Tuesday, May 19, 2015

Prospects for Cruises from the US

New federal licenses mean cruises to Cuba may be close

Published:    |   Updated: May 19, 2015 at 09:19 PM
TAMPA — It has been less than a month since the U.S. Treasury Department approved the first licenses for ferries to carry Americans to Cuba. The ferry companies have not announced what U.S. ports they’ll use and the Cuban government has not agreed to allow any boats access yet.
Still, those in the U.S.-to-Cuba tourism industry are already talking about what might be next — cruises to Cuba.
The Treasury Department is willing to consider applicants for licenses and may allow the ferry companies to provide a cruise-like experience provided they introduce a third location — say, another Caribbean-island stop between Cuba and the return trip home.
The buzz over this prospective boost in cruise opportunities arose last week when Jose Ramon Cabanas, Cuba’s top representative in the U.S., told a Sarasota audience about his government’s interpretation of the new U.S.-approved ferry licenses.
“If you read the licenses granted they say commercial vessels going to Cuba can transport people,” Cabanas said. “It is not just a ferry. It could be something else. You could go from here to Havana and then to another port. The sky is the limit.”
He did not go so far as to suggest cruise ships by name but others share his broader interpretation of the ferry license language, issued by the Treasury Department’s Office of Foreign Assets Control, or OFAC.
“That was my immediate thought,” said Tom Popper, president of New York-based Insight Cuba, which has been taking American tour groups to Cuba since 2000.
In an email response to Tribune questions seeking clarification, OFAC did not rule out cruise ships or ferries visiting another destination after Cuba.
“That is huge,” Popper said. “OFAC’s position always has been that they only authorize U.S. passengers to go to Cuba by air.”
OFAC reiterated in its email that any travel to Cuba by U.S. nationals would be limited to the 12 categories allowed under U.S. policy, which includes cultural-education programs but not tourism.
“Cruise trips to Cuba could not be about drinking mojitos on the beach,” said Johannes Werner, editor of “Cuba Standard,” an online publication following Cuban business news. “They would need to be organized educational tours around the island that provide historical and political context in their tours.”
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Americans are already permitted to take educational cruises to Cuba from ports outside the U.S.
Take, for instance, “Cuba Cruise,” headquartered in Canada.
U.S. travelers fly to Montego Bay, Jamaica, where they board the 1,200-passenger Celestyal Crystal cruise ship and head for Cuba.
The ship docks in Isla de la Juventud, a Cuban enclave off the coast of the main island, then visits Havana, Holguín and Santiago before travelling back to Montego Bay.
At each Cuban stop, Americans on board are taken for an educational land tour of the region.
Then at night, like all Cuba Cruise passengers, they relax and have fun in the manner of a cruise aboard the Celestyal Crystal while the ship remains in port or heads for the next destination.
Popper’s Insight Cuba is the American tour operator for these cruises.
President Barack Obama announced Dec. 17 he would normalize relations with Cuba by easing trade and travel restrictions. Before then, Insight’s tour groups could not board the ship in Montego Bay and had to fly to Cuba then join the cruise in process.
Since Obama’s announcement, the groups have been allowed to start the sea voyage from the beginning in Montego Bay.
Popper said Cuba Cruise could now potentially add a U.S. city as the port of call.
“They would have to apply for a specific license from OFAC to do so. As a non-U.S. operator, and going through Montego Bay as they do currently, they don’t need any authorization from OFAC,” he said. “Whether they want to add Miami at this stage would be a business decision for them.”
Port Manatee on the southern edge of Tampa Bay is willing to accommodate any cruise line providing trips to Cuba.
“We are interested in anything that floats,” said the port’s executive director Carlos Buqueras. “We always want to diversify the port.”
Port Tampa Bay could not be reached for comment this week on ferry prospects.
Still, don’t expect to see Carnival Cruise Lines or Royal Caribbean Cruises docking in Cuba anytime soon, Popper said.
He’s not sure the island nation can accommodate such large ships along with the ships already docking there.
“Those bring a lot of questions,” Popper said. “Can Cuba provide provisioning for a boat that size with that many passengers, such as fresh water and electricity?”
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Werner of “Cuba Standard” envisions a U.S.-Cuba cruise industry starting with “charter cruise ships” — smaller vessels with scaled back versions of the amenities offered large cruise ships.
The Celestyal Crystal used by Cuba Cruise is considered a charter cruise ship, Werner said.
Charter cruises provide hundreds of staterooms, fine dining and alcohol, live entertainment and perhaps even small pools and casinos.
And even ferries can offer a cruise-like experience, said Joe Hinson, vice president of Baja Ferries, licensed by Treasury’s OFAC to take passengers to Cuba.
Baja Ferries has staterooms that can accommodate up to 2,000 people, along with fine dining, live entertainment and potential gaming.
The only difference between his ferries and a charter cruise, he said, is the purpose of the voyage — an overnight shuttle to Cuba versus a ship providing a longer journey and multiple stops.
Another view comes from Antonio C. Martinez II, chair the international law/Latin America trade practice at the Gerstman Schwartz Malito in New York. Martinez believes ferries might be allowed to take travelers to a second island destination.
Jorge Fernandez, CEO of Havana Ferry Partners, also licensed by OFAC, thinks this interpretation is correct.
“That is our understanding pending confirmation from the legal review and the state department of course,” Fernandez said.
Clouding the question is the actions of those in Congress who oppose Obama’s moves to normalize relations with a Castro-led Cuba.
U.S. Rep. Mario Diaz-Balart, a Cuban-American in his 12th year representing Miami, attached a proposed amendment to a transportation and housing funding bill that would block federal maritime officials from issuing a license or certification to any vessel that has docked within the previous 180 days and within 7 miles of a port on property confiscated by the Cuban government.
If this measure passes, it would put an end to ferry services and cruise lines to Cuba from U.S. ports.
Questions also remain about what the Cuban government wants to do.
During the forum in Sarasota last week, at New College, Cuban representative Cabanas spoke of a timeframe for allowing any U.S. passenger ships docking privileges in Cuba.
Said Cabanas, “That will depend on how companies will address that, how companies will come to our government and the kinds of business proposals they will deliver.”
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my comment
Road Scholar initiated use of Cuba Cruise for transportation and housing in the 2013-2014 season under a specific license from the Office of Foreign Assets Control. They were joined by Insight Cuba in 2014-2015. Both incorporated Cuba Cruise within a longer full cost program and were barred from boarding in or transiting Montego Bay.
When OFAC's new rules were announced in January 2015, our organization partnered with Cuba Cruise, pioneering the right of Americans to embark in either Montego Bay or Havana under our people to people general license. The total cost is close to what Canadians, Jamaicans and Europeans pay, about 1/3 to 1/2 of prevailing charges for conventional tour programs by Americans. It is the easiest way for a greater diversity of middle income and younger Americans, including families, to encounter Cuban life in four very different regions of the country.

By the last sailing March 20-27 almost 10% of the passengers were from the US, including 35 travel professionals on a FAM trip. It is reasonable to expect that in the coming season from December 18 to April 11 at least one-third of the passengers will be Americans.

The procedure is very simple. Booking of the cruise is done directly on line or through a travel agent, and then the US traveler affiliates with our people to people program on board and for ground excursions.

John McAuliff
Fund for Reconciliation and Development

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Monday, May 18, 2015

Cuba's Potential

cuba (1)
At a conference focused on opportunities in emerging markets this month, Cuba found some love.
A panel of investment professionals at the IFC EMPEA Global Private Equity Conference in Washington DC discussing opportunities in Latin American was optimistic about the chances of Cuba reforming enough to attract new investment dollars. The U.S. and Cuban governments announced on Dec. 17 efforts to restore diplomatic relations after 50 years of hostility.
The first step is to build an ecosystem that allows businesses to grow and flourish, according toSusana Garcia- Robles, principal investment officer at the Inter-American Development Bank. “One lesson we’ve learned is, it’s not only about, ‘Is there a business opportunity?’ but ’Is there an ecosystem that supports a business environment?” Garcia-Robles said. “I don’t think Cuba will be able to absorb private equity activity for a while.”
Felipe Vilá González, chief executive officer at funds-of-funds manager Fondo de Fondos, was confident changes would happen in Cuba to make it an attractive place for investment. “In some sectors it’ll happen sooner, like entertainment…and tourism,” he said.
It’s not clear if any private equity money has flowed into Cuba in past years. In March, CNBC reported that Thomas Herzfeld, manager of closed-end Herzfeld Caribbean Basin Fund, was raising money for direct investments into Cuba.
Entrepreneurs interested in starting businesses in Cuba should seize the opportunity now, said Luc Gerard, founder and chief executive officer of Tribeca Asset Management. Gerard said he has visited Cuba three times in the last decade.
“There’s tremendous potential,” he said, citing the educational system and the entrepreneurial drive of the people. “I’m more bullish on Cuba than on Venezuela…”
For all the negative perceptions surrounding the Castro government in Cuba, the World Bank last year named the Cuban education system the best in Latin America. Cuba’s system of universal education has led to “universal literacy,” the World Bank said.
“Only Cuba…has a truly efficient education system and high-quality teachers,” the World Bank said. “The Caribbean island is also the nation in the world that allocates the highest share of its national budget, 13 percent, to education.”
Another factor that will drive economic growth is the mass of immigrants ready to travel back to the country as it opens for investment. Around 1.1 million Cuban immigrants lived in the United States as of 2013, according to the Migration Policy Institute, citing data from the U.S. Census Bureau and American Community Surveys. Cubans represented the seventh largest immigrant group in
the United States, the Institute said.
“It’s going to be the powerhouse of the Caribbean,” Tribeca Asset Management’s Gerard said.
Still, despite the optimism, people continue to flee the country for the United States. In the first three months of 2015, 9,371 Cubans arrived in the United States, Reuters reported earlier this month. That is more than double the number from the same period last year.
The increase was driven by a surge of migration after the U.S. and Cuban governments made the December announcement, Reuters reported. This caused uncertainty over the special immigrant status Cubans have been granted since 1966 in which they have the right to stay and seek residency if they can reach U.S. soil, Reuters said.