TED Case Studies

CASE NUMBER: 87

CASE MNEMONIC: CUBA

CASE NAME: Cuba Tourism


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I. Identification

1. The Issue

Cuban policy makers are promoting the tourism industry in an attempt to aid the island's struggling economy. While tourism expenditures generated significant amounts of foreign exchange, the associated development and increased number of visitors in certain regions has threatened Cuba's environment. Coastal areas are of particular environmental concern, since new beach front hotels are being constructed in prime habitats for a variety of rare species.

2. Description

Cuba is in the throes of a severe economic crisis. The island's heavily trade-dependent economy has been hit hard by the dissolution of the former Soviet trade bloc (CMEA) and bysignificant shortfalls in petroleum and other supplies. The Cuban economy has not grown since 1989. From 1989 to 1992,analysts estimate that Cuba's gross national product (GNP)declined by 28 to 45 percent. Similarly, Cuban exports and other sources of foreign exchange have dropped dramatically. Total Cuban exports fell from $5.4 billion in 1989 to $4.9 billion in 1990, more sharply to $3.6 billion in 1991, and then even more sharply to $2.2 billion in 1992. In the face of these adverse conditions, the Cuban government has begun toration food, oil, and basic consumer goods. Officials on the island have sought the return of an important source of revenue -- tourism.

Cuban officials have great hopes for the island's tourism sector. Hundreds of thousands of tourists from Canada, Europe, Mexico, and other Latin American countries now visit Cuba annually. Notably, most of the reported 76 joint ventures in1991 and 1992 are in the tourism sector. In November, 1992,Carlos Lage, Secretary for the Cuban Council of Ministers, stated that Cuba's gross tourism revenues would be $400 million and that at the beginning of 1993 Cuba would have 20,800 rooms available for international tourists. An industry expert noted that, with capital and expertise from Spanish, Mexican,Jamaican, German and other foreign hoteliers. Cuba will increase its number of hotel rooms to as many as 23,000 by next year from 13,357 in 1991. Ernest Preeg, in a 1993 publication from the Center for Strategic and International Studies, puts forth more conservative estimates. He calculates that Cuba's convertible currency earnings from the tourism sector amounted to only $350 million in 1992 and that by the end of 1992 only 13,000 rooms were available.

No matter which estimate is employed, it is clear that earnings from this sector recently have increased significantly. The World Tourism Organization estimates that in 1989 this sector generated $240 million for the Cuban economy. Using the more conservative estimate for 1992, this sector has grown 46 percent in the past three years. This growth is more significant given the overall decline in earnings currently faced by other Caribbean countries. Cuban officials remain optimistic for the prospects of this sector and as a recent Cuban American National Foundation (CANF)report points out, "Cuba is ideally situated to capture asignificant share of the $7 billion tourist trade in the Caribbean region."

Statutory law restricts U.S. tourist expenditures in Cuba. In July, 1963 the Secretary of the Treasury issued the Cuban Assets Control Regulations ("CAN Regulations") under the authority of Section 5(b) of the Trading With the Enemy Act of 1917 (TEA). The CAN Regulations imposed a complete embargo on any direct or indirect financial or commercial transaction with Cuba or Cuban nationals. Easing the U.S. travel restrictions likely will significantly increase the number of tourists visiting the island. Ernest Preeg estimates that in the fifth year of a post-Castro Cuba, four million tourists will visit the island.

The 500,000-600,000 tourists visiting Cuba last year may already be straining Cuba's environment. While information on tourism's impact on the Cuban ecology is not readily available, Cuban scientists note that on the north coast, the government is pushing to build beach front hotels in prime habitat regions for dozens of unique birds, rodents and iguanas. Biologists from the natural history museum in Havana can sometimes persuade the regime to delay or even halt construction for the benefit of wildlife, but the island's need for hard currency isso pressing that the scientists' efforts often fail.

Data from neighboring islands on the tourism industry's impact on the environment show that the effects can be significant. As a direct result from the stains of tourism, Cuba's neighbors have endured environmental effects ranging from damage to coral reefs to depletion of water tables (see BERMUDA and JAMTOUR and CORAL cases).

Barbados, which has no major rivers, depends heavily on underground water supplies. Environmentalists are pressuring the government to rescind its permission for construction of a golf course. They argue that the facility will place severestrains on the water supply and that the chemicals used on the grass will contaminate the underground water, but the government intends to make Barbados the golfing capital of the Caribbean. In the U.S. Virgin Islands, the island of St. John, famous for its national park and coral reefs, is suffering from regular assaults of tourists. Up to one million tourists visit the 52 sq. km island each year and contribute significantly to the destruction of the coral reefs. An article published inJuly 1993 lists Cuba as one of several countries worldwide with severely damaged coral reefs. Increased numbers of visitors to Cuba likely will damage the reefs further.

3. Related Cases

JAMTOUR case

BERMUDA case

TOBAGO case

CANCUN case

VENICE case

MEDIT case

GUANTAN case

Keyword Clusters

(1): Trade Product = Tourism

(2): Bio-geography = Caribbean Islands

(3): Environmental Problem = Habitat Loss

4. Author: Brian W. Hill

Note Date

II. Legal Clusters

Legal Clusters

5. Discourse and Status:

Disagreement and in progress

6. Forum and Scope:

CUBA and REGION

7. Decision Breadth:

1 (CUBA)

8. Legal Standing:

LAW

C. Geographic Cluster

9. Geographic Locations

a. Geographic Domain: North America [NAMER]

b. Geographic Conflict Site: Caribbean

c. Geographic Impact Area: CUBA

10. Sub-National Factors:

NO

11. Type of Habitat:

Tropical and Ocean

IV. Trade Clusters

12. Type of Measure:

Regulatory Standard [REGSTD]

13. Direct vs. Indirect Impacts:

Indirect

14. Relation of Trade Measure to Environmental Impact

a. Directly Related: Yes

b. Indirectly Related: No

c. Not Related: No

d. Process Related: Yes

15. Trade Product Identification:

Tourism

16. Economic Data

Cuba's tourist industry earned $530 million in grossrevenue for 1993 with employment of 60,000 direct employees.

17. Impact of Measure on Trade Competitiveness:

Medium

18. Industry Sector:

Tourism

19. Exporters and Importers:

MANY

Most tourists to Cuba come from Spain, Germany, Canada,and other countries in Latin America.

V. Environment Clusters

20. Environmental Problem Type:

Habitat Loss

21. Name, Type, and Diversity of Species

Cuba's coral reefs may be most at risk from increased tourism. Coral reefs are among the most biologically diverse ecosystems on Earth. Globally, coral reefs are thought to besecond only to tropical rain forests in terms of numbers of species they contain. Causes of reef degradation include sedimentation, oil spills, shipping, tourism, and other factors.

22. Resource Impact and Effect:

LOW

23. Urgency of Problem:

MEDIUM

Cuba is rapidly developing areas for the island's tourist industry. The number of tourists visiting Cuba has more than doubled in recent the past five years. Some experts estimate that the number of tourists visiting the island annually will increase from the current 500,000-600,000 to four million five years after a post-Castro Cuba. Last year Cuba expanded its airport facilities and opened several new hotels adding some 3,000 rooms.

24. Substitutes:

Eco-tourism

VI. Other Factors

25. Culture:

YES

Cultural issues need to be taken into account when considering ways to limit tourism's impact on the Cuban environment. Tourism may be the only sector where young professionals have access to dollars, the hard currency of choice since the government legalized the possession of foreign money in July 1993. This inserts a wedge between the generation of professionals who have risen from Cuba's peasantry and the 300,000 workers currently bringing in the sugar harvest. The latter earn around 150 pesos a month, less than $2 on Havana's black market -- which for a great many services, not all of them illicit, is the city's only market. Those Cubans now earning hard currency in the island's tourism industry may act to protect their new found source of income. Moves towards environmentally-sound tourism will need to take their motivations and influence into account.

26. Trans-Boundary Issues:

NO

27. Human Rights:

NO

28. Relevant Literature:

Blum, Ernest. "Is Cuba Destined for a Tourism Boom in the Post-Castro Era?" Travel Weekly,
December 6. 1993.

"Caribbean: More Talks on Pact to Protect Wildlife." Inter Press Service, June 19, 1989.

Carr, Stanley. "Winter in the Sun: What's New Under the Sun." New York Times, November 3, 1991. Section 5, 15.

"Cruise Ship Visits Causing Concern." Agence France Presse, July 9, 1989.

"Cuba: Castro Comments on Foreign Relations at Conference on Tourism." Tele Rebelde, June 6, 1993. Transcribed by the British Broadcasting Service. Fernandez, Carmen Alicia.
Inter Press Service, February 19, 1992.

Kaufman, Holly. "A Revolution of Necessity: Crisis Forces Conservation in Cuba," 4/6E, December, 1993:

Lunan, Charles. "Tourism in Cuba in Limbo: If the U.S. Embargo Were Lifted, Experts Think the Island Would See A Business Transformation." Orlando Sentinel, October 10, 1993:

Martindale, Carol. "Environment: Push to Hike Tourist Arrivals Worry Conservationists."
Inter Press Service, November 15, 1993.

Oro, Jose R. "The Poisoning of Paradise: The Environmental Crisis in Cuba." Miami: Open Road Press, 1992.

"Tourism Developments in 1993 Reviewed." Radio Havana, January 2, 1994. Transcribed by the British Broadcasting Service.

Weber, Peter K. "Saving the Coral Reefs," 27/4 The Futurist, July, 1993:

References:


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