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Canadian golf resort projects in Cuba not without risks
NEW YORK - Shunned by Fidel Castro for being too bourgeois, golf could finally be on course to make a dramatic comeback in Cuba — in large part thanks to Canadian investors.
But while Canadian developers feature prominently among groups pushing to build golfing resorts with the island’s cash-strapped communist government, Cuban exiles and some experts are raising new alarm bells that the ventures are headed for the rough.
At risk are billions of dollars to be spent on developing courses, hotels and residential facilities targeting, for the most part, well-heeled golfing enthusiasts.
The exiles say the land picked for the developments could yet be subject to reclamation should the current regime, now led by Castro’s younger brother, Raul, give way to a democracy.
For their part, the Canadian companies say they’re confident they are not developing on land subject to claims by U.S. companies or Cuban Americans, and tout their respective projects as offering a new high-end golfing destination, complete with holiday homes for purchase.
But the exiles raise a host of other potential pitfalls, including whether the Cuban government is prepared to offer clear title to the homes, or mere “leases.”
“If there is regime change in Cuba and you have invested millions of dollars in land that has other owners, you are going to have to face serious questions about the title,” said Maria Werlau, a Cuban American who runs the human rights Free Society Project from New Jersey and, as a consultant, has written on foreign investment and tourism in Cuba.
“Any serious due diligence on these projects should turn out huge risks for investors, which is why the multimillion dollar deals are generally just smoke.”
Experts say there is also the question of whether the Cuban government is sufficiently business-friendly at heart to allow investors to make a decent return on their cash injections.
After all, the development plans are possible only because of economic reforms the communist regime has been obliged to consider as it seeks foreign cash against the backdrop of Washington’s continuing economic embargo and the former Soviet Union’s long-dried up subsidies.
On the golfing front, the Cuban government has stated it seeks investor partners to build as many as 16 courses and resorts — a massive number for a country where the elder Castro’s ideology all but wiped out the sport. That raises the question as to whether there really has been any evolution in the regime’s mindset.
“That is the old planning style,” said Arch Ritter, a Carleton University economics professor who has written extensively on Cuba. “Instead of going at it bit by bit, they jump in whole hog and have major over capacity.”
Cuban exiles have long warned that the Cuban regime may pull the plug on joint ventures should average Cubans threaten social upheaval by balking at the prospect of luxury apartments being built for foreigners.
“I don’t think (pulling the plug) is going to happen because they need the money, and the old approaches are so discredited that they have return to a market economy — with the appropriate kowtows to socialist planning and state control,” Ritter said.
“But they talked tough at the communist party congress in April, saying they wanted to welcome foreign investment, but that they also wanted to make sure Cuba got a good deal out of it.”
Among a handful of declared golfing developers is Vancouver-based Leisure Canada, which claims that a joint venture deal it’s struck with the Cuban government is the only one the country’s Tourism Ministry has so far approved.
Leisure Canada is planning on investing $1.2 billion to develop a 5.5 square kilometre oceanfront property at Jibacoa, 68 kilometres east of Havana.
The company’s website describes the property as having “the potential to host several luxury hotels and two championship golf courses.”
In anticipation of the development, which is in addition to a combined $550 million planned investment in hotel complexes elsewhere in Cuba, Leisure Canada recently struck a licensing deal with the Professional Golfers’ Association of Britain and Ireland in a bid to provide a rules structure for the sport in Cuba.
“With no rules and regulations in place in Cuba, we felt strongly that the direction of the PGA UK would help the Cubans to build the foundations for a better golf industry,” Robin Conners, company president and chief executive officer, said in an interview while on a trip to Havana.
He indicated the development will have a “mixture of hotels and different product” — which could include “cottages, casitas and condos.”
But he admitted that the Cuban government has yet to establish the terms of ownership for the properties that would be sold. This was despite the fanfare emerging from Cuba surrounding the decision at the April party congress — the first such meeting in 14 years — that the government would allow Cubans to buy and sell their homes for the first time since Fidel Castro seized power in 1959.
“We have not seen the new rules and regulations,” he said. “We understand that they are coming out shortly. It is sort of in progress.”
The fact there is a time lag reflects testimony emerging last year from a Council of the Americas panel discussion on the Cuban investment climate. Some members said the Cuban government is torn between needing the cash generated by foreign investment, and wanting to remain loyal to socialist ideology.
Panel member Anna Szterenfeld, Latin America editor for The Economist Intelligence Unit, predicted the Cuban government will not likely permit much expansion of private enterprise — domestic or foreign — within the next five years because it views foreign direct investment as a threat to its sovereignty.
Still, Conners maintained that the Cubans are, in fact, considering instituting for foreigners a “fee simple” arrangement, which would allow a tourist to wholly own a property and the land it sits upon. Short of that, developers have long pushed for long-term lease arrangements — which are currently mainly applied to commercial property, and run for 50 years with an option to tack on another 25. Conners said he believes the Cubans will at least grant leases.
“We have been led to understand that (50 plus 25 leases) will be extended … to 99 years,” Conners said. “It is the British-Hong Kong structure where an instituted lease of 99 years is considered to be whole ownership by a bank, and, of course, that makes financing much easier.”
Lease arrangements may be a tough sell in Canada, where consumers are used to freehold ownership, but Conners insisted that foreign demand would be strong whatever the terms for non-nationals.
“There are a lot of people who would be interested in doing either a vacation club-type product or whole ownership, if it were possible,” he said.
Conners stressed his company has done extensive “due diligence” in verifying that none of the land it is to develop is claimed by U.S. entities. If it were, his firm could face sanctions under the 1996 Helms-Burton Act, which seeks to penalize companies that transact in property formerly owned by U.S. citizens, including Cuban exiles who have adopted U.S. citizenship.
But he suggested it was a moot point anyway — expressing faith in the future survival of the current regime, which would have to fall before any returning Cuban exiles could lay land claims.
“We go to great lengths to make sure we don’t (get) contested assets,” Conners said.
“By the same token, the regime here is pretty stable. The government is very popular with the people,” he added.
There can be no accurate gauge of the supposed “popularity” of the Cuban regime since it does not hold free elections. Human rights groups, meanwhile, charge the regime has a poor human rights record.
A Canadian Aboriginal business consortium called Standing Feather International rivals Leisure Canada in its ambition to re-adorn Cuba with golf courses.
The Ottawa-based company has pushed to build an entire golf “community” complete with 1,200 villas, bungalows, duplexes and apartments on 2.1 square kilometres bordering Cuba’s northern coast in the eastern province of Holguin. The residences of the so-called Loma Linda Golf Estates will sell for an average of $600,000 per unit — representing wealth that contrasts sharply with the average income of the local population of just $20 a month.
“I think (the Cubans) recognized that just to put a stand-alone golf course was maybe not the best direction to go,” said Graham Cooke, a Montreal-based globetrotting golf course architect engaged by Standing Feather to design the $410 million project. “To support golf and to make it feasible, a housing development or residential component (for) a tourist destination is important.”
But this project too has been years in the making, with final agreements yet to be signed.
“You have to really work in Cuba,” Cooke said. “You need full cooperation with the government; you have to be partners with them, and that takes time. And because this was a major change for them, they wanted to make sure that everything was set with regard to the different ways a private enterprise would be looked at, with ownership.”
Operating profits are believed to be set for a 50-50 split following a standard deal in which Cuba contributes “in kind” the land, while the “developer develops the package,” Cooke said.
On its website, Standing Feather says the Cuban government “has approved in principle” the sale of real estate to foreign nationals.
“Standing Feather International is in the final stage of negotiation with our Cuban partners, and the imminent formation of the … joint venture will allow the earliest possible access to the opportunity of real estate in Cuba,” the website entry says.
Two British entities are among other proposed multi-million dollar golfing developments on the island.
Cuba once had a dozen golf courses, but Castro closed almost all of them after he came to power. Canadian architect Les Furber designed the only current 18-hole course, which opened in 1999, and is built on the grounds of the former Dupont family property in the resort town of Varadero, 140 kilometres east of Havana.
Cuba’s only other current golfing opportunity is at a nine hole course in Havana used mostly by diplomats and foreign business officials. Soon after the Cuban Missile Crisis in 1962, Fidel Castro and the revolutionary Che Guevara played what has become a famous round there in a supposed snub to the United States. By 1980, the Cuban government had nationalized it.