Post by @CubanWindow from the original posts via @WMLeoGrande – –
Does the Cuban Military Really Control Sixty Percent of the Economy ?
Anatomy of a Fake Fact
President Donald Trump’s decision to prohibit U.S. transactions with Cuban enterprises controlled by the military has thrown a spotlight on the role of the armed forces in Cuba’s economy. That role is extensive, reaching across a number of different sectors, and it has grown in recent years along with Cuba’s tourism industry, where military-controlled firms are concentrated. These enterprises are managed by the holding company Grupo de Administración Empresarial S.A., GAESA, which reports to the Ministry of the Revolutionary Armed Forces (MINFAR).
The sudden spurt of media interest has produced widespread repetition of the spurious “fact” that the Cuban military controls 60% of the economy. “GAESA is the business arm of the Cuban Revolutionary Armed Forces and controls 60 percent of the island’s economy,” the Miami Herald reported shortly after Trump’s speech and repeated several times thereafter. The Economist, Politico, The Guardian, The Times of London, Business Insider, and others repeated it.
Even a cursory review of the composition of Cuba’s Gross Domestic Product demonstrates that this “fact” is ludicrous. Sectors in which the military has little or no participation easily comprise more than half of GDP, and in the other sectors, there are civilian as well as military-controlled firms (Anuario Estadístico 2015).
So how much of the economy do military enterprises really control and where did the 60% claim come from?
The Cuban government does not routinely report the revenue from individual enterprises, but we have a few data points for the largest military holding companies from which we can make reasonable projections.
Total revenue from enterprises managed by the military was reported as $970 million in 1997. Since a large portion of their revenue comes from tourism, let’s suppose that their revenue has increased in tandem with the rapid growth of that sector. In 1997, Cuba had 1.2 million foreign visitors (according to Cuba’s 2004 statistical year book, Anuario Estadístico). In 2016, Cuba had 4.1 million — a 249% increase. At that same rate of increase, projected revenue from military-linked firms in 2016 would be $3.4 billion.
We can check the reliability of this estimate with data from the three main military companies, Gaviota, Cimex, and TRD. Gaviota, the largest military-controlled conglomerate, is concentrated in tourism. Total revenue from the tourism sector was $2.8 billion in 2015 (Anuario Estadístico 2015). While Gaviota is the largest player, it does not hold a monopoly; it controls 40% of all available hotel rooms (though it has a higher proportion of the better ones), plus car rentals, tourist taxis, and restaurants. It is plausible, then, that Gaviota may generate as much as 60 percent of the earnings from tourism, or approximately $1.7 billion.
Cimex had 2004 revenue of $740 million. Using the same projection method based on the growth of tourism, Cimex’s estimated 2016 revenue would have been about $1.3 billion. The Havana Consulting Group, whose President Emilio Morales was formerly an executive at Cimex, estimates its revenue as $1.2 billion.
TRD, a chain of retail stores created to capture hard currency, had sales of $250 million in 2004. Using the same projection method, TRD’s estimated 2016 revenue would have been about $442 million.
Thus we estimate that the three largest GAESA companies taken together would have had 2016 revenue of about $3.45 billion, very close to the $3.4 billion initially estimated from the data on total MINFAR revenue. Emilio Morales at the Havana Consulting Group, using data he has collected over the past 15 years, estimates GAESA’s total current revenue at $3.8 billion.