Identifier
Created
Classification
Origin
09HAVANA345
2009-06-10 19:13:00
CONFIDENTIAL
US Interests Section Havana
Cable title:  

CUBA BREAKS UP CONGLOMERATE CUBALSE

Tags:  ECON PGOV PREL PINR PBIO CU 
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RR RUEHAG RUEHROV RUEHSR
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ZNY CCCCC ZZH
R 101913Z JUN 09
FM USINT HAVANA
TO RUEHC/SECSTATE WASHDC 4476
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEHBS/USEU BRUSSELS
RUCOWCV/CCGDSEVEN MIAMI FL
RUEAIIA/CIA WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCOGCA/COMNAVBASE GUANTANAMO BAY CU
RHMFISS/HQ USSOUTHCOM MIAMI FL
RHMFISS/JOINT STAFF WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 HAVANA 000345 

SIPDIS

DEPT FOR WHA/CCA

E.O. 12958: DECL: 06/09/2019
TAGS: ECON PGOV PREL PINR PBIO CU
SUBJECT: CUBA BREAKS UP CONGLOMERATE CUBALSE

HAVANA 00000345 001.2 OF 002


Classified By: COM Jonathan Farrar for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 HAVANA 000345

SIPDIS

DEPT FOR WHA/CCA

E.O. 12958: DECL: 06/09/2019
TAGS: ECON PGOV PREL PINR PBIO CU
SUBJECT: CUBA BREAKS UP CONGLOMERATE CUBALSE

HAVANA 00000345 001.2 OF 002


Classified By: COM Jonathan Farrar for reasons 1.4 (b) and (d)


1. (C) The Cuban Council of Ministers decided on May 26 to
"extinguish" Cubalse, the second largest conglomerate in
Cuba, and transfer its assets within 90 days to seven other
entities. Cubalse was originally created to serve the
diplomatic community with local employees and housing. The
entity has grown over the past 35 years to include many other
activities including retail stores, gas stations, car rental
agencies, restaurants, a shipping company, and even pest
control. Cubalse's diplomatic responsibilities will transfer
to the Palace of Conventions (Palco). The official reason
for this move, although the Cuban press is yet to publish the
news, is to reduce costs, increase negotiation power, and
concentrate management in order to improve efficiency. Our
contacts at Cubalse know little more than we do and many fear
for their jobs. Despite talk of decentralization, Cubalse's
break-up will further consolidate power within a few, mostly
military hands. End Summary

--------------
ABOUT CUBALSE
--------------


2. (SBU) The original structure of the state company now
known as Cubalse was created in 1962 with the purpose of
serving the diplomatic community and to recuperate and
protect Cuba's national patrimony, including management of
assets seized from Cubans who departed in the early years of
the regime. In 1974, the name was officially changed to
Cubalse or Cuba al Servicio del Extranjero, and its mission
defined as providing the broad range of services required by
the diplomatic community and foreign businesses located in
Cuba. Cubalse operations expanded in the 1980s and 1990s to
include over 200 retail stores (supermarkets, boutiques,
etc.); more than 80 Oro Negro fuel service stations; ice
cream plants and shops; Fiat and Peugeot dealerships; well
known state restaurants; construction and maintenance
services; photo and video services; a shipping company with
regular lines to Panama, Mexico, and the Dominican Republic;
Arandia custom and cargo services; and Biocontrol pest

control. Cubalse is one of the most important holders of
Cuban real estate. It also participates in joint ventures
and has offices in Panama, Venezuela, and China. Cubalse
generated an estimated USD 400 million in revenue in 2007.
Cubalse is not under the supervision of any ministry, but
rather answers directly to the Council of State. (Note: The
Council of State is the decision making executive body of the
National Assembly that operates in between the very
infrequent formal National Assembly sessions. End Note)


3. (SBU) The U.S. Interests Section (USINT) works closely
with Cubalse as the landlords for our diplomatic housing,
management for an annex building used for refugee processing,
and as the compulsory intermediary for hiring Cuban personnel
by diplomatic missions. All diplomatic officials in Cuba are
required to hire not only local contract nationals through
Cubalse, but also domestic employees such as personal
nannies, maids, and gardeners. The process is long and
bureaucratic. For example, it can take three to six months
for Cubalse to approve a new personal maid. At USINT, around
15 LCN positions remain vacant at any given time as we wait
for Cubalse to send us qualified candidates. According to
our diplomatic colleagues at other missions, these delays are
not unique to USINT.

--------------
WHO IS TAKING OVER
--------------


4. (SBU) According to a document produced by the Council of
Ministers but not yet published in the official media, the
Executive Committee of the Council of Ministers decided on
May 26, 2009 to "extinguish" Cubalse and transfer its
activities to other entities. (Note: The Council of
Ministers is similar to an expanded Cabinet. End Note) Vice
President Ricardo Cabrisas Ruiz will lead a commission
created to organize the process of splitting up Cubalse
within 90 days as directed in the document (see below). In

HAVANA 00000345 002.2 OF 002


the meantime, Cubalse is not permitted to do anything related
to the movement of goods, assets, or properties. (Comment:
USINT was in the final stages of negotiating all our leases
with Cubalse. This last provision may delay those
negotiations at least three months. End Comment.)


5. (SBU) The Palace of Conventions will take over real
estate and personnel services for the diplomatic community,
along with the management of the Focsa building in Havana.
Palco currently runs the main convention centers in Havana,
the Karl Marx and Sala Atril cultural complexes, three well
known state restaurants located near the convention centers,
a graphic arts business, a shopping center, and the Havana
Club. The Havana Club is a country club (minus the golf
course) and residential center for diplomats and foreign
businessmen. A few diplomatic missions, including the
Canadians and British, currently rent some residential
properties from Palco at the Havana Club and report better
and more timely customer service than that provided by
Cubalse. Abraham Maciques has been the Director General at
Palco for more than ten years. Maciques was reportedly
involved in the creation of Cubalse in the 1970s. He was
considered by the international press in 1989 as the man
charged with improving tourism services in Cuba and
co-founded the state company Cubanacan, which started many of
Cuba's first hotel joint ventures. Like Cubalse, Palco is
not under any ministry but answers directly to the Council of
State.


6. (SBU) The Oro Negro gas stations will transfer to state
oil company Cupet (Union Cubapetroleo). Cubalse was the
second largest holder of gas stations in Cuba. The widest
network of gas stations Servi-Cupet belongs to Cuba's largest
conglomerate Cimex, which stands for Comercio Interior,
Mercado External (Domestic Business, External Market). Cimex
will also profit from the Cubalse break-up by picking up
restaurants, car dealerships, ice cream plants, laundromats,
and animal clinics. Cimex will take over Cubalse's
properties in the former resort town of Tarara, now known as
Ciudad Milagro since the GOC has used several of the
abandoned buildings to house Ukrainian children affected by
the Chernobyl nuclear disaster, recovering eye surgery
patients from Venezuela and other Latin American countries,
and now Chinese students learning Spanish. Cimex also
answers directly to the Council of State and is headed by
former Fidel Castro physician Dr. Eduardo Bencomo Zurdo.


7. (SBU) Other than the auto part and repair shops, which
will go to Servicios Automotores, the rest of Cubalse will
transfer to the control of the Cuban Armed Forces. The
military conglomerate GAESA (Grupo de Administracion
Empresarial or Business Administration Group) will directly
control all of Cubalse's foreign offices. GAESA subsidiary
TRD-Caribe will take over transportation and logistics
operations and Cubalse's greatest source of revenue through
its retail stores. TRD-Caribe already operates close to
1,000 retail stores selling a wide range of goods in
convertible currency. GAESA subsidiary Almancenes
Universales will assume all the warehouse and wholesale
operations. Armed Forces Minister General Julio Casas
Regueiro is the president of GAESA and Raul Castro's
son-in-law, Luis Alberto Rodriguez, is the General Director.

--------------
COMMENTS
--------------


8. (C) Several USINT contacts see the end of Cubalse as part
of Raul Castro's attempt to improve his control over the
large parastatal structures created outside of formal
ministries by Fidel Castro. If true, then we should
eventually expect further decisions regarding the future of
Cimex and Palco. While some of the recent moves could bring
efficiencies (i.e. transferring retail operations to
TRD-Caribe),the Cubalse break-up clearly consolidates the
Cuban government's monopoly power in even fewer hands.
FARRAR