By Steven Edwards, Postmedia News June 25, 2011
NEW YORK — Shunned by Fidel Castro for being too bourgeois, golf could
finally be on course to make a dramatic comeback in Cuba — in large part
thanks to Canadian investors.
But while Canadian developers feature prominently among groups pushing
to build golfing resorts with the island's cash-strapped communist
government, Cuban exiles and some experts are raising new alarm bells
that the ventures are headed for the rough.
At risk are billions of dollars to be spent on developing courses,
hotels and residential facilities targeting, for the most part,
well-heeled golfing enthusiasts.
The exiles say the land picked for the developments could yet be subject
to reclamation should the current regime, now led by Castro's younger
brother, Raul, give way to a democracy.
For their part, the Canadian companies say they're confident they are
not developing on land subject to claims by U.S. companies or Cuban
Americans, and tout their respective projects as offering a new high-end
golfing destination, complete with holiday homes for purchase.
But the exiles raise a host of other potential pitfalls, including
whether the Cuban government is prepared to offer clear title to the
homes, or mere "leases."
"If there is regime change in Cuba and you have invested millions of
dollars in land that has other owners, you are going to have to face
serious questions about the title," said Maria Werlau, a Cuban American
who runs the human rights Free Society Project from New Jersey and, as a
consultant, has written on foreign investment and tourism in Cuba.
"Any serious due diligence on these projects should turn out huge risks
for investors, which is why the multimillion dollar deals are generally
just smoke."
Experts say there is also the question of whether the Cuban government
is sufficiently business-friendly at heart to allow investors to make a
decent return on their cash injections.
After all, the development plans are possible only because of economic
reforms the communist regime has been obliged to consider as it seeks
foreign cash against the backdrop of Washington's continuing economic
embargo and the former Soviet Union's long-dried up subsidies.
On the golfing front, the Cuban government has stated it seeks investor
partners to build as many as 16 courses and resorts — a massive number
for a country where the elder Castro's ideology all but wiped out the
sport. That raises the question as to whether there really has been any
evolution in the regime's mindset.
"That is the old planning style," said Arch Ritter, a Carleton
University economics professor who has written extensively on Cuba.
"Instead of going at it bit by bit, they jump in whole hog and have
major over capacity."
Cuban exiles have long warned that the Cuban regime may pull the plug on
joint ventures should average Cubans threaten social upheaval by balking
at the prospect of luxury apartments being built for foreigners.
"I don't think (pulling the plug) is going to happen because they need
the money, and the old approaches are so discredited that they have
return to a market economy — with the appropriate kowtows to socialist
planning and state control," Ritter said.
"But they talked tough at the communist party congress in April, saying
they wanted to welcome foreign investment, but that they also wanted to
make sure Cuba got a good deal out of it."
Among a handful of declared golfing developers is Vancouver-based
Leisure Canada, which claims that a joint venture deal it's struck with
the Cuban government is the only one the country's Tourism Ministry has
so far approved.
Leisure Canada is planning on investing $1.2 billion to develop a 5.5
square kilometre oceanfront property at Jibacoa, 68 kilometres east of
Havana.
The company's website describes the property as having "the potential to
host several luxury hotels and two championship golf courses."
In anticipation of the development, which is in addition to a combined
$550 million planned investment in hotel complexes elsewhere in Cuba,
Leisure Canada recently struck a licensing deal with the Professional
Golfers' Association of Britain and Ireland in a bid to provide a rules
structure for the sport in Cuba.
"With no rules and regulations in place in Cuba, we felt strongly that
the direction of the PGA UK would help the Cubans to build the
foundations for a better golf industry," Robin Conners, company
president and chief executive officer, said in an interview while on a
trip to Havana.
He indicated the development will have a "mixture of hotels and
different product" — which could include "cottages, casitas and condos."
But he admitted that the Cuban government has yet to establish the terms
of ownership for the properties that would be sold. This was despite the
fanfare emerging from Cuba surrounding the decision at the April party
congress — the first such meeting in 14 years — that the government
would allow Cubans to buy and sell their homes for the first time since
Fidel Castro seized power in 1959.
"We have not seen the new rules and regulations," he said. "We
understand that they are coming out shortly. It is sort of in progress."
The fact there is a time lag reflects testimony emerging last year from
a Council of the Americas panel discussion on the Cuban investment
climate. Some members said the Cuban government is torn between needing
the cash generated by foreign investment, and wanting to remain loyal to
socialist ideology.
Panel member Anna Szterenfeld, Latin America editor for The Economist
Intelligence Unit, predicted the Cuban government will not likely permit
much expansion of private enterprise — domestic or foreign — within the
next five years because it views foreign direct investment as a threat
to its sovereignty.
Still, Conners maintained that the Cubans are, in fact, considering
instituting for foreigners a "fee simple" arrangement, which would allow
a tourist to wholly own a property and the land it sits upon. Short of
that, developers have long pushed for long-term lease arrangements —
which are currently mainly applied to commercial property, and run for
50 years with an option to tack on another 25. Conners said he believes
the Cubans will at least grant leases.
"We have been led to understand that (50 plus 25 leases) will be
extended … to 99 years," Conners said. "It is the British-Hong Kong
structure where an instituted lease of 99 years is considered to be
whole ownership by a bank, and, of course, that makes financing much
easier."
Lease arrangements may be a tough sell in Canada, where consumers are
used to freehold ownership, but Conners insisted that foreign demand
would be strong whatever the terms for non-nationals.
"There are a lot of people who would be interested in doing either a
vacation club-type product or whole ownership, if it were possible," he
said.
Conners stressed his company has done extensive "due diligence" in
verifying that none of the land it is to develop is claimed by U.S.
entities. If it were, his firm could face sanctions under the 1996
Helms-Burton Act, which seeks to penalize companies that transact in
property formerly owned by U.S. citizens, including Cuban exiles who
have adopted U.S. citizenship.
But he suggested it was a moot point anyway — expressing faith in the
future survival of the current regime, which would have to fall before
any returning Cuban exiles could lay land claims.
"We go to great lengths to make sure we don't (get) contested assets,"
Conners said.
"By the same token, the regime here is pretty stable. The government is
very popular with the people," he added.
There can be no accurate gauge of the supposed "popularity" of the Cuban
regime since it does not hold free elections. Human rights groups,
meanwhile, charge the regime has a poor human rights record.
A Canadian Aboriginal business consortium called Standing Feather
International rivals Leisure Canada in its ambition to re-adorn Cuba
with golf courses.
The Ottawa-based company has pushed to build an entire golf "community"
complete with 1,200 villas, bungalows, duplexes and apartments on 2.1
square kilometres bordering Cuba's northern coast in the eastern
province of Holguin. The residences of the so-called Loma Linda Golf
Estates will sell for an average of $600,000 per unit — representing
wealth that contrasts sharply with the average income of the local
population of just $20 a month.
"I think (the Cubans) recognized that just to put a stand-alone golf
course was maybe not the best direction to go," said Graham Cooke, a
Montreal-based globetrotting golf course architect engaged by Standing
Feather to design the $410 million project. "To support golf and to make
it feasible, a housing development or residential component (for) a
tourist destination is important."
But this project too has been years in the making, with final agreements
yet to be signed.
"You have to really work in Cuba," Cooke said. "You need full
cooperation with the government; you have to be partners with them, and
that takes time. And because this was a major change for them, they
wanted to make sure that everything was set with regard to the different
ways a private enterprise would be looked at, with ownership."
Operating profits are believed to be set for a 50-50 split following a
standard deal in which Cuba contributes "in kind" the land, while the
"developer develops the package," Cooke said.
On its website, Standing Feather says the Cuban government "has approved
in principle" the sale of real estate to foreign nationals.
"Standing Feather International is in the final stage of negotiation
with our Cuban partners, and the imminent formation of the … joint
venture will allow the earliest possible access to the opportunity of
real estate in Cuba," the website entry says.
Two British entities are among other proposed multi-million dollar
golfing developments on the island.
Cuba once had a dozen golf courses, but Castro closed almost all of them
after he came to power. Canadian architect Les Furber designed the only
current 18-hole course, which opened in 1999, and is built on the
grounds of the former Dupont family property in the resort town of
Varadero, 140 kilometres east of Havana.
Cuba's only other current golfing opportunity is at a nine hole course
in Havana used mostly by diplomats and foreign business officials. Soon
after the Cuban Missile Crisis in 1962, Fidel Castro and the
revolutionary Che Guevara played what has become a famous round there in
a supposed snub to the United States. By 1980, the Cuban government had
nationalized it.
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