By Melanie Zanona
This article appeared on The Hill on June 18, 2017
HAVANA — In the heart of Old Havana along the city’s historic Cathedral Square, a restored colonial mansion housing a popular tourist restaurant is packed with travelers sipping mojitos and nibbling on plantain chips.
El Floridita, a daiquiri bar made famous by novelist Ernest Hemingway, has become such a hot spot for tourists that the establishment sells merchandise in the corner.
Not too far away, a historic Cuban building has recently been turned into a five-star hotel with a rooftop pool that is operated by Kempinski, a luxury Swiss resort chain.
All of the lucrative tourist spots have something in common: They are run by Cuba’s military, which will soon be restricted from receiving U.S. business under President Trump’s new crackdown on the island.
Many U.S. visitors to the island have no idea which entities are tied to the Cuban government and which are privately owned.
“I get that question a lot,” says Diana L., a tour guide who works for both a private company and one owned by the Cuban government. “We know. Cubans know. But yes, it’s hard to tell.”
A three-day visit to Cuba’s capital by The Hill, involving interviews with tour guides, business owners, Cuban economists and government officials, highlighted some of the difficulties Trump’s administration will face in enforcing its policy.
The White House announced last month that it would be reversing some of former President Obama’s opening policies with the country, which included re-establishing commercial air service and easing travel and trade restrictions with Cuba.
Trump didn’t fully roll back the policies, but he issued a directive that will prohibit U.S. people and companies from engaging in direct financial transactions with entities or subsidiaries that “disproportionately benefit” the Cuban military.
The effort is aimed at restricting the flow of U.S. dollars to Cuban President Raúl Castro’s government and instead funneling American commerce toward the growing private sector.
In practice, that means Americans will likely be restricted in where they can spend their money, while U.S. companies will have a tough time setting up shop on the island, given the Cuban government’s dominance of the travel and tourism economy.
The new regulations, which agencies were directed to start developing within 30 days, are squarely aimed at the Grupo de Administracion Empresarial S.A. (GAESA), the business arm of the Cuban Revolutionary Armed Forces.
The military-controlled conglomerate is involved in nearly all sectors of the economy, but tourism is its crown jewel. GAESA’s tourism affiliate, Gaviota, operates an estimated 40 percent of all the island’s hotel rooms, in addition to controlling a number of restaurants, shops, tour groups, car rentals and taxis.
U.S. travel to Cuba has been surging since Obama made it easier for Americans to visit, though pure tourism is still prohibited. Cuban officials told The Hill and other U.S. reporters on Friday that over 346,000 American citizens visited the island during the first six months of 2017 — a 149 percent increase from the same time last year.
Both private entrepreneurs and the Cuban government have been racing to get in on the action. The crumbling, century-old colonial buildings that line Old Havana’s streets are rapidly being transformed to accommodate the growth.
GAESA’s tourism arm recently acquired Habaguanex, which previously ran all state-owned hotels, stores and restaurants in the historic center of Old Havana. It’s now almost impossible to navigate the tourist quarter without bumping into a military establishment.
But not every business is government-owned. Diana points out two private-sector restaurants with blue-and-white-striped awnings sitting along another square.
She also says there are some clues that can help people figure out what is run by the military.
Private restaurants tend to be more creative and trendy and sometimes have the word “paladar” — a Cuban term for a family-run restaurant — in them, for example. And privately owned stands that sell water bottles are more likely to have small coolers that look like they are from someone’s home, as opposed to a large industrial cooler, Diana added.
Still, it could be confusing for travelers trying to avoid patronizing a military establishment. Further complicating matters is that access to the internet, where one might find such information, is severely limited on the island.
When it comes to U.S. businesses, Trump administration officials have emphasized that the new restrictions will not apply to deals that have already been inked. That is likely to include Four Points by Sheraton Havana, which is operated by GAESA and became the first U.S. hotel to come to Cuba in more than 50 years.
But Trump’s new policy will make it difficult for new American companies to do business on the island.
“Companies spent the last year coming to Cuba to understand how Cuba operates, while simultaneously trying to get a license from [the Office of Foreign Assets Control],” said Collin Laverty, president of Cuba Educational Travel, which arranges exchange programs and helped organize The Hill’s trip.
“Many of these companies don’t have a deal or contract that is signed, but were close — and that may involve doing business with entities linked to the military.”
Trump has directed the Commerce and Treasury departments to identify all the Cuban military-linked entities that will now be off-limits under the new regulations, which will allow a few exceptions.
Yet new businesses, which are constantly popping up on the island in the wake of the tourism surge, are likely to grow even after the list is published.
Diana, a regular tour guide, said she often stumbles upon new establishments in Old Havana she’s never seen before.
“Oh, I didn’t even know that was there,” she says, pointing to a new restaurant.
The Trump administration could also struggle to determine which companies “disproportionately benefit” the Cuban military. The books of state-run companies, including GAESA, are not public.
There are also questions about whether a private taxi driver who rents his car from the government or a Cuban military worker who has a side job in the private sector would be banned from doing business with American travelers and companies.
“This concept of an organization linked or belonging to military, it is very much discussable,” María de la Luz B’Hamel, director of North American commercial policy for Cuba’s Ministry of Foreign Trade and Investment, told reporters.
Roadblocks to auditing
Another crux of Trump’s new Cuba policy is stepping up enforcement of existing travel restrictions. But that, too, could run into roadblocks.
The White House directed the Treasury Department to conduct regular audits of travelers and called on the inspector general to keep tabs on them, an effort that could require significantly more resources for federal agencies.
“Our policy begins with strictly enforcing U.S. law,” Trump said during his speech in Miami unveiling the new policy. “We will enforce the ban on tourism.”
The administration warned that U.S. travelers can expect to face more questioning from authorities when they return home from Cuba, either from customs agents at the airport or through audits later on.
All visitors are required to maintain full schedules while in Cuba and keep detailed records of their travels for five years. It’s a policy that has been rarely checked, and after a three-day visit to the island, it’s easy to see why.
Financial transactions on the island are done in cash, which makes it challenging for the U.S. government to prove where Americans spent their time and money.
Although visitors are supposed to keep receipts, they are often hand-written or just entirely unavailable. One taxi driver scribbled down his name and the ride’s cost on a piece of paper with the taxi company’s logo, but left off the time and date.
And Julio Álvarez, owner of a family-run company that renovates classic American cars and provides rides to tourists on the island, laughed when asked if they give out receipts.
“The best I can do is write my signature on the back of a business card,” Alvarez said through a translator.