AMERICAN BUSINESS IN CUBA 1898-1959: A BRIEF OVERVIEW

by Lisa Reynolds Wolfe on August 17, 2011

Havana Hotel Nacional

Americans planning a trip to Cuba to explore future commercial opportunity will want to know the background of American business interests in Cuba.

Large-scale American ventures in Cuba began about 1890, reaching US $50 million in 1895.

By the mid 1890s, the US was the island’s principal market for sugar exports. Direct North American investment was concentrated in the production of crude sugar for refineries in the US and, to a lesser degree, in such other enterprises as tobacco, mineral export (chiefly nickel), and transportation.

Cuba’s economy was so important to the US that when the Cuban War of Independence against Spain began in 1895 the US intervened to protect its interests.

Shortly after the US became involved in the struggle, Spain and the United States signed the Treaty of Paris transferring sovereignty of Cuba to the US.

Cuba was occupied by American troops from the end of the war in 1898 until 1902 when the island gained its independence. Subsequently, American influence on the island was strengthened when a US sponsored amendment, the Platt Amendment (1902-1934), was incorporated into the new Cuban constitution.

Provisions of the amendment gave the United States the right to intervene in Cuba at will, greatly restricted Cuban sovereignty, and stimulated nationalist ferment. It became the basis for expansion of US nonmilitary intervention in Cuba’s political system.

Treaty of Commercial Reciprocity (1903) was also signed, reviving the war-damaged sugar industry and facilitating its 17 fold expansion between 1900 and 1925.

According to provisions of this agreement, Cuban sugar received a 20 percent tariff reduction in the United States in exchange for reductions of 20 to 40 percent for US goods entering Cuba.

This reciprocity agreement consolidated the Cuban mode of development which was based on monoculture and large landholdings. As previously noted, a substantial stake in the sugar industry was held by US capital which, by 1925, owned 41 percent of all mills, and controlled 60 percent of the harvest.

In a third agreement, Cuba agreed to lease the sites of Bahia Honda and Guantanamo to the United States. Guantanamo, occupying the easternmost tip of the island, became the site of a US naval base. Bahia Honda was later ceded by the United States in exchange for larger facilities at Guantanamo.

Cuban-American business reciprocity grew over time.

By the mid-1950s, the US Department of Commerce estimated combined Cuban short-term assets and long-term investments in the United States at $312 million, of which $265 million were in the form of short term assets, especially real estate.

By 1955, Cuban real estate investments totaled over $150 million. While Cubans favored the markets in New York and South Florida, Americans were investing heavily in Cuba, especially in Havana. Since three-fourths of all manufacturing outside of sugar was located in the capital, American commercial investment disproportionately affected the city.

Americans owned or dominated the majority of key manufacturing plants as well as the largest chain of supermarkets, several large retail stores, and most major tourist facilities. Moreover, 25% of all bank deposits were held by branches of American banks.

Investors from the United States owned 50% of the public railway system and over 90% of the telephone and power industries. Consequently, Cuba was integrated directly into the larger United States economic system and its concomitant consumption patterns.

Even though Cubans (particularly those living in Havana) enjoyed a remarkably high per capita income in Latin American terms, they lived within a North American cost of living index, enjoying a material culture underwritten principally by imports from the United States.

Between 1954 and 1956, new foreign investments quadrupled, flowing into almost every strategic sector of the Cuban economy: petroleum, public utilities, petrochemicals, mining, non-sugar manufacturing, tourism, and construction.

By 1957, new direct US private investments since Batista’s military coup totaled in excess of $350 million.

The most important ‘growth’ sector in the economy under Batista was the largely American-financed expansion of the tourist industry.

Many US citizens made a Cuba Trip as a wide array of government concessions and supports resulted in the construction of 28 new hotels and motels at an overall investment cost of more than $60 million. Each new building received substantial tax exemptions and, in the cases of the luxury Havana Hilton and Havana Riviera hotels in the Vedado section of the city, direct government financial assistance during the process of construction.

Investment in Cuba’s tourist industry remained highly profitable in comparison with equivalent investments in the United States, even beyond the ten year period of tax exemption.

In actuality, US capital operations in Cuba were not only granted specific tax exemptions but, for all practical purposes, were excluded from any significant tax burden whatsoever.

American multinationals were able to profitably exploit the island’s existing tax laws for their own benefit and there were relatively few obstacles to the repatriation of profits to the metropolitan center.

Major quantities of new US investment capital flowed into the Cuban economy for almost the duration of the Batista dictatorship.

By the end of 1958, the total book value of US enterprise in Cuba was, with the exception of Venezuela, the highest in Latin America.

Lack of controls on capital remittances between 1952 and 1958 had enabled American capitalists to channel some $378 million in corporate profits back into the US.

Cuba’s trade relationship with the United States dominated the country’s economic system.

In 1959 almost 80 percent of the country’s commercial transactions were with the US.

The capital city, Havana, was dominant, handling a majority of the country’s imports, with between 60 and 80 percent of the country’s incoming cargo passing through the port of Old Havana.

In sum, Havana was home to both the privileged and the marginalized, reflecting both Las Vegas style glamour and the struggle of hardworking residents. Havana’s identity was soon to change, however, with the coming of Fidel Castro’s 1959 Cuban Revolution. Soon American business men were no longer making a Cuba trip and the Cuban government was courting a new business partner, the Soviet Union.

Photograph of the Hotel Nacional in Havana by Lisa Reynolds Wolfe.

 

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