The Truth About Castro

Editor’s Note: Fidel Castro, the longtime Cuban politician and revolutionary, recently passed away. Doug Casey had the chance to meet the Cuban leader back in 1994. Here is an article Doug wrote about Cuba and his encounters with Fidel. It was written in the 1990s, but it’s still as relevant as ever.

Half the fun of Cuba is getting there.

I was there in the 1990s with about a dozen financiers from Europe. The contingent from England, Norway, and Switzerland came over together from London, changing planes in Miami for Panama. When an impertinent customs clerk asked one of them where he was going, he innocently responded “Cuba.” All six men were hustled into a locked room, with all kinds of armed and uniformed types milling about, and were detained there for two hours while agents ran background checks on them. The government couldn’t have cared less if they missed their connection. Your tax dollars at work, winning friends and influencing people for America.

Current Prices on popular forms of Silver Bullion

It used to be there were no restaurants, no shops, no cars, and few hotels in Cuba. People were malnourished, and even at a couple of official receptions, the staples were olives and Spam because that was what they were able to barter for.

That was 1994, and things were especially grim because the recent collapse of the USSR was starting to bite in earnest. The bankrupt Soviet government had been subsidizing the even more bankrupt Cuban government for the equivalent of billions of dollars a year for several decades, in a historic example of the blind leading the doubly dismembered. The cutoff of Soviet subsidies resulted in an acute depression within the chronic depression Cuba had experienced since 1960.

The Embargo

The US embargo on trade with Cuba was put in place by Kennedy in 1962. A window into Kennedy’s venal character is offered by his having sent White House Press Secretary Pierre Salinger out to scrounge up scores of boxes of Cuban cigars the day before he announced the embargo; JFK didn’t want to be even slightly inconvenienced by something he hoped would devastate thousands.

Perversely, the embargo has helped those it was intended to hurt, and hurt those it was intended to help.

In theory, the embargo was supposed to economically strangle Cuba and help unseat Castro. In fact, it helped entrench him, because Castro was able to effectively blame the country’s myriad economic problems on an outside source instead of the idiotic economic policies he instituted. And it had the additional advantage of making the Americans look like aggressive and irrational bullies.

If the US government really wanted to see Castro deposed, it would instead have encouraged travel to Cuba. Cubans would have discovered that the average American doesn’t grow horns and have a forked tale. His ideological purity would have been corrupted with imported books, magazines, and videos, and his revolutionary fervor dulled by the prospect of wearing Italian shoes, driving a German car, and taking pictures with a Japanese camera. It was these things, not just the internal contradictions of socialism, and far more than the insane levels of military spending, that caused the collapse of the Soviet empire.

In reality, the embargo has just been a silly, destructive, and massively inconvenient public relations scheme. The Cubans have been at liberty to buy anything in the world they wanted over the last 55 years, including American products, as long as they didn’t buy from an American. They lacked goods not because of the US embargo, but because they simply didn’t have the money to buy from anyone.

But the cat’s out of the bag and the embargo is soon going to be history. And I expect growth to be hyperbolic.

A Word on Castro

Some made the point that I seemed somewhat star-struck when I met Fidel years ago. I’ve thought about it, and perhaps the allegation is true. Having made a practice over the years of meeting the thugs who run a lot of the world’s countries, I find my taste runs to the ex-revolutionaries. True, they’re almost all misguided, destructive, and completely corrupted by the power they’ve gained. But apart from any other considerations, it takes real courage, ability, and vision to violently overthrow any established government; the type of people who do it are like a force of nature. They’re a far cry from the loathsome publicity seekers and despicable popularity contest winners that woo the masses with lies and promises of stolen booty during elections.

Revolutionaries play for the highest stakes and make things of world historic importance happen. It’s not a question of who’s good or who’s evil, who’s right or who’s wrong. The important thing in a revolution, and what the world remembers, is that few stood against many, and triumphed.

Of all the revolutionaries of recent history, Castro (along with Che Guevara, who may cut an even more romantic figure) is in a class by himself. Intellectual, athlete, raconteur, bon vivant, and war hero, he’s the kind of guy you’d love to have at a cocktail party. I see Castro as a Jedi knight fallen prey to the temptations of the Dark Side, a Latin Darth Vader. Too bad he cottoned to a dumb philosophy, and then overstayed his welcome. But his essence isn’t the reality; it’s the myth.

Do I respect him? About 100 times more than every politician in the Republicrat and Demopublican parties put together. He’s done more harm than good, but so have Clinton, Bush, and Obama. And in absolute terms, they have done far more harm, and are far more dangerous, simply because they’re so much more powerful. Sure, Castro is a dictator who’s killed hundreds of people and arbitrarily imprisoned thousands; but that puts him in the minor leagues, with people like Franco, or Pinochet, or Batista. Not Stalin, Mao, or Hitler. And any world leader inevitably has blood on his hands. At this point, Castro is as much a media figure as anything else. People who get hot under the collar when they think of him and Cuba as the Communist Menace, are just as out of touch with reality as Fidel himself.

Opportunities

You may recall the scene from the movie The Godfather, where Michael Corleone visits Cuba in the late 50s, during the Batista regime, to determine whether his family should invest there. All reports were enthusiastically optimistic, but he begged off after witnessing a street fight in which one of Castro’s rebels didn’t hesitate to sacrifice himself to take out a couple of soldiers. Michael concluded that if Castro’s people were that motivated, they were certainly more than just opportunistic bandits. The point stuck with me and I’m always on the alert for something that gives me a clue I should be zigging instead of zagging.

There are only two areas where Cuba has a competitive advantage: tourism and cigars. As you might guess, cigars are a major foreign-exchange earner for Cuba, and the only one, other than tourism, that has a future in my opinion.

I’ve long been a cigar aficionado. Unlike cigarettes, which are simply a nervous habit, and evidence of stress, a good cigar is a mellowing, contemplative experience.

Good cigars signal market tops because they’re expensive. People don’t send money up in smoke when the market’s down or they can’t make the mortgage payment.

Cuba has historically cranked out about 100 million cigars a year. I think there’s been some diminution of quality, which evidences itself in cigars that don’t draw well and wrappers that come undone easily, among other things. What’s likely to happen is that Cuban production will peak just as the world enters the Greater Depression and people stop smoking cigars because (a) they can’t afford them, and (b) they don’t want to be characterized as an undeserving and malevolent rich person. The popularity of cigars is as cyclical as the popularity of stocks.

What is a good cigar? That depends on to a large degree on what you like. Personally, I prefer a mild smoke in the shape of a panatella (relatively long and thin). The premier Cuban brand is the Cohiba, which is what Fidel used to smoke before he gave up smoking. They’re excellent smokes, but not really worth the cost. My own choice is the Rey del Mundo, and to my taste, it’s actually superior.

Two tips: beware of buying cigars on the street in Havana; you could get a box of phony Cohibas that are completely unsmokable garbage. Get a good humidor; if cigars are allowed to dry out they can be totally ruined and have to be thrown out.

Property

I’m pretty familiar with the Caribbean, and I’ll give you the bottom line. There are a few bright spots that are friendly, pretty, progressive, and upmarket, but on the whole, the place is very expensive, racially charged, and regressing economically. Very little merits consideration for a vacation, much less an investment. Cuba, however, is a special situation. Prices are extremely low. The place is completely undeveloped and in dire need of capital. The population has been isolated from the rest of the world for more than 55 years, and even around Havana it’s going to be years before they learn to resent tourists. But things will really explode when, and this is absolutely inevitable, the place becomes legal for Americans. At that point, millions of gringos will pour in annually. Why would anyone go to Florida when Cuba is only 90 miles offshore? The US government itself estimates 12 million visits from Americans the first year the embargo comes down. But that’s an impossible number since only a fraction of them could be accommodated with facilities that are even in the planning stages.

I look at businesses and real estate from an investment perspective all over the world, and I can tell you that Cuba is all you need to know about how to make an absolute killing for at least the next generation. There are various places in Africa, Asia, and South America, many of which I’ve discussed, that may have more of some desirable things and less of some undesirable things. But there’s no place that has the mix that Cuba does, plus one overwhelmingly huge factor: It’s right on the doorstep of the US.

The good news is that Cuba is all an intelligent property speculator needs to know for the next generation. The bad news is that the Cuban government is only allowing commercial investment, where it acts as a joint venture partner. The standard deal is that a foreigner puts up 100% of the capital for his 50% interest; the Cubans put up the property for theirs. The investor is exempt from import duties and pays no income tax until he’s received 100% of his capital back. This is a fair deal, but it precludes passive investment. A real pity in a country with over 2,000 miles of pristine seacoast; priced, when it trades, at a pittance.

The fact is that around a third of the land in Cuba is still privately owned and theoretically can be transferred. The problem is finding out what there is, and who owns it. And even if you can jump those hurdles, it will be a real problem getting permission to buy and transfer title. In other words, it’s completely impractical to try buying land. Too bad, because some beachfront will be a 100-1 shot over the next decade.

Overseas Cubans with relatives on the island should get those relatives working on the problem; there could hardly be a more productive way for them to spend their time. A word to the wise.

Editor’s Note: With Fidel Castro’s recent death, we believe it’s just a matter of time before American tourism to Cuba will explode. The International Monetary Fund estimates there could be up to 10 million visits from Americans every year. Currently, there are only 61,000 total hotel rooms to accommodate tourists, according to the Cuban ministry of tourism.

In other words, Cuba’s current hotel capacity can accommodate only a tiny fraction of the American tourists expected to visit the country.

We expect the potential for investment returns to be explosive.

Reprinted with permission from Doug Casey’s International Man.

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