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Miami Herald
6 days ago
- Business
- Miami Herald
Cuba telecom firm hikes prices, cites debt – yet military owner has millions of dollars
A recent astronomic price hike on internet data packages for cell phones in Cuba has caused such an uproar, even among government supporters, that the island's leaders have been forced to acknowledge criticism publicly, promising to find 'solutions' for the most affected, although without any signs of backtracking on the measure. On Friday, Cuba's telecom monopoly, ETECSA, announced that it was raising cell phone service prices. Users were dismayed at learning by how much: they will be limited to one data package per month of up to 6 gigabytes plus 60 call minutes capped at 360 Cuban pesos — about a dollar in the informal currency exchange market. Anything further would cost over 800% more in Cuban pesos — or its equivalent in dollars. The increase means state workers would need to spend almost their entire monthly salary of around 4,000 Cuban pesos to buy the next-level package or rely on top-ups in dollars from relatives abroad. 'We find ourselves in an extremely critical situation due to the lack of foreign currency and the significant reduction in revenue in recent years,' Tania Velazquez, the president of ETECSA, said in a television interview on Saturday to justify the price increases. 'The company faces high debt — it's a reality we must acknowledge. We have debts that prevent us from importing necessary technology, supplies and equipment. We're not even talking about development, but simply maintaining current services.' But critics of the company have wondered what ETECSA, which is partly owned by Cuba's military, has done with the millions of dollars it racked up by selling top-up data packages to Cuban exiles abroad, who pay for the service so relatives on the island can remain a WhatsApp call away. Secret financial documents obtained by the Miami Herald reveal that RAFIN S.A., a military-controlled company with a major stake in ETECSA, had $407 million cash on hand as of August of last year. RAFIN is part of the larger conglomerate of companies known as GAESA, which is owned by Cuba's Revolutionary Armed Forces. RAFIN was created in 1997, and Cuba's Central Bank lists it as one of the financial institutions operating on the island. Both GAESA, which controls large swaths of the island's economy, including tourism, and RAFIN are under U.S. sanctions for their ties to the Cuban armed forces. Due to the lack of transparency in government affairs, the current ownership structure of ETECSA is unclear. However, in 2011 it was widely reported that RAFIN had bought 27% of ETECSA's shares from Telecom Italia. According to media reports, RAFIN paid $706 million. Banco Financiero Internacional, currently part of GAESA, also held 6.15% of ETECSA shares at the time. The remaining shares were owned by Cuban companies affiliated with the Ministry of Communications and the Cuban government. According to GAESA's consolidated balances obtained by the Herald, the conglomerate was holding $407.8 million 'in cash' at RAFIN as of last August. The dollar amount suggests that ETECSA is a significant source of foreign revenue for GAESA, not just through international calling rates and other typical services but also through cell phone data packages that Cubans abroad purchase with hard currency for relatives and friends on the island. RAFIN is listed in international business databases as operating in the telecommunications and information technology industries. 'GAESA uses RAFIN to finance things; that's why it has so much money,' said a source with knowledge of GAESA's operations who asked for anonymity for fear of government retaliation. 'It's not a bank... but it finances investments, provides money for hotels and ETECSA stuff.' A fight for dollars GAESA keeps its own money outside the reach of the civil branches of government and has steered foreign currency away from public services to finance the construction of hotels. A Herald investigation found that GAESA's leading tourism subsidiary, Gaviota, had $4.3 billion cash on hand last year, at the time public health, electricity, agriculture and other basic services have been collapsing on the island. It seems unlikely that the military would allow ETECSA's leadership to freely tap into RAFIN's coffers to upgrade the company's technology or pay its debts, the two reasons for the price increases provided by Velazquez on Saturday. Besides the latest effort to increase internet data prices, Cuban observers believe the Cuban military conglomerate is behind other government-sanctioned schemes to squeeze the country's hard currency revenue while resisting significant reforms. 'This decision by ETECSA — or, rather, made through ETECSA — is similar to many others recently implemented under the pretext of correcting distortions in the Cuban economy,' said Ric Herrero, the executive director of the Cuba Study Group, a Cuban American organization supporting the private sector on the island. 'It gives the impression that a kind of vacuum cleaner operates behind the military-led institutions, all in a desperate attempt to capture foreign currency at the expense of the population and the most basic state benefits,' Herrero added. 'It is clear that there is no other vision or plan to rescue the Cuban economy.' Activists have also stressed that the price hike comes with a major bonus for the government: It will effectively restrict Cubans' access to information, the internet and social media, which officials have linked to anti-government protests and increasing dissent among Cubans. Some activists and U.S. officials, including U.S. Rep. María Elvira Salazar of Miami, have urged Cuban exiles to stop financing ETECSA by buying top-up packages for their relatives. Crack in government support Still, Cubans' uproar over the measure during the weekend is a sharp reminder for the government of the growing discontent on the island, even among its core supporters. Shortly after ETECSA announced its new pricing policy, readers flocked to the official online news outlet Cubadebate to leave over 1,600 comments, mostly critical, on an article reporting the increases. 'As always, the people never benefit from any measures taken by those who lead us,' said one reader who appears to be a teacher. Another wrote, 'ETECSA wants DOLLARS and is putting a noose around our necks so we hand them to them. Simple as that.' Some openly advocated for major political and economic change, urging the government to stop 'trampling on the people,' 'step aside,' and pay workers in dollars. More rare was criticism from representatives of the Federación Estudiantil Universitaria, a student federation under government control. The federation branches at the University of Havana's schools of communication, mathematics, philosophy, history and languages, as well as representatives at an international relations school tied to the Cuban Foreign Ministry, put out a statement expressing 'disapproval' of measures that would significantly limit access to the internet for students and the rest of Cuba's population. The widespread condemnation also led to an unusual instance by state media of seeking accountability, producing headlines like 'ETECSA responds to criticism and explains new measures' and an editorial in a provincial newspaper calling for ETECSA to come up with more affordable rates. 'Isn't there a middle ground between ETECSA's financial asphyxiation and the economic asphyxiation of users?' the Matanzas newspaper Girón wrote. The pushback prompted officials to scramble to respond. Prime Minister Manuel Marrero chimed in on Saturday, stating on X that the National Assembly had approved the price increases and that concerns among the population were partly due to a lack of explanation. After Velazquez's television interview later that day was not able to sway public opinion, the country's leader, Miguel Díaz-Canel, said Sunday on X he was aware of 'the opinions, criticisms, and dissatisfaction of our people with the measures announced by ETECSA.' 'We do not like any measure that limits benefits, and it is our duty to thoroughly explain each step taken to avoid the blows of the #Blockade,' he said in reference to the decades-old U.S. embargo, a frequent stalking-horse of the government. 'Options have been developed for the most vulnerable sectors, including our beloved students.' Announcing that there would be a special television program to address the situation later on Monday, Marrero echoed Díaz-Canel's comments, saying that 'listening to the people, addressing their demands, explaining and finding solutions together has always been and will always be a practice of the Revolution.' But even people aligned with communism warned the government its supporters were on the brink of exhaustion. 'The way in which this ETECSA rate increase has been implemented makes even more evident something that has been observed and warned about for some time: the growing rift between the state leadership and the revolutionaries, the masses who have not renounced their identification with the Revolution and have sacrificed for it but who do not feel represented by the government' wrote Javier Gómez Sánchez, a digital content creator who writes in Cubadebate and other outlets aligned with the government. He cautioned Cuban officials to be careful about believing 'that popular support is infinite, that the people have the capacity to absorb, and absorb, and absorb political misery one after another, and that those people will support a government like this because they have to. 'The next question is whether they'll end up like Ceausescu,' he said, referring to the Romanian socialist dictator, whose violent death in 1989 marked the end of the communist regime in that Eastern European nation.
Miami Herald
10-04-2025
- Business
- Miami Herald
Things are about to get a lot worse in Cuba: Trump's crackdown plans explained
In a gambit to try to precipitate regime change in Cuba, the Trump administration is planning to ramp up sanctions on the island's military as part of a maximum-pressure campaign that may also further restrict travel, remittances and exports. Trump administration officials and Cuban-American members of Congress believe the communist regime in Havana is at its weakest moment in decades and have been pushing for an all-out effort to topple it. The island's economy has been in a downward spiral in recent years, and the country's ruler, Raúl Castro, is 94. In a Miami event last week, Trump's special envoy for Latin America, Mauricio Claver-Carone, said the administration perceives 'a historic opportunity in Cuba for political opening and political transition.' Taking the broad sanctions on Venezuela enacted during the first Trump administration as a model, officials have been discussing how to update the existing decades-old embargo against Cuba and close 'loopholes' to avoid 'the ups and downs, pressures and non pressures' that have hindered its success, Claver-Carone said. 'The tools used against Cuba are very outdated,' he said. 'Even the sanctions themselves are based on old laws that sometimes have no secondary effects.' Claver-Carone said the administration has already made strides in that direction and created 'new mechanisms to be more efficient, to be more surgical' to target 'the different economic sectors in the regime,' particularly the military. The Cuban Revolutionary Armed Forces control much of the Cuban economy through an umbrella organization, GAESA, that handles many of the most lucrative businesses, including large swaths of the tourism industry. A Miami Herald investigation in 2024 showed that GAESA has funneled much of the country´s hard currency toward its own enterprises. The military also seems to be the real power behind the government of leader Miguel Díaz-Canel, so the administration plans to 'leverage that pressure quite a bit to ensure there are incentives... for change,' Claver-Carone said. In a parallel effort, U.S. Rep. Carlos Giménez, a Cuban American Republican from Miami who represents a district stretching to the Florida Keys, asked the administration last week to halt all travel and remittances to the island, which would prohibit Cuban Americans from visiting relatives on the island or sending money to help them. Giménez also called for a halt to all travel to the U.S. originating from the island and asked for financial sanctions, including tariffs, on countries that do not directly pay Cuba's doctors in the medical missions abroad that have become a significant source of hard currency for the island's government. The Herald has also learned of other measures being floated by the Trump administration, including revoking export licenses held by U.S. companies supplying the island's private sector and shutting down U.S.-based online supermarkets that allow Cuban Americans to pay for food, and even medicines, that are then delivered directly to Cubans on the island. The measures are still under discussion, and it is unclear how far officials would ultimately push to shut down revenue going into the island. But if enacted, some of the ideas proposed also risk destroying a nascent private sector and worsening the country's ongoing humanitarian crisis. Travel, remittances at stake Several years into a recession, Cuba faces chronic shortages of food, medicines and essential goods, and a crippled infrastructure that is hitting seniors living off state pensions the worst. The lack of food is particularly acute outside Havana, especially in rural areas in eastern Cuba. That's why remittances and the online supermarkets have been a lifeline for many Cubans — the government sells groceries and other necessities in dollar stores but pays monthly salaries in pesos worth around $15, and much less to those on pensions. Some of these online platforms also deliver much-needed medications not available in state-run pharmacies. The broad restrictions the administration is contemplating would also hamper discreet efforts by religious organizations and other non-profits to send humanitarian aid to the island. As the situation has deteriorated, donations to Cuba have jumped from $36.5 million in 2023 to $67 million last year, according to figures compiled by the U.S.-Cuba Trade and Economic Council. 'Shutting down U.S. flights and informal remittance channels would harm innocent Cuban families far more than communist party elites with global ties who can travel anywhere else,' said Ricardo Herrero, executive director of the Cuba Study Group, a Cuban American group based in Washington. 'Prohibiting Cuban Americans from supporting their loved ones in Cuba won't topple the Cuban regime nor usher in democracy. It will only stoke migration to third countries and hasten the island's descent into a failed state.' But in a Fox News interview, Giménez called the money sent from Miami to Cuban relatives 'a cash cow' that helps the Havana regime finance its repressive apparatus. Without that revenue to spend on repression, he said, he hopes Cubans could rise and topple the government.. Secretary of State Marco Rubio has already moved to ban a company controlled by the Cuban military from processing remittances in partnership with Western Union, prompting the U.S. money-transfer giant to withdraw from Cuba. A similar measure against another Cuban company during the first Trump administration brought significant losses for the military's economic arm, the Herald reported. Still, the investigation showed most Cuban Americans were not using Western Union to send money to relatives, relying instead on smaller agencies working in a gray legal area and people who travel to the island to deliver the money in person, known as mulas, mules. John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, said returning to the more strict travel and remittance limits imposed by the first Trump administration would have a 'profound impact' on the Cuban government. At the time, the U.S. canceled flights to cities other than Havana and limited the amount of money that could be sent to relatives to $1,000 per quarter. Adding more travel restrictions would likely deter travelers wanting to avoid scrutiny and decrease the flow of money to be delivered by mules, Kavulich said. 'Cuba would lose revenue from visitors and remittances.' As it has happened under past administrations' crackdowns, such severe measures are likely to face opposition from some Cuban Americans in South Florida. A Florida International University poll that regularly surveys opinion among Cuban Americans in South Florida has consistently found support for travel and remittances to the island, even as many also support sanctions on the Cuban government. A source familiar with Giménez's thinking said he wants to cut all revenue going to the Cuban government and that while many Cuban Americans want to help their families, they also want to see the end of the Cuban regime. 'It's a difficult line to walk,' the source said. In the Miami event, Claver-Carone, who played a central role in shaping Cuba policy during the first Trump administration, showed little enthusiasm for Giménez's proposal, which he called an example of the 'old' sanctions tools. The first Trump administration did not go as far as Giménez is advocating now, in part to avoid past controversies that divided South Florida's Cuban American community. Cuban Americans have been debating on social media the wisdom or effectiveness of ending remittances at a critical time for Cuba's population. 'I don't think that will bring down that dictatorship,' an X user whose profile says 'Maga! Trump 2025' replied to a Giménez post warning Cuban Americans not to travel or send remittances to Cuba. 'They always benefit, and the Cuban people continue to die of hunger, and our families need that little bit of money we can send them just to eat. Bring down the dictatorship, but don't starve our families to death.' For their part, Cuban officials are reacting to the proposals by redoubling accusations that the United States wants to starve the island's population. Sanctions and the private sector U.S. officials are also looking at ways to stem increasing U.S. trade with Cuba, which the island's emergent private sector has driven in recent years. In the month of February, exports to Cuba were $47.6 million, a 75% jump from February last year, according to figures compiled by the U.S.-Cuba Trade and Economic Council. In 2024, U.S. companies exported $586 million to Cuba. Most of that trade, $433 million, is food and agricultural commodities, which is allowed under the embargo thanks to a 2000 law – the Trade Sanctions Reform and Export Enhancement Act. Unlike in the past, when the Cuban government was the leading importer, private enterprises on the island and U.S. exporters selling to private businesses are responsible for most of the recent trade growth. U.S. food products are sold in private stores and privately owned restaurants on the island, or delivered directly to people's homes. U.S. companies have also exported cars, solar panels, clothing, household items, and many other types of goods, using special government authorizations known as licenses or invoking an exception in the embargo rules that allows activities 'in support of the Cuban people.' The merchandise is imported mainly by private business owners residing on the island or bought by Cuban Americans for their relatives living there. 'Today, most of the food exported from the United States to Cuba is shipped to private businesses on the ground because the government is broke and in arrears with all of its former suppliers,' Herrero said. 'Limiting U.S. food exports to Cuba would not only harm those independent entrepreneurs, but also countless Cuban families already suffering from severe food scarcity.' Prohibiting food exports from the U.S. would be difficult because it would require a change in the law, but revoking licenses might be easier for the administration, Kavulich said. Critics of companies that export to Cuba question whether they ultimately benefit or have links to the Cuban government. Hugo Cancio, a Cuban American who owns the online supermarket Katapulk, has been criticized by activists because he has attended events in the U.S. with Cuban officials, including Díaz-Canel. But he said his business does not benefit Cuban authorities, other than through duties paid to Cuba's customs agency. Cancio said he buys around 20 percent of the food and goods sold on Katapulk in the U.S. and third countries and ships them to Cuba. There, they are handled by a private company that is also in charge of deliveries. The other 80 percent is supplied by independent private businesses in Cuba that offer their products on the online platform. 'We have no ties to the Cuban government. I don't sell to the Cuban state, I don't have contracts with any government entity, I don't pay anything to the government beyond customs duties,' Cancio said. Cuban families, not the government, will be harmed if the Trump administration shuts down the online food sellers, he added. Because of the trade expansion, Kavulich said that limits imposed by the Trump administration might trigger pushback from a larger constituency of U.S. companies in several states. But Claver-Carone signaled the administration is ready to enact unpopular policies in a big bet it hopes will pay off sooner rather than later. 'There's still going to be disagreements. There's always commercial interests,' he said in the Miami event. 'But it's either short-term pain for long-term gain, or you'll have long-term pain and no gain. So we have to be all in — go big or go home.'
