Colombia

July 12, 2015 10:52 PM


As many of you know, I live in Miami—what you probably don’t know, is that without the cocaine trade, Miami would still be a backwater like Fort Meyers—good weather, some interesting architecture, but not much modern development. Instead, Miami is the capital of Latin America. It got to that pinnacle through the activities of a motley band of Colombians—none more famous than Pablo Escobar.

With the cocaine coming in, the money had to go out or at least get laundered into something. As you look at the skyline from my pool deck, you can see the many towers that were built with cocaine money—along with the many small banks that got their start from laundering this gusher of illicit funds. If cocaine built Miami, Pablo Escobar was inadvertently the creator of Miami’s modern economy.

With this firmly in mind, in late August, I will be joining my friends from Capitalist Exploits in Medellin, Colombia—which was ground zero for Miami’s renaissance. Fast forward a few decades and the Colombian economy has advanced a long way from the days when its principle exports were cocaine and violence, while importing little more than CIA funds to be siphoned off by drug kingpins.

Colombia is now experiencing a resurgence on the back of commodity exports and a relative peace dividend. I intend to take it all in, explore Medellin, see some old friends and figure out where the opportunities in Colombia are. It promises to be a very enlightening experience.

If you would like more information, please click this link Medellin, Colombia Meet Up

Or email Chris directly at chris@seraph.vc

 

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Cuba--Por Que Hay Un Bloqueo

February 13, 2014 6:51 PM


Cuba Bloqueo

Let’s say that Cuba’s socialist utopia doesn’t quite appeal to you—shocking right? How do you escape? Well, actually, it’s a simple process. You need to start by scavenging for materials, building a floating contraption of some sort, piling your worldly possessions into that contrivance and setting out for Florida. Along the way, you must evade the Cuban Coast Guard, who will imprison you for trying to escape and the American Coast Guard who may alternatively; turn you over to the Cubans, spray you with water cannons, capsize your boat, or let you continue floating north depending on America’s capricious Cuba immigration policy.  

US Citizenship can be yours, if you can successfully cross the Straits of Florida and then physically step off your boat onto mainland American soil. This is known as America’s “Wet Feet, Dry Feet” policy—you need to get at least one “Dry Foot.” Unfortunately, there are some unique wrinkles in America’s policy; such that the Dry Tortugas, despite being part of Monroe County Florida, are considered an unincorporated area of Florida (whatever that means), hence they’re not officially “Dry” and that disembarking on bridges and other man-made structures, not connected to land, do not count as “Land.” The important thing to remember is that despite a Cuban internet blackout, you should make sure to research the hundreds of “Dry Feet” rules, because they’ve likely continued to evolve by the time you read this.

If “Wet Feet, Dry Feet” sounds like a game created for a kindergarten playground, it is only because it was created by Congress, the world’s most august kindergarten. Unfortunately, thousands of people have now died while playing this game, proving conclusively that the Castro Brothers do not have a monopoly on asinine Cuba laws. However, no policy is as ridiculous as the five decade long US Embargo on Cuba.

cuba ocean

Staring at his dreams in Florida...

 

Let’s face it; embargos as a rule rarely achieve their intended goal of overthrowing governments—55 years later, and the Castros are still there. Instead, embargos tend to deprive the poor of basic necessities, enrich government cronies while giving the government an excuse for why their economic policies are failing. If anything, embargos help to entrench the very governments that they are meant to overthrow.

As I wandered Cuba, it was interesting to see which American products were available. Coca-Cola was ubiquitous, as were household P&G products, meanwhile, I never saw a single Pepsi product. The shops were full of knock-off luxury clothing from China, but there was also plenty of US clothing—no one knocks off Old Navy (or do they?). Red Bull was cheaper than in Miami (not American) as were most American whiskeys (damn liquor taxes in America). In fact, with a few notable exceptions (no American cars older than 1959) most American products were getting through the embargo just fine.

What was not getting through was the fact that the embargo was not particularly responsible for Cuba’s economic predicament. While even the most ardent Communists that I met with agreed that Cuba’s economic policies were holding back the country—most Cubans placed a majority of the blame on the embargo. I have a hunch that the embargo is the only thing keeping the Castro Brothers in power. Without the embargo, the people would recognize the immediate failings of Cuban Socialism.

This brings me back to the title of this piece—the question that pretty much every Cuban asked me while I was there: “Why is there an embargo?”

 

 

Some More Cuba Images

cuba chinatown

Yes, Havana has a Chinatown...

cuba soda\

Tu Kola Is Pure Adrenaline...

cuba tropicana

Not quite the same without the mafia running the joint...

 

cuba museum of revolution

For a government that does NOTHING except celebrate the revolution (literally), you'd think that they'd at least maintain the Museum Of The Revolution.... What's the Spanish word for state sponsored irony....

Cuba Painters

I spent most of my trip convinced that no paint ever made it through the embargo, but then I saw this... In a country that has not repainted a single building in 55 years, they're instead painting the fence around a renovation site, for a building that they will probably never renovate.... Just when you think Cuban Socialism is starting to make sense, you have to throw away the puzzle pieces and try to figure it all out again...

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Cuba--The Economy

January 21, 2014 4:42 AM


Che 1

If the secret to economic prosperity was the erection of Che Guevara murals, Cuba would be the wealthiest nation on Earth. Unfortunately, revolutions are meant as transitions between an inferior form of government, and one that is supposed to be better. Revolution itself isn’t a form of government and socialist sloganeering only takes you so far. In the end, you need to produce things that people need. As one Cuban pointed out, Cuba produces cigars, sugar and more Cubans. That isn’t exactly the making of an economy; ironically, since the advent of communism, all three have seen their production decline.

During my second day in Cuba, a very wise taxi driver tried to explain socialism to me as;

“A big puzzle where you spend years putting the pieces together, only to learn that the last few pieces won’t fit how you want them to. Therefore, every decade, you need to disassemble puzzle and put it back together again so that you can get more of the pieces to fit this time.”

A few devoted socialists humored me by explaining that Cuba had finally created a perfect socialist state without classes. It was working, except that the state didn’t earn any hard currency to pay for imports. Cuba had no choice, but to re-do the puzzle—the foreign currency piece would not fit, yet by redoing the puzzle, they unfortunately took a step away from socialism.

Che 2

Cuba then opened up parts of the economy to tourists in an effort to attract foreign currency. At first, it was anticipated that tourists would choose to essentially seclude themselves in beach communities, surrounded by specially selected Cuban workers. The problem was that tourists had money to spend, and it didn’t all go to the state. Suddenly an unregulated market sprung up, driven by tourists. 

In the communist critique of capitalism, whoever has the highest income, is the most valued in society. Today, in the tourist driven economy, prostitutes make the most, followed by tour guides, taxi drivers, bar keepers, waiters and anyone else who is paid in cash, either for services rendered or in tips. Meanwhile, doctors earn roughly US $20 a month while working for the state. Multiple people pointed out that if doctors are now choosing to become prostitutes and taxi drivers, how will there continue to be free health-care? It sounds like socialism in Cuba is having an existential crisis—is it time to re-do the puzzle?

Che 3

As one very devoted former communist youth leader pointed out, “Cuba now needs a handful of millionaire businessmen—otherwise prostitutes will dominate the social strata. Too many people have seen spendable money in their hands from tourists, for us to go back to the old system. The current system isn’t tenable. Cuba will have to move forward and continue to liberalize the economy—there is no other choice.”

As investors, that is all that you need to know—they’re about to re-do the puzzle again—now, none of the pieces fit. Once you start to liberalize an economy, the trajectory is set—it will only accelerate from there.  

It has already begun to accelerate. Despite turning economic mismanagement into a science, we saw many Cubans buying flat screen TVs and designer clothing. Somewhere between a massive black market economy, tourism and overseas remittances, many Cubans are actually doing quite well—which I did not expect. That said, the majority are still mired in a form of socialist inspired poverty, where their needs are taken care of, but they cannot get much more than basic food.

Che 4

The situation with the currency is emblematic of the problems created by Socialism. The National Peso (CUP) is used by the government to pay government employees or the majority of the people. Meanwhile, the Convertible Peso (CUC) is meant for the tourist economy and only supposed to be accepted by certain businesses catering to tourists. In theory, one US Dollar is worth one CUC which is worth 25 CUP. Of course, in Cuba, it doesn’t work that way. At the government run exchange booths, $100 US Dollars are worth 87 CUC—talk about a wide spread. Meanwhile, CUC cannot convert back to US Dollars and the government mandates that all transactions happen at a handful of government exchange booths. No one will take US Dollars in a transaction outside of the exchange counters and Cubans are not allowed to possess US Dollars. Finally, the vast majority of stores will only take CUC for transactions and will refuse to take CUP—which is what most Cubans actually have.

So you enter the country with US Dollars, convert them into CUC at a horrible spread, but get most of your change back in the CUP that no one will accept. It is like the county fair where you have to buy either food tickets or ride tickets and you always end up with too many of one and not enough of the other. They might cost the same per ticket, but you cannot exchange them for each other. Meanwhile, the kid running the tilt-a-whirl will let you pay a dollar to ride it instead of 8 tickets because he wants to pocket the money. On the way out, you give the food tickets to some cute kid in line because you can only eat so much fried dough before your stomach decides the matter for you. Cuba is that dysfunctional carnival.  

Che 5

After the first time that I exchanged for CUC, I wised up to the fact that all the hotel employees are tipped in CUC yet desperate for US Dollars. I have been to many black markets in my life, but exchanging currency in Cuba has the feel of a drug deal, because it is equally illegal. In the bowls of the luggage storage rooms of various hotels, I asked why the bellhops would give me parity or better for my US Dollars.

“Castro says I cannot have it, so I probably want it.”

“When I escape this stupid island, my CUC won’t be worth much in Miami.”

“I can only pay the bribe for my travel visa in US Dollars. Since I won’t return from my travel, I won’t need CUC.”

Like most things in Cuba, there is an element of the surreal in everyday life, but that is to be expected when a government tries to interfere in the economy.

Che 6

Che's Victory?? What Victory??

The economy clearly isn’t working right in Cuba, but then again, I certainly expected a whole lot worse. Cuba actually scores very high on GDP per capita for Latin America and I continually wondered how it was all held together given the natural failings of a planned economy.

On one hand, I continually wondered if maybe the Cuban government had a plan after all. Then I realized that no matter how much a government tries to screw up the economic system of a country, people somehow find a way to persevere and survive. When you see the thousands of vintage cars on the streets of Cuba, you will understand what I mean. Given some freedom, Cuba will once again prosper.

 

 

 

In terms of the images, I cannot let Che get all the attention. There's plenty of Socialism to go around....

Che 7

Che 9

Che 8

Trust me, excluding the food, Cienfuegos is indeed failing...

 

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Cuba--A History

January 11, 2014 4:12 PM


cuba building 1

Cathedral restored for the tourists.

Renaissance era philosophers wandering the ruins of the Roman Empire wondered: What sort of super-humans could have built these structures? What sort of knowledge did they possess that was no longer available? Why did they let it all slip away? The Europeans simply could not comprehend how it could have been lost until Gibbon tried to explain it two centuries later.

As I wandered Cuba, I had the same feeling; who were these people and how was it all lost to them? The irony is that many of them are still alive. This isn’t some distant race separated by a millennia—these are just people who have lived under the curse of socialism.

cuba building 1

Typical building that has been left to rot..

It’s hard to talk about where a country is today, without at least traipsing through that country’s history. In the case of Cuba, there is over 500 years of recorded history. The story starts in 1492 when Christopher Columbus discovered the island on his first voyage. By 1511 Cuba had its first settlement and Havana was founded in 1515.  Almost immediately, Spain recognized the value of Havana as a port and Havana became the primary marshalling point for the annual treasure fleet that transported the metallic wealth of the New World back to Spain. As you can likely imagine, with all of that wealth coursing through the port of Havana, it became a phenomenally wealthy city with major military, naval and administrative positions for the Spanish government. In addition, a successful merchant class grew up to support the administration and trade (often illegally) with various Spanish and unaffiliated colonies. In summary, the first few centuries of Spanish rule were very lucrative for Cuba and particularly Havana.

Of course, the only constant is that there is change. When Spain’s colonies rebelled in the early 1800’s, Cuba remained loyal. By then, the massive treasure fleets were a distant memory—sugar and trade were the mainstays of the economy. The rebellions actually benefitted Cuba as anarchy, wars and successive coups came to define the newly independent countries of South America. First Spanish loyalists, followed by waves of disaffected refugees fled to Cuba. These people brought skills and capital with them.

cuba building 3

If Spain had been better at governing distant lands, it would probably still own most of Latin America—instead, Spain frustrated the Cubans with high tariffs, heavy taxes and a lack of representation in Spain. In 1868 these policies kindled a revolutionary spark that could never be extinguished. Cuba fought three bloody wars against both Spain and its own people. These wars lasted for nearly thirty years and thoroughly exhausted Cuba and Spain. With Spain on the way out, the United States decided to get involved and after a short war, Spain left the Americas forever. The US was now in control and Cuba was a quasi-colony. While Cuba was granted self-rule, the US maintained the right to intervene whenever it chose to—which was often.

US control brought stability, infrastructure and American capital. All three of these had been lacking during the wars. In particular, after three decades of war, much of Cuba was financially destroyed. Americans flooded in to fill this vacuum and became substantial investors and operators of major businesses, from sugar to railroads, to banking and telephony. However, no business was as dominated by American interests as tourism which blossomed under the Mafia with the willing acquiescence of the Cuban government.    

Cuba Building 4

Seen better days...

Havana was an obvious tourist destination for Americans who were restricted from certain guilty pleasures back in the states. Under the Mafia’s “benevolent commercial guidance,” tourism blossomed on the back of drinking, gambling and prostitution. Business in Cuba was also booming as sugar prices entered a multi-decade period of elevated prices, while increased investment lowered Cuba’s production costs. For many Cubans, the half century of American dominance was a very lucrative one, ushering in a large and wealthy middle class.

That said, beneath the surface, things were not right for everyone. While the rich did well, many Cubans in the countryside were illiterate and destitute. Working the sugar fields was hard work, for meager pay. Estimates are that in the first half of the 20th century, nearly a quarter of all employees were in the sugar business. Popular unrest often simmered just under the surface, incensed by a corrupt and inefficient government, union activists, political violence and disgust brought on by the decadence of the Mafia age.

cuba building 8

Imagine how Cuba had once been...

This all culminated with the Cuban revolution of 1959 where a handful of revolutionaries in the mountains were able to garner support amongst the disaffected and eventually overthrow the government. Had the revolution ended with a new strongman—possibly a more enlightened one—Cuba would have continued to sail forward towards prosperity. Instead, Cuba chose the communist path forwards where all businesses and property were nationalized, to feed a dysfunctional ideology.

In the 1960’s, the confiscated wealth served to improve the living standards of millions of poor Cubans through education, training, land distribution and newly appropriated apartments. Very generous subsidies from the Soviet Union perpetuated these standards for decades, while the infrastructure of the country crumbled. When the Soviet Union failed, so did Cuba. During more than a decade known as the “special period,” (following the collapse of the Soviet Union) Cuban standards of living collapsed and have stayed down, despite a recent recovery on the back of tourism. Nothing better symbolizes the failures of communism in Cuba than the fact that the sugar harvest has declined from 5.5 million tons in 1958 to 1.5 million tons in 2013.

Cuba Sugar Mill

One of many deserted sugar mills...

Over the past two decades, since the fall of the Soviet Union, the Castro brothers have somehow held onto power through sheer ingenuity, by slowly re-inventing the country as a tourist destination and slowly loosening the yoke of state control. However, the unspoken story of Cuba’s survival is the constant stream of remittances from émigrés to family members still in Cuba. With the Castros in the sunset of their career, Cuba is beginning to chart a new course—hence my week of discovery.

 

 

I've included some additional pictures.

Cuba Bay Of Pigs

Bay Of Pigs 2

Bay Of Pigs Museum.

Original Bacardi Building

The Original Bacardi Rum Building

cuba building 5

Typical street view.

cuba building 6

Amazingly ornate buildings...

cuba building 7

Not a bad street with a coat of paint...

Cuba Waiting

In Cuba, There Is A Lot Of Waiting For Something To Happen (I Don't Think I'd Cope Well With Socialism...)

Cuban Censorship

As long as people use art to protest censorship, there is hope for change...

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Bienvenido a Cuba!

December 31, 2013 5:32 PM


cuba rum

It all started as I was grabbing coffee with a close friend of mine. After a very successful, but exhausting year in Mongolia, I was looking for a holiday location where I could unwind. The prerequisites were that there be limited phone or internet access to avoid roping me back into work. I wanted a place that I could truly escape to and that business could not find me. I was worried that it would take some far-away land to achieve this goal—an African safari—or some deserted Pacific island. I had already spent the morning spinning the globe around on Google Earth—nothing piqued my interest.

Then my friend suggested the obvious; “How about Cuba—the forbidden fruit of American travelers? Your cell phone won’t work, the internet is impossible to access and business won’t come and find you—heck, business cannot even legally exist in Cuba.”

“…But won’t that take months to get the visas in order? I need to leave immediately as I’m due in Mongolia, during the first week in January,” I replied.

“Don’t worry. I’ll get your visas sorted out. Let’s just say that I know people… (wink, wink) Besides, I’ve been there many times in the past decade. It’s finally starting to wake up and shake off communism. You need to see it now, so that you have perspective on it in a year or three when Americans can start investing there.”

cuba nice

Is This The Real Cuba?

48 hours later, my girlfriend and I were on a plane to Cuba with a visa for the “purposes of attending worship services….to interact with the people of Cuba….to the purpose of friendship and worship.” Those of you, who know me well, will appreciate the irony and incongruity of me getting a visa to do missionary work—then again, the last half century of Cuban history is full of incongruent ironies.

old cuba 1

Is This The Real Cuba? (About A Mile From The First Location--Not For Tourists)

Having lived in Miami for the past decade, I have met plenty of Cubans and heard the disheartening tales of Cuba and the Castro brothers. I expected to find the world’s largest tropical gulag. Instead, I found a cheerful country, full of warm friendly people, some of whom seem to genuinely admire the government—despite its arcane rules and habitual dysfunction. I also found many who were illegally saving their money in US Dollars and plotting their escape from Cuba.

I expected to find an island mired in misery with chronic scarcity of basic goods. Instead, I found a place that was remarkably devoid of extreme poverty—a true anomaly in Latin America. Given the inevitable failings of a purely socialist state, I expected much worse. If you remove the top few percent of wealthy Argentines, the average Cuban is roughly on par with the average Argentine in terms of standard of living and Cuba’s infrastructure is a good deal ahead of Argentina’s—something I certainly did not expect to find.

cuba food

Great Food!!

I expected that men in green army uniforms would harass us as we went about life—typical of military dictatorships with a suspicion of America (we have spent the last half century trying to topple the government). Instead, the police presence was less than that of Manhattan and the military is effectively out of sight. The only government representatives that we met were in Museums—they were both helpful and amazingly patient as I fumbled for words in Spanish.

In many ways, it was an island of contrasts and unexpected surprises. My friend with the visas, was also correct, Cuba is beginning to open up and transition to a market economy. While there is no business to be done by Americans (yet), I spent my week in Cuba trying to cut the Gordian Knot of misconceptions, misinformation and failed economic plans that have characterized Cuba’s last half century of economic dysfunction. I expected to see another failed socialist state, impossible to revive—a Zimbabwe off the coast of Florida. Instead, I was both surprised and impressed by the country and its potential as a future investment destination.

Over the next few pieces, I will take you through my week in Cuba—the misconceptions, the obvious failings and occasional successes of state-planned socialism. This collage of stories was the result of dozens of conversations with ordinary people that I met during my vacation—hotel employees, barkeepers, waiters and especially taxi drivers (who tend to have the best pulse on the economy in every transitioning economy). These people ranged from life-long communist ideologues to those who truly despised the government; however, the majority of the people I met, were simply divorced from politics, frustrated with socialism, but appreciative of the occasional benefits that it brought. I stayed true to my mission of escapism. I did not speak with any senior government officials and I did not engage in any business. Rather, I ate, drank and travelled myself ragged, through dozens of cities and over a thousand kilometers of back roads. Let’s just say, that I’m not the type of vacationer who sits on the beach…

cuba kid with dog

Bienvenido a Cuba!!!

 

 

(All Pictures By Mili Martinez)

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