. so most of the hotels that you would stay at, there is some international presence. there are endless beaches. that's where the growth is. you don't see many cranes operating in havana. but if you travel to the beach resorts, you'll see a lot of cranes. seems odd, doesn't it? why aren't they building more capacity in havana? there are various reasons having to do with insentive structures. bust the 44,000 rooms of four to five star quality, only 6,000

are in havana. that's why if you want to stay in a good hotel, you're going to pay 300 to $400 a night. and there are only three important new hotel sites currently under construction in havana. for various reasons, it's easier to build boxes on the beach than to do an interesting hotel in havana and there are also questions of profitability. that's one problem. overemphasis on beach resorts as opposed to urban side savannah and elsewhere and spreading the investment around the country to eco tourism, et cetera. second problem, the cuban tourism sector needs to be better intergrated into the entire economy. there are no numbers published on what percentage of food and beverage is provide domestically versus imported. they don't have the counts that look at it in those categories.

there are two-thirds of food and beverage is provided domestically. but certainly it could be a higher per sent. and that has to do with the sluggishness and the agriculture sector. they need a profound reform in agriculture providing much better insentive to farmers so there is better integration of the compo, rural sector into the overall tourism sector. those of you study the cuban economy know the international hotels do not directly hire labor. labor is hired through something called human resource entities that are government. not directly higher by the hotels. the average cuban employee has two bosses, hotel management but also this employment agency. that is confusing. it's not productive. it is part of the reason why there underinvestment in training and in workforce.

only 6,000 room right now include joint ventures. the government projected of the 110,000 rooms they want to add over the next 15 years, only 30 thou thouf those rooms are under 30% will have foreign investment will be joint ventures. in other words, 70% of the new investment going into the tourism sector is projected to be paid for with the domestic capital. i mentioned the private sector growing dramatically. anybody that has a house, $15,000 to $25,000 investment, you put up a new room, get on

air b & b, very high rates of occupancy. we estimate that roughly one-third of money flowing into the economy is going to the private sector. why cutting down u.s. visitors and trying to close off the globalization on the island would only destroy the growth of this private sector which would seem to be very counter productive in terms of u.s. national interests. the private sector still operates under various disincentives. they're outlined in the report. i'm not going go into them in detail now. but just to point out, there are are a lot of reforms that could be made which would provide yet

more tourism in cube yachlt these are two places where there will be plaques. these are private homes renting out. there will be plaque that's say here slept new farmer and fine bsburg. >> i'm not sure it warranted that. they were lovely places wlachlt is interesting about this picture by the way, the one on your left is this is a private bed and breakfast in trinidad. you can see that the sign their advertising in is english. and i thought it was kind of revealing of the new client he will that they're catering to

internationally. one point to scroll back for a moment that should be mentioned here is air b & b has now set up a program with more than 4,000 listings in cuba. and this to me augers a new impetus to growth. a person can go online, look at the myriad of offerings in havana, get testimonials from people that 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. air b & b solved the trust problem that links individual entrepreneurs in the global marketplace in the case of cuba as with elsewhere. and i think in -- because particularly in havana, there is

really important. it is worth emphasizing. i think it would be worth while to analyze the plans and think through the implications of them. this basically the government would like to expand the current level of participation in the industry of tourism for up to some 10 million from, say, four 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 on to a stock of about 54,000 rooms of international quality. this is three to four star hotels in the state owned enterprises. and it advertises sites to protective investors from all over the world including golf courses, marinas and other tourists potential

developmentes. we met in havana earlier this week, we met with the head of the port authority. and they're talking about any number of investmentes including things like as strange as a theme park in cuba. so there is really a lot of broad thinking looking to the future. that said, we want to look also at the fees built. and what are the economic implications? in the plans that you get, very frequently you don't find very much information about what the economic investment requirements and the like. because we know that if this -- these numbers were actually realized, it would really give an impetus to growth. koibt the industry could become a real motor and locomotive of the economy into the futures. so for purposes of our calculations, we want to project the investment over 15 years at about a steady state of 7% a year to get that 108,000 additional rooms that we talked

about. including in the refurbishing and hookups. those 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 it altogether in a table which can you find in the report. and we'll highlight a couple numbers. first is 108,000. that is the number of rooms they seek to add over the next 15 years or so. the second number is the cost per room. we talked to industry sources both in the united states and in europe as well as in cuba to find out what -- give us an estimate of what it costs to build a hotel room. and we came up with a number of $200,000 per room. we, by the way, went back and talked to some industry sources earlier this week just to verify that number. we were quite pleased to hear that number happen to be spot on in terms of this view.

the total calculations, depreciation, restoration, a large number of rooms have not been able to have been refurbish. you add numbers to refurbish the rooms. you nad depreciation and normal remodelling cost that's should occur over every five years or so 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. the gdp of yub is $86 billion according to their statistics. if you were to apply appreciation to the currency on some market based formulation, it would be substantially less. the point is this is a very big number relative to this rather

small economy. and in fact, if you look at it as a share of gdp, well to date numbers in 2016 wouldn't 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 grow any faster than it has for the last four. 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 total or -- sorry, 33%st total investment in the tourism industry alone. why is that? because it has health needs. it has education needs. it needs highways and power and, of course, needs renovation of the major cities. so this led us to conclude under

the current circumstances, if i can get this to work again -- the driver of rising incomes without major internal policy changes. the internal policy changes have to folk ounce two or three things. one is it has to focus on increasing domestic savings that is all savings but particularly to begin with, domestic savings. how can it do there? one sway to accelerate the develop mentst b & bs. these represent a barely tapped potential for future growth. similarly, they have to think about ways to tap into foreign savings more efficiently than it already has. more importantly, might be the savings from the diaspra, savings from the cuban community in florida that is already

financed much of the b & b development. we have ideas on ways to structure financial inl mediation so investment coming in and n. tthe transition perioe development might be undertaken without alienating property in cuba from cuban ownership. something we think is particularly important in the transition period. let's talk about the policy between cuba and the united states. >> so we conclude the study with policy recommendations for the cuban government. of course, they will make their own decisions. but in all humility and without

arrogance, we put forward suggestions for them and also, of course, for the u.s. government. we hope that you find these policy recommendations flow organically from our aanalysis. they want $2.5 billion in capital inflows per year. they're not even close. recently president castro as well as senior officials chastised the cuban government bureaucracy for not approving more foreign investment. you might ask, why hasn't more foreign investment been improved? and that has to do with unclear signals at the top, misalined incentives for bureaucrats and decision making is still way too centralized. all that has to be solved. those are profound problems if they're going to be able to bring in enough foreign investment which they clearly need to do. the booming bed and breakfast

sector. one of the most exciting develop ment in this private sector tourism cluster that is emerging that is showing the entrepreneurial capacity of cubans whether market forces are unleashed. cubans can still only own legally one house and one beach property. you can't really build a chain legally of bed and breakfast. you can't 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 rent smfg it out for income that comes from abroad that earns foreign exchange. cuba has to start from ground zero to build a modern tax system. many options there. value added tax. tax on personal incomes, property taxes eventually as

cuban moves to a more market based system. as a way to extract resources from the booming tourism sector so that those in capital in flows can finance the rest of the economy, infrastructure, higher quality social services, growth and 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. they have to reflect market conditions. they have to reflect supply and demand. they have to have incentives to export. these things seem obvious to anyone who has taken economy 101. the cubans need to learn all of that. within the tourism sector itself, essentially the current cuban model in the beaches is low value tourism bringing in

essentially blue collar tourists from quebec, from russia, other areas of europe. 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. it means they must provide higher quality services. that means among other things more investment in training. they have to fix the whole labor market. and that means more employees per visitor, per client. that's where quality tourism is all about. they need to move in that direction. of course better internet service. any of you that have been there know how frustrating that is. and that's important for the entire economy, of course. but it's also very important for

tourists whether they're in the business sector or even looking for a higher quality tourism in the luxury tourism market. sustainability is critical. they can accommodate many more tourists. they don't want to ruin the beauty that will tract the tourists. we have a number of recommendations in that regard. transparency, we've done our very best in putting together some numbers to analyze the tourism sector. i have to tell you, it's been a heroic effort in so far as the amount of published data by the cuban government is very thin. these large state oenld enterprises i talked about earlier, where is the annual report? with the financials? there are none. the whole idea that the state has some responsibility to the population and that needs to

publish data so that then people with can analyze and make decisions on public policy, all that needs to be put in place so anlives like ourselves and the cubans can have a better set of data for critical discussion. the reason we published this paper is to help the cubans begin to think in terms of numbers and strategy so they can drive a more rational, transparent and productive tourism sector moving forward. we also suggest that perhaps when one talks about sustainability and beauty and aesthetics, that's about coral reefs and coastal areas. it's about the compo and cityscape. what will havana look like in 20 years? are they bringing to bear the best possible quality of architecture and city planners? not just from cuba but from around the world?

what high quality topnotch architect living anywhere in the world wouldn't want to be able to advise what is 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 suggest that u.s. firms going into cuba ought to be encouraged to abide by high quality corporate responsibility standards. finally now the united states where we sit today. of course, we fully realize there is about to be an important event tomorrow in washington. not all of the members of the new administration may be fully in agreement with our point of view here. nevertheless, this is our best advice. we think it is in the u.s. national interest.

we were encouraged when the probable next secretary of state said in being asked about future cuba policy, of course, we don't know where that might lend. there are different tendencies within the incoming administration. but the probable future secretary of state said he thought first on cuba policy we should undertake a careful review and that seems to me to be always a good starting point in making public policy. so what we suggest first and foremost here that -- 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 and the council of meshgz, america society. i'm proud to say my name was on that as well. which suggested it would be counterproductive to fully reverse course and once again revert to a policy of cutting off relations and just trying to squeeze the cuban economy. for among other reasons, aside from the humanitarian aspects of

that, this private sector, the united states in a worldwide basis has always had as a policy tried to support a private sector. for its own reasons, it's own right but also private sector will tend to promote a more open economy, more friendly economy to u.s. 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 remittances, et cetera, would kill this growing private sector in cuba. it would be so counter productive. i can't imagine why that -- we would want to do. that it would be so obviously counter to the u.s. national interests. we can help them with connectivity as we've been doing to some degree. we suggest that if you're going to allow u.s. visitors, does it not make sense to allow u.s. firms to help provide the infrastructure necessary to support those visitors?

i've argued some of you may have seen a paper i published with brookings back in 2011 suggesting that cube yashgs the only country in the world other than north korea is cuba. don't we want cuban economists to have the best advice on how to build an open market driven economy? with so many companies that have gone from a centralized government to a market driven economy. of course that's what we want. the cubans, once thenlter, they may or may not accept that advice. at least they would hear it and have an opportunity to dial og with all those washington, d.c.-based experts. the cuban government has to take the step. we should certainly not stand in the way. then finally, finally, with regard to sustainability --

sustainable develop ment, there are a lot of ngos some of which already are involved on the island and we should continue to promote that engagement. so overall, as a wrap-up, we suggest that policy of engagement at the governmental level, at the level of private sector and business and the diaspra and cubans on the island, the nonprofit sector it is in the u.s. national interest to continue that connectivity and communications. so thank you all very much. >> thank you, richard. if i could as the other panelists to join me now on stage. and as they come up, let me briefly introduce them. first, dr. maria espino. dr. espino is professor of

economics at the university here in miami. 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 to 1994. she's been a full bright scholar in colombia and has had several other appointments here in the united states and outside. she is a activist on environmental issues and minority issues and something that i admire and respect she does. john thomas, john is assistant professor here at the chaplin school of hospitality and tourism manage ment. john is a lawyer, practiced -- practicing attorney for 30 years and then 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 has earned a board association in maritime law by the florida board and served on the committee. and then least but -- last but certainly not least is my colleague over at main campus, dr. jorge duwani which i introduced at the beginning. he's the director of the cuban research institute and 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 is known by many of you. he has taught and held research positions in a number of universities in the united states. so thank you for joining us, panelists. at the beginning what i like to do is have each of them and

we'll start with dr. espino, five to seven minutes. and then we'll have a brief discussion before we turn it over to you. doctor? >> thank you. >> let me start by thanking fiu here. this is a wonderful report. there's many things and i would -- that i like in it. i pretty much agree with all of the conclusions. but i am going to start with some of the disagreements or some of the things that i see problematic a little bit. and one of the things i thought that the report should not have used is the comparison of tour iflts revenues, tourists receipts from country to country. that's number one. let me tell you why. it's really, you know, methodology are so different

from country to country. and not only the methodology but the capability of collecting data from country to country. that they really, you negotiating the comparison are really meaningless. this especially true whether you're talking with the cuban economy vis-a-vis these other caribbean economies. most countries use what we call the direct approach to estimate tourist receipts or tourist xpen expenditures. they take surveys and try to determine. you know, they survey tourists, international tourists entering or leaving the country. cuba does not do that. cuba use what we call the indirect approach. in other words, they try to figure out how much is being spent in different entities and then calculate what portion of those entities -- what portion

of that expenditure is attributed to international tourists or to tourists. now whether we were in a purely enclave economy in cuba, this was 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. as a matter of fact, i've identified three differences here at the time. and even the ones that we have does not really include -- includes things that are not usually included in tourist expenditure or if you follow international guidelines for it. that's the first thing that i think. the other part you is never know if they're giving you nominal, real, or what exchange rate they're using. i tried to go -- i've tried to -- i've looked at the data

and gone down to the province level to see if i can get a better sense of how they put it together. and i was mind boggled. i gave up. there is no way some provinces report it in pesos, others in cutes and others in dollars. i don't know what exchange rate they use. so a couple things there. so any time 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 that it seems to have been flat for a couple years. i don't think we can argue that reflects the poor quality of the cuban tourism industry. i agree with you. the quality of the tourist industry is poor. i'm not sure that's a measure of it. we meant -- we need to come up

with a different measure of it. for the reason as i said. it also gets complicated for tourists argument because we have a shift -- we've had a shift in the last five, ten years of who are the tourists coming to cuba? cuba, like the caribbean, lost the european market while rest of the caribbean were able to substitute the european market with americans, cuba will to substitute with, you know, with canadians. and cubans living abroad. so that really lowers the per tourist calculation. that's a little technical. i'll leave it out. that is one concern i had in this study. 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 i'm not going to argue. but it's the only one that uses that methodology, therefore, kit not be compared to anybody else. so when you use the percentage of the direct expenditures given the cuban gdp, you have a problem in the num rater and the denominator where there is no comparison. so i would be weary about that. my other concern is -- my other -- it's not a concern. my other concern is the idea of, you know, how the use of -- what is the fact of the revenues

coming in and the linkages effect? you estimate only a 30% import component. that to me seems very low. back in the mid '90s, there was some cuban publication, i cited some words, that estimated it to be around 70%. and i tried to keep track of what has happened since then. and the only thing that has me concerned is it got better. it got better. the private sector is now trying. i can not believe it is that much better. it went from 70% to 30%. okay? i'm a little bit concerned about that. i just want to make emphasis on the concept of the multiplier here. that is when we start doing not only the direct but the induce

effect. in here i agree with you. talk about what comes first, the chicken or the egg? the concept of the multiplier really rests on the idea that the man creates his own comply. that if you demand, there's going to be supply forthcoming. as you have pointed out, there is incredible restrictions on supply in cuba in all sources. because of the restriction more supply but we're seeing increasing prices. increase in food prices which has a negative social effect in the population. increase in the housing prices. because there is no way of producing more or there's constraints into the production. so it's an idea of, you know,

for there to be a successful and sustainable tourist growth and development in cuba, both have to work at the same time. the increase in expenditures with the new tourists, more tourives coming in at the same time you have reform in the system that allows for the supply to actually, you know, be creative. one more thing, i'm a little bit concerned about everybody's gung-ho about the bed and breakfast. i am too. sort of. but i cannot but remember that cuba has an incredible housing shortage. and that we're now having, you know, some of the households instead of being open for multigeneration, you know, the kids coming in and living with parents or being having to get out because you are, what,

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

chinese influence. now this are a few call tours i think are more opposed than the chinese culture and the cuban culture. and you got to wonder why do i think this has anything to do with cuba? well, it turns out that there is, you know, that in havana and they had 150,000 chinese living in cuba. now it's down to a couple thousand. and they don't have many chinos but 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. they have president xi visited cuba. that's an important thing for the president of china to have visited there a couple years ago. the premier and vice premier of

china visited havana. three chinese navy ships paid a visit to havana. 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 going to run the hotels. not that they're going to own the hotels. but they're building the hotels. and that exceeds $460 million in chinese money investment. they're also multiple numbers of golf course being built by the chinese in cuba. there is a direct flight from beijing to havana.

it's a once a week flight now. they plan to make it three times a week. they plan to bring a lot of chinese touristed rs directly into cuba. they're going to be chinese visitors, tourists coming to cuba. in the university of havana school of tourism, there are chinese students studying there as they are here in miami fiu's school of hospitality and tourism management. cuba's second largest trading partner after venezuela, which is fading fast, the second largest trading partner is china. the chinese military government tourism hospitality company has produced promotional video with chinese subtitles showing them staying at four and five star

hotels eating chinese food. they clearly are interested in the chinese market. why is this important in the discussion here today? because it's uncertain from the u.s. policy what the future of american tourism and hospitality and tourism development will be in cube yachlt i'm bringing up the possibility that if there is a vacuum, it may well be the chinese tourism influence that moves into that vacuum in cuba. one other type of tourism that you did mention is the cruise ships. cruise ships are the easiest type of tourism to take into cuba. and there are -- i looked ton day's listings of cruises going cube yashgs i see six different cruise lines scheduling cruise ships going to cuba. they really would like to stop there. i think 19 ports, not big ports, not ports with big piers that

can take large cruise ships, but there are 19 ports available for stops in cuba. cruiseships bring their own rooms. they bring their own food. yes the tourists will go assure and visit and go to the cultural places in food and dancing and other activities they have in cuba. we do have the american restriction against americans traveling as tourists. so even with those restrictions, there's a great deal of possibility for cruise tourism develop ment very quickly in cuba. medicati medical tourism. cuba has a good deal of medical skill. they have been exporting their medical tourism. they, in fact, export medical devices to the united states.

i'm not so sure what is going to happen with the united states health plan. it may be that going to cuba is a alternative for people looking for health care. just bring that up. the fourth topic that you didn't mention, the agriculture sector for growth of canibus. people are not talking about marijuana tourism. i think there is a market. i think there is a possibility for a quick growth of that type of agriculture in cuba. anecdotally, i heard that there is, in fact, some evidence of canibus in cuba. there are other latin american countries that have decriminalized use of marijuana. in this country we have 30

states that have to an extent or another decriminalized marijuana. at least for medical use. maybe this connects with the medical tourism to cuba. i don't know. it's another aspect of tourism that i think needs more study. thank you. >> was that an applause for the canibus or the presentation? hopeful lit presentation. i just want to begin with a minor personal comment on part of the report which refers to morality. and i have to say, i'm a little insulted because i studied like frank did and to attribute the more aflt the cuban revolution to jesuit is a little exaggerated. although, everyone of course that castro went to that school. but anyway -- >> put your mike closer. >> okay. so so first of all, i want to

commend richard and richard for this very serious, sober well documented report that i think makes a very strong effort to analyze the current situation and some of the future prospect of cuba's main industry since the 1990s. you may recall that is also in the report that this wasn't always this way. i guess that's why they started with the morality story before the revolution. when cuba entered the special peered in the 1990s after the disappearance of the soviet union and the fall of the berlin wall, cuba really turned to tourism as its main source of foreign currency which remains along this day with the remittances and until recently the export of medical services to other countries. so i think that the authors have done a great job of describing of analyzing a host of different sources of information on the structure and opposition of the tourist industry in cuba. i haven't seen anywhere else the kind of very detailed observations about the composition of the state owned

and private sector in the tourism industry as well as the economic significances and xbroections xbroecti projections of the data. they have scanned official sources of information. i agree with professor that it's very difficult smimdz to compare. but that's what is available. but they also went further and interviewed the owners of private bed and breakfast, family restaurants, visit manufactured the hotel facilities throughout the island and contacted experts on the topics. i think that they've done a really good job by putting it all together in one place. and i congratulate you for that. they also, i think, provide an up to date and balanced perspective on what may be the future growth of the industry and particularly the combination very strange combination to some extent of private-public facilities on the island. of course, many of the privately owned restaurants and bed and

breakfasts are connected to the government industry and so to mr. people think they're independent. cuba will have to raise $33 billion to invest in tourism infrastructure and improve the facilities and tract a growing number of tourists in the next decade and a half. the question is where is that money going to come from? they have some suggestions in the report. but really at this point it's very difficult to imagine the cuba will have access to the kind of sources of credit to finance the expansion of the tourist industry. overall, i think the report is quite optimistic in the assessment of the presideent an future of the tourism industry to the island's economic develop ment in terms of the state owned enterprises but

perhaps more importantly to the nonstate sector of the so-called sect self-employed sector. the authors have done a great job steering away from strictly political contributions and they're very balanced analysis. as i said brf different policy options. they do go into some of the possibilities in terms of what the future may bring in terms of u.s. cuba relations, in terms of possible transitions in the cuban government and i think that is not only reading the report but of course a year or so from now we do expect major changes in the, at least the personnel that castro announced he'll retire from the presidency. they remain cautious with regard to the possibility of ending the u.s. embargo of cuba which limits clearly the benefits or the potential growth of tourism industry. i just want to end with three areas in which i think there might be some discussion. first of all, precisely, i think

the big -- the elephant in the room is really the embargo. although they do refer to the embargo, i think at this point it's quite clear that the embargo will not be lifted in the next four years, not a republican controlled congress and not with donald trump in the white house. although again that, would be the second part of the discussion which is given the nakt fact that we expect changes and dwoen don't know what that will mean once the donald trump administration takes office, it will have an impact on travel to cuba and will probably mean a restriction, growing restriction onz 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 be taken. i would imagine that cuban-american sector of this travel industry will continue to

expand. it's very difficult to imagine the trump administration will restrict the number of trips that cuban-americans might make. but that is also a possibility which actually has already -- had already been put in practice by george w. bush. so i think the main problem that i want to raise is what exactly will the scenario be for any kind of future potential growth of the tourist industry if the u.s. tourism market is not open? and so under those conditions, in other words, if more u.s. citizens who are not cuban-american are not able to travel to cuba, then where does the growth come from? the subtitle suggests that it will, the riding wave phrase. so in that context i think we should also talk about what the cuban government might do to make it easier for cuban-americans who wish to travel to cuba and the numbers

are quite difficult to get. the last figures that i've seen suggest that anywhere between 300,000 and 400,000 cuban-americans have traveled to cuba in the last year. many more than u.s. citizens who are not of cuban origin. i think that's where the main sector of any future growth will lie. i draw here on my own personal experience, for instance, why is it so difficult for people who want to visit cuba who were born on the island to get a passport, to get a visa? why is it expensive to do that? last year we saw the controversy about whether cuban-americans could go or not on those cruise ships. but i think if cuba is serious about expanding the tourist industry and given the fact that politically speaking, you know, i doubt that more u.s. citizens who are nost cuban origin will be able to travel to cuba easily come tomorrow, then i think the main chunk of the market will be

cuban-americans. and cuban born people in other countries. reducing cost of these transactions, perhaps even not requiring any kind of visa or cuban passport for those of us who were born in cuba, other countries do it. it seems to work quite well in order to attract that kind of tourism as it's been called in the literature. i think that's one area that needs to be discussed. the final point which the report mentions and again the estimate of cuban-american remittance to cuba are difficult to corroborate. anywhere $3 billion to $5 billion have been put out. there the question for me becomes how can you harness those millions and millions of dollars being sent to cuba so that they can be used productively in addition to solving any immediate household issues which we know are very important, food and housing and other -- and medicine and also

as we know informally because it's very difficult to get that kind of data, a lot of the money is being invested in the bed and breakfast and the taxi drivers and so on. what kind of policy measures would be appropriate to induce more of that money being invested into the tourist industry? so those are my comments. >> great. thank you very much, jorge. [ applause ] >> so if i could ask the authors to briefly respond to anything that our panelists have said. so why don't we start with you, richard fineberg. >> first of all, i want to thank all three panelists very, very much for your very thoughtful comments. you clearly read the report very carefully. and took it to heart and very much appreciate the thought that you gave to your responses.

i'll let richard respond to many of delores' comments on statistics. but as jorge said, we did what we could with the availability stats. but richard can amplify on. that you didn't dispute our basic conclusions, i believe. so that's heartening. right? on john's comments, on the point about supply restraints, of course, 100% in and our report emphasized that. that is the link between any sector including the tourism sector and reform throughout the economy. and that's a major thrust of the report. and we fully agree that in order to release the supply constraints many reforms are necessary throughout the agriculture sector and the housing sector, et cetera. on john's comments about china, there i have to say if i can advertise my again my book "open

for business: building a new cuban economy" i have a chapter on many of the themes you emphasized. i met with the chinese. they see a tremendous expansion in chinese and other asian tourism. already you can see it in havana. i have to say that my own view of overall u.s. hemispheric relations is this is not the time to try to pull back and antagonize the hemisphere when there is obviously another emerging great power who would love to fill the vacuum. surely, surely the incoming administration understands this and will not make false steps in that regard. you know? i completely agree. but in any case, china -- 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 other world out there. you have more european tourists coming, actually, from many european countries in part because other parts of the mediterranean parts because other parts of the mediterranean are not as secure and safe as they were, so you have a displacement there. the cuban are making a big effort to draw more latin american tourists. we've seen some of that, from argentina, brazil, mexico. but asia is the big growth market and that is already happening and 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, 50,000 cuban medical personnel working abroad now as a major income earner. many of them should be able to stay in cuba and provide hmm assistance on an international basis. that would require better

internet connections, of course, and other facilities, but that is the long-term vision, actually, of the cuban medical services as you probably know, and i think eventually that will happen. whether or not that's linked to cannabis tourism would require a change in cuban policies. as things stand right now cuba is very hardline 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. so i don't think we're likely to see that in the near term. but certainly i think the idea of increasing medical tourism, as tourism in cuba becomes not so much, so heavily -- and this is a major part of our study. sun and surf, that's fine. but they can dramaticcally diversify their tourism

offerings, cruise ships, adventure tourism but also certainly medical tourism. then jorge thank you for your thoughtful comments. responding to two of them, richard, i'm sure, has other thoughts. on the issue of where part to have the 33 billion would come, our suggestion is direct investment as opposed to commercial credits. we though of many international 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 their feet. they can take on some debt but debt financing direct investment is what we're suggesting to cover parts of that 33 bll pro skbrek

-- billion projections. di as practice makes so much sense as an expert, of course, i've written so much about. there would suggest that some of the restrictions on investment in the abandoned breakfast sector or in the real estate sector could be modified in ways which would encourage both national investment as well as dee as pa ra investment. so thank you for those comments. >> yes, let me echo richard's thank you and appreciation for these comments. i think they're really terrific. just to pick up a couple of them in order. professor, i couldn't agree with you more. the data are miserable. we spent many sleepless nights just trying to record accurately the number of arrivals which you would have thought would be fairly basic. fact, richard and i had for a long time a discussion about how many russians were coming into

the cuban economy. he was wildly overestimating, by the way. in any case, the data are difficult. that said, i think as you yourself said, some of the basic conclusions pretty much hold even if you adjust 20% up or 20% down. i don't think this industry is doing very well relative to other countries in the caribbean. they haven't been upgraded as rapidly as they could. their strategy is, at least as richard said, the beach boxes, maybe a little underdeveloped because in part, it doesn't recognize at all the emerging prooiflt sector. so these things, i think we all agree on. a couple of points that maybe i would just pick up. one is the linkage 23ekeffects, whether or not the industry is so import intensive today, i don't know.

i'm somewhat skeptical of that. i mean, you've got the economy as a whole, of course, we don't know what imports to the total economy is, because the gdp numbers are messed up. if you use mirror data. i could go on a long time about the inadequacies. i think the conclusions are pretty row best. one point i would make that i think is important here is the rule of the b and bs and the housing shortage and how to think about that. you can think about it in terms of the competition between the industry for food and the domestic clientele for food. the name of the game is changing policy to expand supply and grow it more rapidly over time. that includes housing as well as includes domestic food production. so the trick, i think, from a policy makers stand is to design

a transitional period where you can both expand the supply of the tourist industry and the b & b industry on the one hand and the supply on the other. you can't do it with only 10% of gdp investment rates, which is what they are now. i think the kind of policies are the way to go to deal with the issue of supply. your point is well taken. transition has to be mangds carefully to avoid addressing backlashes. let me pick up with a couple other points. john thomas's suggestion, i have a different view of richard. i think we should stay marijuana industry. i think this will come back with a proposal about this. you know, following up on studying beach tourism, this seems to me to be the logical next step. [ inaudible ] california is moving big-time in

this respect. i saw that all in jest, please. what would be the effect of increased travel restrictions? that is an interesting question, i think. you have to put this together in combination with our speculation on what the future course of u.s. policy would be. if the future course of u.s. policy has to do with some travel resfrikss on the one hand but combined with a very substantial macroeconomic stimulus which, of course, the president-elect has promised, you could see a very strong growth impulse. this is what the markets are telling us will happen -- to the global economy. -- rising incomes in asia and other parts of the world, all of which will generate more money to be spoent in this tourism industry. it will make the cubans and this audience happen. there will be more europeans and chinese tourists coming to the region.

one of the things that has amazed me, when you look at the numbers over the last two or three years, is that since brexit, you have seen no appreciable fall in european arrivals coming in to cuba. this may be a result of early contracting, who knows what, but we don't see with the depreciation of the european currencies, even preceding brexit, a major downn downturn in europeans coming to the cuban economy, cls a good sign. i think that's likely to increase. final point goes back to the issue of investment in cuba. tapping into the nornlous potential wealth in the miami community and the united states generally and also in europe to invest in the bed and breakfast and solve in part the housing short building. one thing cuba lacks is any kind of a mortgage market. if you were to suddenly

liberalize completely the cuban economy and permit foreign investment, i would expect that half of havana would immediate lid be bought up. why is that? bays prices are so low right now in havana. in fact, you're finding a lot of illit it investment in cuban. if you could take bond borrowing, put it into mortgages for the expansion of domestic housing, which would allow those households to borrow in what would be at international rates, much cheaper than what is available in cuba, they could expand the housing market, maintain ownership and it could be a very high-class debt obligation in the u.s. or foreign markets. worth thinking about. i'm sure there's some financial engineers in the audience that could set up this kind of

arrangement and i think it would be extremely valuable for cuba over the long run. the final point i want to make is that all of the discussions we focus on here on u.s. policy are really only a small part of what's going to effect the industry. what's going to effect the industry in the long run is cuban policy. cuba really controls its own future, irrespective of what the united states says. sure, the united states can impose some difficulties, but frankly, if cuba were to liberalize it could swamp any effects coming out of the trump administration. >> thank you, gentlemen. [ applause ] so we're not at the stage of questions and answers. we've got 30 more minutes. we have microphones on this side, on both sides, so please, you have to come up and make sure that our friends in c-span can hear.

i have just two requests in terms of your question. one, if you could identify your whichever way you want. and two, make sure everyone has a chance to ask questions and make comments, please make your comment or question as brief as possible and i -- let me in advance apologize for interrupting you if you go a bit too long. ok? sir, you have the mike. >> yes. thank you very much. my name is nicholas sanchez, professor emeritus of economics of the college of the holy cross. i 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 really the big elephant in the room. and the reason for that is

because i would like to ask my second question, which is do you think it is in the national interest of the united states to support puerto rican tourism rather than tourism to cuba? i mean, you have heard trump talking about america first, right? and i think even trump knows that puerto rico is part of the united states. so the idea that, you know, this would be in 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 the comment on taxation in cuba. when i visited cuba a few years ago, i talked to everybody there and i said, what are youyour tax

like? and everybody said there are no taxes here in cuba. so the government apparently has this huge expenditures and there are no taxes. my own calculations about taxation in cuba, it is that it runs 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? >> ok. these are great questions. why not puerto rico? we just had to pick a number of other countries. we looked at the dominican republic and costa rico because they were similar in size and structures. that's the first point. the second poinld was the cubans themselves are quite interested

in the costa ricans and they ought to be interested in the dominican republic. so taking the point the employ fefr made that the numbers on the comparisons may be funny, the fact is cuba has a lot to learn from those countries and probably has much to learn in puerto rico itself, especially in terms of debt management. so that point is well taken. the point on taxation, you're absolutely right, that taxes are very high. the tax system -- this is a point we make in the report -- seems very inefficient. it's kind of a funny set of taxes that come about on the state enterprises contributing surplus to the treasury chsz reallocated and the other on the multiple exchange rate which is an expensive and difficult system to collect taxes from and manage. we haven't talked about the system. but it really is a major shackle

and weight around the neck of the cuban economy. so you're absolutely right, tax modernization as richard pointed out is really quite important. >> we're not suggesting that the u.s. government support as in subsidize u.s. relations with cuba. we're simply saying that the u.s. government should not impede relations, that is to say, freedom of travel and as mr. tillerson has i thip often argued, economic sanctions which are not multi-laterally enforced are not likely to be effective. so that's our arguments. >> anybody on the other p panelists want to react quickly? the mike, the mike. >> oh. one of the things i don't see the puerto rico and cuba competing. they have very different type of tourism primarily.

ok. the dominican republic, jamaica are more like the competitors for the type of tourism that cuba has. as a matter of fact, one of the things i think that the cuba is missing is the type of tourism that puerto rico has, which is the mixture of the beach and the urban, one next to another, in a noninclusive type of deal. they will only get that if they develop la playa, and there's plans to do that but i think that's going to be very long term. until they do that there's no direct competition between tourism in cuba and tourism in puerto rico. i think one of the things that might be very beneficial when we talk about tourism in cuba is not to lump all the tourists together but recognize what

we're talking about complete different products, ok. the people who come to the all inclusive are different for those who are going to havana, are different those who are going to echo tourism, are different from those going to medical tourism. so in each one of these, you have different competitors. but i mean, i don't see one competing with the other at all. just like i don't see them competing with miami, which is a complete different type of tourism. >> thank you. please go ahead. >> hello. my name is chad olin. thank you for coming today. the report was very informative and whon behalf of the crowd, we appreciate your insights. i'm wondering if you've seen any tension between the growth in the t private sector and the state sector tourism as it relates to competition for resources like food in cuba, or tourist dollars and attention. and if so, if there have been

any new restrictions or proposed restrictions on the private sector growth other than the limitation on homeownership that you mentioned. >> yeah. thanks. that's a great question. you know, in -- like in new york city, for example, a lot of the hotels are upset at airbnb, because they see head-to-head direct competition. by and large, that's not the case in cuba. the reason for that is that the state-owned enterprises are not building hotels fals enough in urban areas where the u.s. tourists, travellers are going, so that the private sector are filling a need to increase supply and they're doing it, in fact, at a cost effective way. we estimate to put in a room in a b and b is 15 to 25,000, roughly, per room.

whereas the hotel costs 200,000. so as the minister of tourism in cuba, marrero has said publicly he seize a complementary relationship between the rising bed and breakfasts as well as the paladardas that restaurants cannot provide. so there were a number of newspaper articles that suggested that the private sector in cuba was being squeezed by the government. so we were just there presenting this report a few days ago and i made an effort to try to find out what happens the truth to this. there were a couple of nightclubs and restaurants, high-profile thavr been shuttered by state inspectors. you don't see as many fruit and vegetable push carts on the street as you saw before. but on the whole, the private

sector, the -- quite the propensity is booming in cuba, is booming in cuba. and i saw and had the opportunity to visit new restaurants, new nightclubs, not enjoying mooip, just doing research. so i think really on the whole, despite some crackdown, you know, of course, the inspectors, the private sector and most people in cuba dislike. they're frequently referred to as parasites and there's some tension there. on the whole, though, the big picture is the private sector at least until january 20th continues to expand in alhealthy way in cuba. >> let's go to our next question. >> hi. i'm simmons chase with the cuba journal. my first question is very quick. does anybody have an update on london club creditors? i've not been able to find anything on that. paris club, we know about. second has to do with the

sequencing of reforms. northern advanced economies with the support of the imf and world bank struggle with one or two of these problems simultaneously, and that is currency unification, agricultural reform, labor reform, attracting foreign investment. it just is bewildering. where do you start if you're cuban, if you're in the government coming up with policy, can you take a guess at where you'd start? thank you. >> i'll let richard handle the -- actually, the easy question of this one, which is the london club and the external debt. he's written a paper on it. i'll preempt him on that. you might take a look at it. it's a good paper. where do you start? that's really the tough question

they obviously have been struggling with. one place i think to start is of course price liberalization in agriculture. they've made some tepid nooufs that direction. they're worried, however, about rising food prices and what the impact will be on urban labor in the cities. if you begin to unify the currency and eliminate the multiple exchange rate system you've got to raise wages. it's redistribution of income within the associate, winners and losers. it has to be mangds very carefully. the second point i would make is that it has to be a part of a coherent program that's administered over a period of three or four years in order to be able to -- and there's going to be a lot of fits and starts in doing so. but we've seen in the case of poland or even the chinese unification of currencies back

in 1994, which is a relatively smooth story, that it's a complex process. the third point is that growth is really important. if you can get your growth rate up from its anemic rate of now -- i don't know -- this year is a recession, so it's a terrible time to do any reforms. if you can get your growth rate up from 2.8% to 5%, it makes it really much easier to lubricate the process of reform and do this re-allocation process. if you can begin to liberalize the tourist industries, get growth, link it to agriculture, then you can begin to do some of the other things they very much need to do. to my surprise, they have been able to lay off people in the public sector quite dramatically and they've created eloquent things that are covered nicely in richard's book. when they've done that, to my

surprise, it's been absorbed relatively quickly. the second surprise think we've had is the unification of the exchange rate may be a lot easier because they have already introduced multiple exchange rates. now you find up to seven different exchange rates in the system. that helps to kind of make it a little bit easier. they're moving slowly. we'd like to see them move faster. that's really important. external help. to the extent they could be helped by the ifis, they've made some insipient moved to join the caf, which is the first step towards multi-laterals. that would provide an enormous cushion. they would be awash in donors if they had a coherent program that deanors could support. >> all good comments. in relationship to the external

credits, so fidel castro had a cavalier attitude to international borrowing and any number of times suspended payments when governments would come to him and say how about payments on the credits we extended, he would say, oh contracts, contracts, how about international solidarity. isn't that sufficient payment? very cavalier. so cuba's credit rating was on the floor. when raul castro came in, he said publicly, we're going to be more serious now about international credits. we're going to try to make you're payments on time and re-establish our creditworthiness. and he sat down as a first step, as your question suggests, negotiated or renegotiated official credits, some dating from the cold war per. others more recent. and with most international creditors, the official kretd oors, those have been

renegotiated, as you know, in terms of the private. the paris club, cuba is now so far makie ining p payments on t portion of the restructured debt. it's not a lot of money for a normal economy, but for a economy which struggles so hard to export, cuba's merchandise exports are under five billion a year. guys! any medium size american company produces that much in annual revenues. but they are making those payments so far. now, then you have the question you asked about the london club which is credits owed to commercial enterprises. to my knowledge, those negotiations have not reached any conclusions as of yet. cubans can still not really borrow on private credit markets. any credits that they might receive from suppliers are short term and are very often linked

to direct external earnings. that is to say there's an escrow arrangement, because the credit rating is still not high. and given the current crunch that the economy is in for various reasons having to do with venezuela and nickel prices, etc., i think cuba will struggle to improve their international credit ratings. >> please. >> yes. my name is karina and i'm a student in anthropology here at fiu. i have an comment about racial equity in the tourism industry in cuba. this is a significant issue. it is well documented. it is a concern of groups on the island and in the diaspora, but in terms of who is getting the jobs, whether it be the tour guiding jobs or particular positions in hotels and other aspects of the tourism industry,

there is a lack of representation of afro or black cubans in some of the best jocks, so to speak, in the tourism industry, so i didn't -- i haven't had a chance to read the report very thoroughly, but i didn't see any mention about racial inclusion in equity in the report and if you want to comment on that. thank you. >> so this is an issue about income distribution that one has to think about very carefully. because it can be twisted in a way which i'm sure you don't intend it to be used. the people on the -- some people on the island, the hardliners say look what's happening. we're introducing some market mechanisms, we're allowing in more tourists. that's creating discrimination. therefore, we should go back to

the old way. surely, you don't mean to suggest that. so yes, how does one deal with an economy that's becoming more diversified and with more market mechanisms, investments which will generate some inequality. do you go back to a completely directly man dated economy or do you think about introducing, as we suggest in the report, various incentive structures, tax reforms, labor reforms that allow you to combine greater efficiency while you try to meet your equity objectives? ok. now, with regard to issues of inequality on the island, most -- the bulk of afro -- first of all, your point about these things being well documented -- excuse me -- is not correct. i know of no numbers in the last ten years that really lay out income distribution in cuba. i don't -- i have not seen them.

there are no surveys that i've seen. f you have some, i'd be interested in seeing them. there are a lot of anecdotal reports but numbers, i don't think we have them. the eastern part of the island, more afro cuba has fallen behind when the resolution first occurred in santiago, the government stwried to redistribute money away from havana into the provinces. in recent years that's been reversed. partly, by the way, of u.s. laws. u.s. laws are saying you have to be people to people, cultural turism that largely means staying in havana which is more difficult and more difficult to document. on the eastern part of the island, one of our suggestionings if the government can diversify tourist offerings,

as has been suggested, that would move wit into the eastern part of the island and where you would naturally get a pickup in hiring of -- on the afro-american community. is there still racism in cuba? absolutely. is there as much racism as there was in 1958? i would say probably not but certainly there is still a lot of it. some of it has to do with the left over stereotypes and prejudices, etc. that, now, if you have american hotels that are allowed to go -- right now, what leverage do we have, we as the united states over the issues that you're discussing? if you had american hotels investing in cuba, then you -- one could suggest that they themselves as well as perhaps suggestions by the u.s. government that best practices includes corporate smont would

bring into play joender equity and anti-discrimination standards. ok. thank you. >> do you want to address that in any way? >> no. just to underline precisely, the last part of your comment, which is that in addition to racial inequality, which i think we may not have statistics, i think all the evidence suggests it has increased over the past 20 years or so in conjunction with the rise of the tourism industry. much of it has to do with the regional imbalance. so to the extent that tourist industry has been reconcentrated in havana and the western provinces -- just got back from the -- she can talk about it personally. there has been less growth in the eastern provinces where you have a larger concentration of afro cube people there's a correlation between race and region that is quite perverse in

the way that the tourism industry has favored the western provinces. >> so we're running out of time. i think we have two questions. why don't we take those two questions now at a time? so please go ahead. >> my name is muhammad razib, head of marketing with baywood hotels. i didn't hear you touch on the poor sector impacting cuba's tourism. few years past they had a baseball game there. do you guys see whether it's basketball, baseball or nfl having an impact on cuba's tourism. >> did you have a question? >> yes. >> please. all right. i am a hospitality students. i have two questions but i can shorten it to for the sake of time, when i saw the policy outline for what you recommend both cuba and the united states go for to help improvest growth

that we're seeing there, my question is at least from a policy perspective, do you see in the future cuba starting to adopt what we consider i geese like a one cuba two systems similar to what china did in the 80s where we would have open free trade areas but not the entire island itself. second question, as a hospitality student and someone who apires to great and open my own businesses in the future, how hard would it be do you see right now from any business people here in the united states who want to open or start their own venture in cuba? >> all right. thank you. all right. >> why don't we start with you, richard? >> terrific questions. on the sports question, this is really a pretty important thing culturally. fidel himself was a baseball fan. one of the things that led to the breakdown in the u.s. relationships in the early days

when the u.s. emergencies unilaterally prevented major league baseball from having exhibition matches in cuba, as i recall, the story. so i think it's -- this is a whole new area. i think to the extent that there can be increased commerce and interchange between the two countries sports is a very good form of engagement that would win the hearts of both sides of the florida straits. the issue on whether or not the special economic zones could be as they were in china, a vehicle for initial liberalization, you may be see part of that in the marry el port area. probably will have a different course of liberalization. where do you begin first. i think you've got to formulate and overall macro program that's

a serious program that adds up. secondly, you need to have systematic deregulation. start with a negative list rather than saying cubans can do these 192 countries, 192 activities, say cubans can do anything they want in terms of economic commerce except the following several things. and that would, i think, unleash a tore ent of private savings that is now hidden and -- from those who would come in, to spur investment. deregulation is a second part of the story. i think price equalization would support the poor. there are a lot of poor people in cuba. to the extent that you have to use the national fiscal policy to compensate losers in the process of reform, programs have to be thought through to make that happen.

cuba is in a position where it actually can do this, because it has the administrative apparatusened the knowledge of its working class and people that it can set up these programs rather quickly. so i think price liberalization is one way to begin to solve the problems. >> this is our last shot, right? let me thank fyu and the panelists for very thoughtful and exciting feedback. on these particular questions. in terms of cuba diversifying its economy and diversifying international offerings, sports, of course. very exciting athletics in cuba and the creative industries, music, dance, art, architecture, tremendous talent in cuba that will hopefully grow in cuba and also have more of an international and cross-straits

projection. with regard to americans investing in cuba? the official cuban position is that u.s. citizens can participate in the cuban economy like any other citizens from any other parts of the world. they have to go through this elaborate and very burdensome approval process but there is no specific discrimination against u.s. citizens in general. there may be some with regard to cuban americans, but the major restriction, of course, is on the u.s. side. even under obama regs, most investments from the u.s. side would be prohibited. my very last point, frank, here we are, january 19th. i have to conclude the panel was saying, the thrust of our study is that the interaction with the united states has by and large advanced u.s. -- between the u.s. and cuba. has ranced u.s. interests, has

helped to promote an explosion of private independent economic activities on the island. there's a tremendous sense of excitement and entrepreneuralism in cuba today and for the u.s. to purposely destroy that would seem to be both tragedy and p counterproductive not only for cuba but for u.s. national interests. thank you very much. >> please join me in thank youing our two authors. [ applause ] and of course our three commentators. thank you so much. and thank you all for being here and thanks to the c-span audience for joining us. thank you to the brookings institution. follow us and look at all the pramgts we're doing at the center via twitter and our website and hope to see you soon at another event. thank you so much.

[ applause ] >> president trump will mark his 100th day in office with a rally in harrisburg, pennsylvania on saturday night at 7:30 p.m. eastern. you can see it live on our companion network c-span. for the first time since ronald reagan was shot, the president is not attend iing the white hoe correspondents association dinner. our coverage begins at 9:30 p.m. eastern saturday. the senate armed services committee yesterday heard from former government officials about u.s. strategy until the asia-pacific region. tensions on the koreanen