To fill this information gap, The Havana Consulting Group (THCG) has been monitoring travel to the island from key locations in the United States. According to THCG monitoring, from January through October 2015, 3,764 flights to Cuba originated from the Miami and Tampa Airports, 277 more flights than during a like period in 2014, for a growth rate of 8%, on top of a growth in flights of 24% a year earlier.

Table 1. Flights to Cuba originating from Miami and Tampa Airports

Source: Based on daily monitoring of flights to Cuba from the Miami and Tampa airports conducted by The Havana Consulting Group.

From January to October 2015, 573,510 passengers traveled to Cuba from the Miami, Tampa and Orlando Airports; of these, 440,388 are Cuban-Americans, 116,184 are U.S. residents, and 16,938 are Cubans returning to the island from visits to the U.S. These statistics do not include U.S. residents who travel to Cuba through the Bahamas, Cancún or the Cayman Islands, estimated at several thousand. Considering that November and December are traditionally very heavy months for U.S. travelers, visitors from the U.S. alone could come close to or exceed 730,000 in 2015 and to continue this upward trend; the figure could reach one million by 2016.

Strong Impact on the Tourism Infrastructure and Food Supplies

The measures implemented by the Obama Administration that have facilitated travel to Cuba have been partly responsible for the sharp increase in Cuban tourism. Not only has the United States become the second largest emitter of tourists to Cuba, but travelers from the United States have contributed to pushing the island's tourism infrastructure to its limit. The impact has been felt on the lodging sector as well as on logistics, transportation, and supply and distribution of food and other inputs that are essential to meet the needs of the hundreds of thousands of visitors arriving in the island each year.

Identifiable are shortages in retail markets of a range of products that are consumed domestically and also by tourists.  A few weeks ago, THCG surveyed over a 10-day period about 25 stores in the city of La Habana and in other cities with high dollar purchasing power where private businesses offer lodging and prepared food services (paladares), to assess the availability of supplies for several key products over a 10-day period.  The study found that the level of supply for certain national products, such as Cristal and Bucanero beers, was low, while there were adequate supplies for imported brands such as Heineken, Beck’s, Presidente, Corona, Brahma, Prima, Sol, Claro, Bavaria and other brands which have recently become popular in the island.

Another important finding of the study was the low availability of chicken meat; of the 25 stores surveyed, 12 did not have any chicken meat for sale, while in the others, only one or two chicken products (e.g.,  whole chickens, wings, drumsticks) were available.  With respect to domestic bottled water and soft drinks, these products were not available in 55% of the surveyed stores. These findings make it abundantly clear that domestic output is unable to meet the growing demand from higher purchasing power in convertible currency of the population coupled with the increase in domestic tourism, which last year reached 1.5 million tourists, half of the roughly 3 million foreign tourists who visited the island. See Figure 1.

Figure1. Domestic tourists and foreign tourist arrivals

Source: The Havana Consulting Group based on statistics published by the Oficina Nacional de Estadísticas e Información (ONEI) and press reports

Because Cuba does not have wholesale markets where private businesses authorized to process and sell foods or provide private lodging can purchase the inputs they need, these private sector entrepreneurs must also turn to retail makets for supplies, adding pressure on internal markets.  Undoubtedly, this is one of the principal factors that has created shortages of supplies in state dollar-denominated stores on which the population depends for their needs, although there are other reasons as well, such as low production levels, poor planning of import cycles, and bottlenecks in distribution and transportation.

Impact on the Electrical System

The over 57,000 licensed businesses engaged in the production and sale of food products, coupled with the over 25,000 licensed businesses authorized to rent rooms or houses, have been critical for Cuba to be able to accommodate the wave of new tourists that have arrived in the last few months, particularly from the United States. The proliferation of these private businesses has not only had an impact on the levels of supplies of retail outlets but has also increased the demand for electricity.  In several areas of the city of La Habana and nearby municipalities there are again reports of unplanned electricity blackouts.

As noted above, the increase in tourists in 2015 has affected several strategic factors of the Cuban economy.  What would be the effect of an even larger wave of tourists anticipated for 2016 associated with the planned arrival of cruiseships and ferries to the island plus additional tourists from the United States and other locations arriving via air travel?

The bottom line is: Cuba needs very large infrastructure investments in order to be able to meet current and future demands from tourists.  Under present conditions, infrastructure capacity seriously affects the ability of the tourism industry to grow.

Cuba's Reforms Require a Change in Mind Set

The Cuban government wants to turn these challenges into opportunities.  However, two years after the launch of the Mariel Special Development Zone (ZEDM), its success in terms of attracting new investments is very limited.  To date, only 8 investment projects in the ZEDM have been approved.

Despite the government’s efforts to attract investment, the tepid results are indicative, on the one hand, of the problems associated with a state bureaucracy that slows down and hinders negotiations and, on the other, the poor technical preparation, inexperience, and lack of grasp of the issues on the part of some -- but not all -- Cuban negotiators.

Inexperienced and unprepared Cuban negotiators see foreign investors as enemies that have to be defeated at the negotiating table rather than as partners who are going to bring capital, technology, and experience to help Cuba overcome its technological backwardness and underdevelopment.

Beyond attracting foreign investors, Cuba needs a profound change in mind set, in concepts, in how it approaches business opportunities.  Cuba needs to break old ways and taboos to make it possible to launch an efficient and dynamic economy that will benefit all Cuban citizens. The opportunities to transform the economy are there and are real; what is missing at this time is a willingness and an effective strategy to realize the opportunities.

Raúl Castro's prescription that the reforms should progress "slowly but surely” should change to a more dynamic and optimistic: "opportunities for all, at full speed."