OPACITY AND GEOPOLITICS. THE MYSTERY OF HABANOS SA AND THE HABANO FESTIVAL IN CUBA

[El Presidente]

 

 

OPACITY AND GEOPOLITICS. THE MYSTERY OF HABANOS SA AND THE HABANO FESTIVAL IN CUBA

march 7, 2024

Eloy Viera Cañive

Between February 26 and March 1, 2024, the XXIV edition of the Habano Festival was held in Cuba.

During the last night of the event, the usual Gala Dinner took place, marking the closing of the festival. From the dinner, in which Miguel Díaz-Canel and Manuel Marrero Cruz were present, images emerged that show those present bidding in the traditional humidor auction and enjoying luxuries unattainable for the average Cuban. It also emerged that on this occasion the auction managed to collect a record amount of 17.8 million euros, which – without offering further details – the organizers said would be donated to the Cuban Public Health system.

Likewise, the Gala Dinner confirmed the continuation of the cultural exchange 2.0 between Cuba and the United States, resumed in a more discreet manner by the Biden Administration. On the night of March 1, one of the most influential American bands, "The Village People"—exponents of the disco genre of the seventies and eighties of the 20th century— appeared on the stages of Pabexpo and as part of the closing of the festival. "The Village People" popularized hit songs like YMCA and Can't Stop by Music .

The images of the Habano Festival demonstrate the increasingly growing difference between the country that is built for foreigners and magnates in closed spaces and the one that survives outside the walls of the fairgrounds. But they also leave persistent questions about the opaque management that the Cuban regime maintains over the most profitable sectors of the Cuban economy.

With the Habano Festival, the achievements of the company that sponsors it, Habanos SA, a subsidiary of Tabacuba that is responsible for the global marketing of 27 brands of premium cigars, also transcended. Press reports stated that Habanos SA recorded revenues of 721 million dollars in 2023, which represents an increase of 31% compared to the previous year.

However, beyond the cold numbers, we Cubans have no real control over income and much less ability to directly influence the Cuban Government to make it accountable for its administration and disposition. Who controls Habanos S.A.? Where does the money it produces really go? How much does it stay in the country and what is it invested in?

TABACUBA VS. HABANOS SA WHO CONTROLS AND HOW?

Tabacuba is the state business group that has a monopoly on Cuban tobacco activity in each of the phases of its production chain. However, the marketing of tobacco products, which marks the end of the extensive tobacco logistics chain, is not the exclusive monopoly of the state business group—currently directed by Marino Murillo Jorge , the dismissed former Minister of Economy and Planning and president of the Commission. of Implementation of the Guidelines—.

To market some of its most valuable products, especially abroad, Tabacuba has the participation of Habanos S.A.

SAN MURILLO SELLS TRACTORS, SMOKE AND TOBACCO IN MLC

The Díaz-Canel Government puts another setback on Cuban farmers. Abuse, force, manage, earn and charge. Now, tobacco farmers will have to buy tractors from MLC.

A subsidiary company is a business entity that is wholly or majority controlled by another company (known as a parent company). As a general rule, the parent company owns more than 50% of the shares of the subsidiary, giving it control over the decisions and operations of the subsidiary.

Habanos S.A. is a parent company, a company that for the purposes of Cuban legislation is a mixed company made up of Cuban state and foreign private capital. But… in what portions and who are the shareholders?

The data from Cuban commercial registries are not public or at least not easily accessible. However, there are interesting data that can be found outside of Cuba that offer some clues as to who is behind the foreign part of Habanos S.A.

According to what the directors of Habanos SA stated, in 2023 China will consolidate itself as the first global market in turnover for the company. Spain, Switzerland, Germany and the United Kingdom followed. The distribution of the market—which has changed in recent years and now places the Asian giant as the main consumer of Cuban premium cigars—offers some indications that corroborate the reports of several foreign media outlets.

Until 2020, one of the main shareholders of Habanos S. A. was the British company Imperial Brands PLC. Experts pointed out that that year the British company sold its stake in the company and in other tobacco and cigarette factories and brands for an amount of approximately 1.3 billion euros.

The agreement included the transfer of half of Habanos S. A. to a corporation registered in Spain under the name Allied Cigar Corporation SL. However, in November 2020 (a month after Imperial Brands PLC sold its share of Habanos S.A.) Allied Cigar became controlled by an investment group called Asia Uni Corp.

Chen Zhi—one of the direct advisors to the Prime Minister of Cambodia and one of the most influential businessmen in that country—has been linked to Asia Uni Corp and the purchase of half of Habanos SA.

Chen Zhi was born in China, but acquired Cambodian citizenship in 2014. In October 2020—the date on which the agreement to sell half of Habanos S.A. was also sealed—he was appointed advisor (equivalent to the status of minister) to the Cambodian Prime Minister Hun Sen. He is the founder of the Prince Group, one of the most influential business groups in Cambodia.

Although Chen Zhi's participation in the purchase of half of Habanos SA has been kept secret, Radio Free Asia (RFA) managed to link Zhi to the purchase using —in addition to sources close to the negotiation—the annual report 2022 of Asia Uni Corp (the company that took control of Allied Cigar Corporation SL). According to RFA, the report indicates that the shares of Allied Cigar Corporation SL are owned by a company registered in the British Virgin Islands – a recognized tax haven – that has among its five directors Qiu Wei Ren, a Cambodian and Chinese citizen who is a director of several companies owned by Chen Zhi in Hong Kong and Cambodia. 

ARE CHINA AND VIETNAM THE ALTERNATIVE FOR CUBA?

People do not have to be forced to choose between material progress, social justice and political freedom. Understanding the above is, simultaneously, the realistic verification of a historical experience and the utopian commitment to a civil election.

Chen Zhi has participated, in his capacity as advisor to the Prime Minister of Cambodia, in meetings with Esteban Lazo , president of the National Assembly of People's Power, and with Manuel Marrero Cruz.

But the most interesting thing in relation to Chen Zhi's alleged ownership of Habanos S.A. is that the Chinese/Cambodian tycoon and the Prince Group have also been accused of being associated with the United Front Work Department (UFWD). ). The UFWD is a high-level organ of the Chinese Communist Party (CCP) dependent on the Central Committee and whose mission is to transmit the official narrative of the regime at home and abroad through three types of actions—neutralizing criticism of the Party, spread positive propaganda about their management and "seduce" foreign elites to defend the interests of the CCP in their countries.

Today, we Cubans do not have a clear idea of who owns half of one of the most profitable state-owned companies in the country. But the existing evidence shows that it may be in the hands of a person who uses political connections and clientelism for forms of promotion and influence in closed and corrupt environments such as Cuba. A person who was also accused of acting as an agent of influence for one of the main superpowers in the world.

Faced with a scenario like the previous one, the lack of transparency and control of operations by citizens only deepens the risks of corruption, mismanagement and waste that a select political class that controls exchanges can make of the country's resources.

MAFIA DEALINGS

This type of undeclared relationships—which are reproduced, among other reasons, due to the similar characteristics of the regimes involved—and which involve public capital and resources, places Cuban citizens in a situation of greater helplessness. Cuban public resources are being managed and delivered to foreigners without control or transparency that allows us to know the future or the mortgage that weighs on the Cuban nation.

The situation is much more worrying as it is part of a geopolitical game in which citizens have no participation or influence and because it has placed the country's main resources and opportunities in the hands of two great autocratic political forces ( Russia and China ) .

What is most worrying is the fact that the regimes involved in the games are characterized by opacity and clientelism.

CONTRADICTIONS BETWEEN THE SPLENDOR OF THE HABANO FESTIVAL AND THE REALITY OF THE INDUSTRY

The opacity and clientelism of the Russian, Chinese and Cuban regimes allow the management of resources to go unquestioned and, with impunity and preferential, the enrichment of a caste connected and obedient to those powers to occur. The capacities to question the management of resources are also diminished by the repression they exert on dissident civil society and on articulate citizens to keep them silent.

For this reason, the Cuban official press today highlights the increase in Habanos SA's income, but does not clarify the contradiction between the increase and the complaints of tobacco growers in Pinar del Río, the main producing region of the country. The tobacco growers of Vuelta Abajo have recently stated that non-compliance with planting plans is due to a lack of attention and resources to grow the raw material used in the premium products sold by Habanos SA.

BETWEEN FRENCH ELEGANCE AND THE FOOD CRISIS: WHITE DINNER IN CUBA

White Dinner in Havana generates debate for holding a luxury event in the midst of the food crisis.

But it is not a recent problem. The splendor of the Habano festivals has not been synonymous with improvements in the conditions of producers or increased crop yields. The latest Cuban tobacco harvests have been disastrous, among other issues because no resources have been invested in recovering the conditions for cultivation, mostly in Pinar del Río.

The 2022-2023 harvest was the smallest in the history of Cuba, especially due to the effects of Hurricane Ian. But after a year, the 2023-2024 harvest also showed no signs of recovery. On the contrary, since the beginning of the harvest in October 2023, the lack of inputs was the rule by which the planting stage was extended, in an unusual way, until February 2024.

Even with the extension of the planting stage to try to plant as much tobacco as possible, the authorities of Tabacuba recognized that at the end of the 2023-2024 planting stage, only 14,000 hectares of tobacco had been planted in the country. A figure that represents approximately 60% of what was planted in 2021 before Ian passed, about 23,000 . 

The splendor of the Habano Festival also does not correspond to an increase in the importance of Cuban tobacco in the international market. As the luxury of the celebration increases, Cuba's importance in the international tobacco market decreases.

According to a report published in The Spectator , several years ago the Dominican Republic surpassed Cuba in the international tobacco market. Habanos SA reported revenues worth $545 million in 2022 and $721 million in 2023. However, according to the English media, the Dominican Republic has surpassed the $1 billion mark in annual income since 2020. and its exports continue to rise.

The Spectator claims that much of Dominicana's success is due "to a significant increase in the production of machine-made cigars." Currently, he adds, "there are more than 50 factories (...) that employ more than 120,000 people." The newspaper notes that the Dominican Republic "also leads in the production of luxury hand-made cigars, for which Cuba has long been famous" — and mentions world-renowned products, "the Davidoff Anniversary, the Ashton Classic and the Arturo Source “Hemingway” »—.

This is how distant the propaganda and ideas of the bureaucracy are from Cuban reality. A bureaucracy and propaganda that values and promotes the celebration of festivals that do not reflect the reality of those who support the luxuries offered in them or the successes of an industry managed from opacity and clientelism.

The Cuban tobacco industry is losing ground to competitors with less tradition and fewer spatial conditions, instead of consolidating and enriching its reputation and inherited global position.

[DharmaBum]

"The images of the Habano Festival demonstrate the increasingly growing difference between the country that is built for foreigners and magnates in closed spaces and the one that survives outside the walls of the fairgrounds." Well said. 

[Puros Y Vino]

9 hours ago, DharmaBum said:

"The images of the Habano Festival demonstrate the increasingly growing difference between the country that is built for foreigners and magnates in closed spaces and the one that survives outside the walls of the fairgrounds." Well said. 

This is a worldwide phenomenon IMO. It has played out in most Caribbean countries for decades. I even see it in places like Italy. I have family there and the #1 lament is how they (native born Italians) are being priced out of everything. It started with real estate with foreigners buying up old houses and villas from people desperate for money in dying towns. This in turn has driven up the cost of housing for locals. Many people in their 30's to 50's cannot earn enough to own their own home. If they're lucky, they will inherit their parents' place. This is happening in Canada too. Our real estate has been commoditized heavily as investment vehicles for foreigners. The end result? Canadian citizens cannot afford to buy a house and even rent is taking too much of people's monthly earnings at increasing rates. 

[helix]

On 3/8/2024 at 6:58 AM, El Presidente said:

This is how distant the propaganda and ideas of the bureaucracy are from Cuban reality.

The whole situation in Cuba is nonsensical and unsustainable . For the ordinary Cuban all that can be seen is existential angst and despair.

[BrightonCorgi]

On 3/8/2024 at 7:34 AM, Puros Y Vino said:

This is a worldwide phenomenon IMO. It has played out in most Caribbean countries for decades. I even see it in places like Italy. I have family there and the #1 lament is how they (native born Italians) are being priced out of everything. It started with real estate with foreigners buying up old houses and villas from people desperate for money in dying towns. This in turn has driven up the cost of housing for locals. Many people in their 30's to 50's cannot earn enough to own their own home. If they're lucky, they will inherit their parents' place. This is happening in Canada too. Our real estate has been commoditized heavily as investment vehicles for foreigners. The end result? Canadian citizens cannot afford to buy a house and even rent is taking too much of people's monthly earnings at increasing rates. 

This is par for the course where I grew up on Cape Cod. Housing on Martha's Vineyard, Nantucket, and even Falmouth has pushed out life long residents. I do not believe anyone has a "right" to live in any particular locale, but the Cape is turning a bit "rich or poor". Not as much in-between as there use to be. If you do have housing, easy to make money is flowing. 

Summer job scooping ice cream can get $30 an hour plus tips (probably $15 an hour on that). Even at those rates it's hard to find someone.

[Fugu]

Asking the right questions.