Spanish companies operating in Cuba are reportedly assessing the potential risks of continuing to do business in the country after the U.S. sanctioned GAESA, the Cuban communist regime’s tourism conglomerate.
GAESA, or Grupo de Administración Empresarial S.A., is a branch of the Cuban regime operated by its military that controls as much as 40 percent of Cuba’s entire economy. GAESA operates the nation’s tourism industry — one of the few areas that the ailing regime invests time and resources in maintaining, as it represents one of the main sources of income for its repressive apparatus. In addition to tourism, GAESA manages other key sources of income through its numerous branches, such as remittances and the Cuban slave doctor program.
Last week, the administration of President Donald Trump sanctioned GAESA and its President, Ania Guillermina Lastres Morera. Secretary of State Marco Rubio described the conglomerate as “the heart of Cuba’s kleptocratic communist system.” Sec. Rubio noted that it is estimated that GAESA holds up to $20 billion in illicit assets and its revenue is three times higher than the Cuban state’s entire budget.
The Spanish newspaper El País reported on Tuesday that the new sanctions against GAESA have prompted Spanish companies operating in Cuba — particularly, those in the tourism and financial services sectors — to evaluate the continuity of their operations with GAESA-linked entities. Tourism and finance are the two sectors with the most risk of facing consequences for dealing with the sanctioned conglomerate, and could lead to the blocking of assets, monetary penalties, and difficulties in conducting U.S. dollar operations for the involved Spanish companies.
El País, citing statistical data from the Spanish Institute for Foreign Trade (ICEX), detailed that Spanish companies collectively manage roughly 30,000 hotel bedrooms in Cuba, of which 3,000 are operated by of Spanish-Cuban mixed companies. The rest are managed through contracts signed between the Cuban regime and 4-5 star hotel chains such as Meliá, Barceló, and Iberostar. Meliá alone manages over 14,000 rooms across 34 different hotels across Cuba.
Secretary Rubio warned last week that U.S. citizens are banned from doing business with GAESA under the terms of the sanctions. The warning also extended to non-U.S. citizens or entities who engage with transactions with the sanctioned Cuban entities and persons, who could find themselves at risk of sanctions should they decide to engage in such operations.
Unnamed Spanish business sources told El País that the situation is “very delicate” and that some Spanish companies will have to decide whether or not to continue operating in Cuba under risk of sanctions. Similarly, unnamed law firms affirmed to the newspaper that companies have already consulted with lawyers how to address the risks.
“From a legal standpoint, this is a significant change, as the United States is equipping itself with a tool it can use as it sees fit. Companies operating in Cuba will find it much more difficult to continue doing business there,” José María Viñals, a partner at the international law firm Squire Patton Boggs, told El País.
“There will be much greater scrutiny from banks, insurers, and partners when doing business there, and many companies will consider whether it is worth continuing,” he continued, adding, “financial institutions will have to conduct a very thorough analysis and review their credit history with the island.”
Ignacio Aparicio, Director of the Cuban Desk at the California-based service firm Andersen, detailed to El País that companies have expressed concerns over the validity and continuity of their contracts with GAESA-linked entities. Similarly, he noted the personal risk concerns by executives regarding U.S. entry visas and from banking and insurance institutions regarding ongoing transactions with the sanctioned entity. Aparicio told El País that he believes that Spanish companies will carry out a gradual and selective withdrawal from Cuba, but noted that he does not foresee a complete withdrawal.
“This is neither a hypothetical nor a distant risk, nor is it a simple legal matter,” Aparicio stressed.
In addition to the sanctions on GAESA, the United States also sanctioned Moa Nickel SA (MNSA), a Cuban mining company accused of exploiting the nation’s mineral resources to benefit the Cuban regime at the expense of its people. Last week, the Canadian mining company Sherritt announced that it would end its decades-old presence in Cuba in response to Moa Nickel’s sanctions.
“With Sherritt suspending operations, the U.S. has now effectively targeted all of Cuba’s main sources of hard currency,” Paolo Spadoni, a Cuban economy expert at Augusta University, told Canada’s CBC last week.
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.
Read the full article here