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Adventures in Castro’s Cuba

Politics / Social Issues Dec 02, 2016 - 03:42 PM GMT

By: David_Galland

Politics

Dear Paraders,

Some years ago my then girlfriend, now wife, Deirdre and I set off to search Planet Earth for our personal paradise.

Cuba was one of the places we seriously considered.

My logic at the time—and this would be about 1995—was that Castro’s regime couldn’t last. And that once his heavy grip on the throat of the economy was released, the country’s natural charms and resources, sited as they are just 90 miles off the coast of Florida, would assure an entrepreneurially-minded individual (me) a solid chance of profiting.


My plans were a bit more specific than that. I would spend the years between my arrival and Castro’s departure creating and successfully branding a micro-brewery as making the best beer in Cuba. You know, the sort of boutique brewery operation now dominating the upscale suds market in the US.

For marketing purposes, I planned to launch a line of Cuban-themed beers, for example a dark sugar cane beer. I even had a jingle that came to me in my sleep and that I leapt out of bed to videotape in the middle of night. If you watched it (and it still exists), you’d think I was demented. But that’s how entrepreneurial dreams manifest.

Driven by the dream, I took two extended trips to Cuba at a time when it was very much verboten for an American to travel there. For that reason, on arrival in Havana from Montreal, I asked the border officer if he would mind not stamping my passport. With a knowing wink and a “Bienvenidos a Cuba,” he slid my passport back across the counter and waved me on.

And with that, I pushed my way through the tangled crowd blocking the egress from the terminal—Cubans aren’t big on order or personal space—and out into the heat and squalor of Havana and into a country frozen in the 1950s.

(For the music lovers among you, I’m currently listening to It Was Always You by Maroon 5, a group with a surprisingly deep catalogue.)

Adventures in Castro’s Cuba

On the first of my two trips, a Canadian friend of mine with business interests in Cuba kindly helped arrange appointments with government apparatchiks at a high enough level to make something happen.

He also introduced me to Carlos “Charlie” Figueroa, a hero of the Cuban Revolution. Charlie was at the helm of the first of Castro’s captured tanks to enter Havana, essentially announcing the revolutionaries had prevailed. You can still see his tank at the University of Havana where it remains as a monument to this day.

Over the course of my two trips, Charlie and I spent a lot of time together and became friends.

As a reward for his efforts on behalf of the revolution, Fidel gave Charlie a sprawling house and property abutting the Canadian embassy. I don’t know whose house it was before being appropriated by Castro, but even back at the time of our visit, it would have easily sold for a million dollars.

Charlie was possessed of great passions, none of which had anything to do with advancing the cause of the international proletariat.

My undying memory of the man is me bouncing around the potholed streets of Havana in the copilot seat of his ancient Lada as he drove with his knees. That allowed him to lean out of the window, a cigar in one hand and a cigarette in the other, making whooping sounds and unmistakably obscene gestures at every black prostitute we passed. And there were a lot of black prostitutes.

More than a few waved back and shouted out his name as we bumped by.

In any event, Charlie became my personal guide and one of several keys I used to open doors in Castro’s bureaucracy in the quest for the permissions needed to launch my micro-brewery.

I could regale you with many stories about that first trip, but suffice it to say that after a couple of weeks on the ground, and having met and spent a lot of time with a number of Cubans, I concluded the dream might be feasible.

With one small exception. At the time, and likely to this day, it was literally impossible for a foreign male to walk more than two minutes in any direction without someone pestering you to buy a box of stolen Cohiba cigars or rent a woman.

To provide you with a sense of just how persistent was the pandering, I will relate an incident that occurred when taking a swim off the beach in Varadero. Out of seemingly nowhere, a young mermaid popped out of the water in front of me, bathing suit top askew, to make her pitch up close and personal. That I was well offshore at the time was a testament to her ability to swim long distances underwater.

Thanks to my puritanical roots, I declined.

In any event, I concluded that, in addition to knowing the right people, the secret to doing business in Cuba was to come properly prepared to ward off the constant solicitations. So I returned to the US and not very much later came back with Deirdre. Upon returning, the first thing I did was to buy a box of contraband cigars. And thus armed, off we set.

“Señor, I have a very special box of Coh…” Spotting the box of cigars tucked under my arm worked like magic in stopping the cigar hawkers mid-pitch.

And Deirdre on the other arm was an equally effective talisman against the pimps and prostitutes as we sallied forth on our mission to conquer Cuba (or at least a corner of the beer industry).

Behind the Curtain

On our return, I immediately reconnected with Charlie as well other people I had come to know on my first trip. These included various foreigners with business interests in Havana, as well as locals I had become friendly with, including the twenty-something girlfriend of a late forty-something Canadian journalist then living on a sailboat moored in the Marina Hemingway.

On my first trip, several of my Cuban acquaintances—except Charlie, who couldn’t be bothered—were openly complimentary about the successes of the Cuban government. Each was able to rattle off factoids such as that the country boasted the highest number of physicians and engineers per capita in the world.

Interestingly, when we returned to Cuba, having built up some level of mutual trust, the tenor of the conversation took a 180-degree turn.

For example, the engineering student and companion to the Canadian journalist pulled me into the cabin of his sailboat and whispered angrily that everything she had said the last time I was in Havana was a lie.

That rather than creating a proletarian paradise, Cuba’s government was a corrupt and brutal dictatorship and all the progress she had touted was a sham. The people had no money, no food, no freedom, no future, no medicine, and no real healthcare.

Furthermore, most of the doctors and engineers graduated with little and maybe no knowledge of the professions designated on their Potemkin diplomas.

As part of her emotional outburst, she also told me that her decision to be the Canadian’s companion was not based on her feelings for the man, but solely out of the necessity of providing food for her family.

To say it was an uncomfortable and eye-opening conversation would be an understatement, and it was just the first of many I had over the course of our second visit.

The most memorable one came as a consequence of accepting a dinner invitation from a stranger who lived in the Malecón, the large slum located just off Havana’s seawall.

We had met Jose on the street the day before, when he asked us if we could use a guide. As we could, we agreed on the terms, and off we went.

Wandering around the city, the three of us chatted away. We provided Jose with insights into the lives and attitudes of Americans, and he responded with guarded comments on life under Castro. Understandable, given that at the time (and to this day), saying the wrong thing in Cuba could result in a prison term. Or worse.

After about three hours of genuinely enjoying each other’s company, the day came to an end, and Jose somewhat hesitantly extended an invitation for us to join him and his family for dinner the next evening. In the Malecón.

Never hesitant about saddling for a new adventure, we accepted the invitation. An act of great naiveté, to be sure.

That we actually showed up the next night at the agreed-upon rendezvous point, a small hotel on the edge of the Malecón, was sheer folly… a thought that came to mind as we followed the weak beam of Jose’s flashlight through the Malecón’s warren of broken buildings and littered streets, cloaked in almost complete darkness due to the lack of electricity.

People use the word dystopian rather freely these days. However, as an aficionado of video games, which occasionally include post-apocalyptic settings, I can assure you that dystopian is nearly the perfect word to use in describing the Malecón.

Dystopian: an imagined place or state in which everything is unpleasant or bad, typically a totalitarian or environmentally degraded one.

After about 10 minutes, we arrived at our destination. As it turned out, we had read Jose right, and he was sincere and not one of the legions of criminals living in the Malecón.

As a consequence, instead of a gang of thugs lying in wait for us as we walked through a hole in the wall of the building where he and his family lived, our eyes were greeted with a surrealistic sight.

Virtually all of the five or six stories in the building had collapsed of age and poor construction, perhaps helped along by a hurricane. The result was a jagged atrium, the ground floor strewn with broken concrete and other rubble from the collapsed floors.

The stairs to his family’s third-story apartment clung tenuously to the wall—no railing, just crumbling cement stairs attached to the shell of the structure. From where we stood at the entrance, we could see a faint light cast by a light bulb powered by a small generator that illuminated the family’s apartment on the third floor, the only one still occupied in the destroyed husk of the building.

What was left of their apartment was separated from the gaping wound of the “atrium” only by a ragged half-wall.

After climbing up to the apartment, Jose introduced us to his family. At first, the conversation was quite awkward—Jose’s bringing two gringos to dinner was an oddity to his family, as was our accepting his invitation in the first place. None of them had ever talked to a gringo before, and it was clear they were wondering what the hell we were doing in the Malecón, let alone joining them for dinner in their hovel.

Our meal consisted of stewed beans washed down with a weak juice served in cups made by tearing Coca-Cola cans in half. Jose’s father joined us after about an hour, crawling through a hole in the roof of a closet. It led to a secret hidey-hole he had built on the floor above where he kept an illegal radio that allowed him to listen to Radio Free America.

As the evening wore on and the level of trust rose, the family confirmed the stories we were now hearing regularly. Of the extreme poverty and suffering of everyone except Castro’s elites and functionaries. Of life in a police state, with watchers everywhere ready to turn in their neighbors for a reward for anti-state behavior. Now I more fully appreciated why our presence was making Jose’s mother so anxious.

The evening took a further unexpected turn after dinner when Jose led us through the dark streets to a local “bar”. Some clever fellow had rented the roof of one of the decaying buildings and set up a small cane and palm frond structure. That was the bar. All he had on offer was watery beer and “workers’ rum”—true rotgut, but at something like 10 cents a glass cheap enough to allow the proles to periodically drink away their worries.

To gain admission, Jose yelled up to the bar owner, who leaned over the edge and dropped the front door key to us, three stories below.

We stayed a couple of hours at the bar, which overlooked the sea of ruins in the blacked-out slum, sipping on rum just one cut above grain alcohol. In addition to Jose, we were joined by a group of pobres and enjoyed a lively discussion about politics, peppering each other with questions about life in our respective countries.

In the wee hours, Jose led us back to the edge of the Malecón, and we said our goodbyes. The last words he spoke to us were to the effect of, “You were very foolish to have accepted my invitation. Never do anything like that again.”

I Get My Brewery!

In between sightseeing and ultimately apartment hunting, Charlie and I dashed all over Havana in his Lada to meetings with government officials, occasionally joined by executives from my well-connected Canadian friend to add gravitas to the conversation.

In each meeting, I would carefully lay out my plans for creating a new beer line, to join the two then-dominant brands, Hatuey and Cristal. The apparatchiks would ask questions, then insist that there was another bureaucrat I needed to see and get permission from, and off we’d go.

I lost count of the number of meetings we had, but ultimately, near the end of my second trip, we made it through the maze to the decision maker and, to my great shock, got the green light to proceed.

With terms.

“Of course, but what terms?” I wondered out loud.

“I will explain, but we must drive somewhere first,” one of the group replied.

And with that, Deirdre and I and probably eight more people hopped into trucks and headed out of town, into the scruffy jungle on the outskirts of Havana.

In due course, we left the (badly) paved road and began following a dirt track into the jungle. I forget how long we drove, but ultimately the caravan came to a halt and we climbed out into the stifling heat.

“There it is!” one of the Cuban officials stated, pointing his finger.

Following the direction of his arm, I could make out the twisted, rusted metal frame of what had clearly once been a large industrial operation, complete with broken conveyors wending their way up probably four stories.

“What is it?” I asked, feeling no longer in Kansas anymore.

“Your brewery!” the Cuban replied with a smile, setting off a round of smiling and head-nodding among his comrades.

I won’t linger on the events that followed, but once the proverbial dust had settled, it turned out that the “terms” for getting permission to launch my brewery included refurbishing the abandoned Hatuey beer factory and rehiring the 500 employees who had lost their jobs after the place collapsed from disrepair.

Keep in mind, I had explained in great deal to everyone assembled, and all the apparatchiks we had worked our way through to get to this point, that I needed no more than probably six workers to get my micro-brewery up and running, and then we’d see how it went from there.

They weren’t done with the terms. In addition to refurbishing the bombed-out hulk of a factory the great state of Cuba was so generously contributing to my cause, I was to pay my 500 new employees US$500 a piece, per month.

So, US$250,000 a month.

“Carlos, can you explain to them what ‘micro’ means?”

In response, Carlos leaned into my ear to whisper, “Here’s how it works. You pay them US$500 a month per worker, and they pay the workers 500 pesos. They keep the difference.”

As I recall it, 500 Cuban pesos at the time might have been worth something like US$15.

The negotiations continued for another day, by which time it became clear that unless I made it financially worthwhile to each of the comrades in the chain of command—including Castro’s clique sitting like ticks at the top of the heap—there was no deal to be made.

At this point, we had already found a nice apartment and so pondered staying on and trying to find a way through the wall of bureaucracy. In the end, we concluded we didn’t want to have a bunch of corrupt comrades as business partners—the sure outcome, no matter how things turned out—and decided to move on.

In addition, we realized that having more money in our pockets than the average Cuban made in a month, or maybe six months, meant we’d always be targets.

And so it was that, with some sadness, we checked out of the grand old Hotel Nacional de Cuba and headed to the airport to fight our way through the mob and on to greener pastures.

Post-Mortem

Since Fidel’s departed this world last week, there has been much ink spent on eulogizing him. Remarkably, a number of political and social leaders have bemoaned his passing. Just a couple of examples will suffice.

"Fidel Castro was a symbol of the struggle for justice in the shadow of empire. Presente!"

Jill Stein, head of the Green Party

(As Stein uses the word “Presente”, it’s pretty much the equivalent of clicking her heels together and snapping a crisp salute in the direction of Fidel’s corpse.)

“Rosalyn and I share our sympathies with the Castro family and the Cuban people on the death of Fidel Castro. We remember fondly our visits with him in Cuba and his love of his country.”

Jimmy Carter

“In many ways, after 1959, the oppressed the world over joined Castro's cause of fighting for freedom & liberation—he changed the world. RIP.”

Jesse Jackson

“With the death of Fidel Castro, the world has lost a man who was a hero for many. He changed the course of his country and his influence reached far beyond.”

EU Chief Jean-Claude Juncker

It’s mind-numbing to me that these people so clearly fail to understand the nature of the man and his “revolution.” I can only assume it is because they have been blinded by their allegiance to socialist ideals.

Why let institutionalized murder camps and the subjugation of essentially all human rights for over 50 years get in the way of an uplifting narrative of the little people coming together in a common purpose?

If they and others of the philosophical ilk bothered to take even a little peek over the rims of their fashionable half-glasses, they would find that Castro was just another power-mad tin-pot dictator, albeit one with notable skills at manipulating the useful idiots of the Western press.

The US blockade made his great ruse easier. When we were there, it was clear that any number of countries were trading with Cuba, including Canada, Spain, and the UK. Yet, as with all centrally controlled economies, which are invariably weighed down by corruption, the lack of the free flow of goods and services ensured that what little wealth was generated never dripped down to the common folk.

Adroitly using the US blockade to his political advantage, Castro had a big billboard planted on the seawall next to the Malecón with a cartoon of Fidel pointing at a disreputable-looking Uncle Sam. The cartoon-Fidel was admonishing Uncle Sam with words to the effect of “America, stop the blockade and let our people live!”

Utter bullshit. But effective in that Castro could, and did, blame the economic hardship caused by his kleptomania and idiotic policies on the US embargo.

On top of the economic hardships he foisted upon his beloved fellow citizens, there was also the brute force of a dictator unchecked by any sense of morality or compassion. For an accurate portrayal of life—and death—under Castro, take a moment to read this article on the laundry list of his murderous policies.

I feel very fortunate for the time I spent in Cuba, for the people I met, and for having been able to observe life in a country run by communists. Based on that experience, I have concluded the word “communist” is a term with zero meaning.

That’s because, as confirmed time and again by history, once the comrades take charge, they show no concern for the proletariat. Instead, they use the ideal of a society where everyone participates “from each according to their ability, to each according to their needs” as easy cover for looting the landed gentry, professional and entrepreneurial classes, all for their personal gains.

Try to stand up to them and, again claiming to be operating on behalf of the common people, the ruling cadre will first crush your spirit and then your bones.

The useful idiots in the US media have made much of Trump’s “insensitive” comments upon hearing Fidel was headed to hell (one hopes). His comments included:

"Fidel Castro's legacy is one of firing squads, theft, unimaginable suffering, poverty, and the denial of fundamental human rights."

Based on my direct experience, that sounds entirely accurate.

Good riddance.

Snippets

“I wonder where Charlie is?” I said to his beautiful wife near the end of dinner at an underground restaurant in Havana where we were marking the end of the first of my two trips to Cuba.

Charlie had excused himself from the table shortly after the main course and, 20 minutes on, had not reappeared.

“Oh, my Charlie!” she replied with a laugh and a casual wave of the hand. “He’s probably off with those black prostitutes again. He LOVES the black prostitutes!”

My face reddening, I’m sure, I stammered a gentlemanly reply. “Oh, no. I’m sure he wouldn’t be doing anything like that!”

“It’s of no consequence,” she said with a dismissive flip of the hand. Then she leaned forward and innocently inquired, “Have you been with a Cuban woman yet?”

“Uh, no, actually,” I answered truthfully, my face now surely beet red.

“Oh, but you must!” she answered brightly. “We are very, very good at sex!”

I remember reflecting at the time, and many times since, how very different the world’s cultures can be.

****

“You know, you’re crazy,” I said this morning to the back of Deirdre’s head as I wrote up these musings.

“And why would you say that?” she asked, lifting her head from her daily Duolingo practice.

“You must be crazy, otherwise you would never have agreed to go to dinner in the Malecón that night.”

“It seemed like it would be interesting,” was her reply.

“But it could have gone so wrong. We might not only have gotten mugged, but you could have gotten raped or worse.”

“Fortunately, we avoided all of that. Besides, it seemed a lot safer to me than that time in Barbados when we were surrounded by the gang on the empty beach.”

“True, that was a close call.”

“And yet, here we are.”

“Here we are, indeed.”

The Blackest of Black Boxes

This week a friend sent me an article from Bloomberg on the super-secretive Medallion Fund. It’s worth a read. Entirely, or at least mostly, using proprietary quant models created by a group of top mathematicians and programmers, the fund has been able to churn out 30%-plus annualized returns for decades.

Impressively, they do it entirely on short-term trading, with the models fine-tuned to pick valid trading signals out of the daily data hurricane of global financial markets.

Here’s a link to the article.

So here’s an investment tip. If you can get a place in the Medallion Fund, jump at the opportunity. Unfortunately, that is easier said than done, as the fund is now closed to all but employees.

At Compelling Investments Quantified, the proprietary computer model we use to uncover compelling opportunities is nowhere near as sophisticated. And we avoid frenetic short-term trading in favor of long-term, deep-value plays.

However, here’s why you should find the Bloomberg article highly illuminating: it shows you the need to do something other than read a popular finance writer or consult a few charts before placing your hard-earned money into the markets.

Failing to take advantage of the current generation of powerful computers and the sophisticated quantitative modeling adopted by leading investors is to show up to a gunfight with a rubber knife.

We haven’t advertised it, but since launching the service, I have personally invested between $50,000 and $100,000 in every stock we’ve recommended. That’s how much confidence I have in our stock screening process and the deep-value picks our research uncovers.

In addition, I think telling people what to do with their money, but not having the strength of conviction to make the same investment, is a bit cowardly.

If you are tired of going it alone, don’t even hesitate a moment to take us up on our fully guaranteed trial subscription to Compelling Investments Quantified. If it’s not everything you are looking for, simply cancel for a full refund.

Really, you have nothing to lose. Here are the details.

Here Come the Clowns

As this edition is running long, I’m going to sign off with just one item in our “Clowns” feature.

Breakfast in America. This week the Kellogg company made the following announcement:

“We regularly work with our media-buying partners to ensure our ads do not appear on sites that aren’t aligned with our values as a company,” said Kris Charles, a spokeswoman for Kellogg. “We recently reviewed the list of sites where our ads can be placed and decided to discontinue advertising on Breitbart.com. We are working to remove our ads from that site.”

So, here’s the thing. Roughly 93% of Americans eat cold cereals of the sort that Kellogg sells. That is an incredible level of market penetration. From a marketing perspective, that means one of the few avenues open for increasing revenues is to take market share from one of your well-entrenched competitors.

Kellogg apparently has decided that the best way to achieve a more favorable return for its shareholders—you know, the people who actually own the company—is to try to alienate the millions of Trump voters.

Now, I have zero problem with corporate management deciding to eschew certain advertising outlets. But having spent a lot of advertising dollars over the years, deciding to take a pass on advertising on any particular outlet takes zero effort. And it sure doesn’t require making a public announcement.

If I were a Kellogg shareholder, I would be mighty peeved—regardless of my political inclinations—because for management to use something as brainless as ending an advertising contract to make a political statement sure to offend half of the market, and an intensely competitive market at that, is most assuredly an act of fiduciary irresponsibility.

So far, the stock has traded down since the announcement, but I suspect the real fun is only beginning, especially when the fall-off in sales shows up in the next quarterly reporting.

What a bunch of clowns.

ADDENDUM: Oil’s Last Stand

After finishing the draft for this week’s Passing Parade, OPEC announced that its members had approved a bold new plan to reduce production and henceforth adhere to a quota to reduce the glut and support higher prices.

The price of oil, and related stocks, surged.

Hallelujah! Higher prices and happy days are here again. That is, if you are fortunate enough to be near the front of the chow line in one of the petroleum kleptocracies that make up OPEC and their conspirators. A new heyday for oil is just around the corner. Or is it?

For the reasons I outlined in The Passing Parade of November 18, count me a skeptic. For starters, most of the nations signing on to the new quota arrangement are already hard at work figuring out how to cheat on it.

In addition, there is the simple reality that, should supply shortfalls support oil at anywhere near today’s levels, the world’s largest exporter, the United States, with its hyper-efficient frackers will rush to fill the gap and merrily go laughing all the way to the bank.

The next couple of weeks should prove very interesting in the energy patch, because if the hot air of OPECs announcement begins to cool, as it almost certainly will, a severe and sustained reversal may begin.

I rarely go short, but as of today, I am short.

And with that, I will sign off for the week. Next week, I intend on writing about my candidate for the toughest person who ever lived.

If you have any comments about this week’s edition, please drop me a line at David@garretgalland.com, or even better, use the commenting feature at the bottom of the page so others can join in the fun.

Until next week, thanks for subscribing and don’t forget to enjoy the perpetual parade!

David Galland
Managing Editor, The Passing Parade

http://www.garretgalland.com

Garret/Galland Research provides private investors and financial service professionals with original research on compelling investments uncovered by our team. Sign up for one or both of our free weekly e-letters. The Passing Parade offers fast-paced, entertaining, and always interesting observations on the global economy, markets, and more. Sign up now… it’s free!

© 2016 David Galland - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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