Just back from another eye-opening trip to Cuba (cycling this time). I was struck by the continuing improvements in the old city of Havana. Mostly I was impressed by the business model driving the restoration of this world heritage UNESCO site.
Remember, this is a city that sets the standard for “infrastructure deficit.” Every week some cracked, rebar-sprouting old building just gives up and collapses into the street. On good days nobody gets hurt. Crumbling, exhausted old buildings – some abandoned, some inhabited and keeping homelessness at bay – are everywhere.
But that’s changing in Old Havana.
The business model for Old Havana’s remake is strikingly similar to what some cities in Metro Vancouver are doing. Just as the City of Vancouver property endowment fund (PEF) takes public land and develops it – or finds partners to develop it – for profit, so does a public corporation in Havana called Habaguanex.
This being Cuba, it starts with the advantage of owning everything. Since the devastating end of Russian aid in the mid-1990s, an enterprising planner/developer set up this real estate company to bootstrap development, starting with around $3 million in seed money.
Sensing potential tourism demand, the “Fenix” project started fixing up old hotels, bars and restaurants, with almost half the profits ploughed back into the next round of renovations. The other half is split between social services and general revenue.
This is similar to how the proceeds from Vancouver’s PEF provide some general revenue, with the rest going back into the endowment fund for future developments (usually social housing). The model in Havana is working well enough to finance non-revenue-producing day-care centres, galleries, clinics and public-square renovations.
The resulting makeover is now throbbing with tourists from around the world paying international prices for rooms in stately old hotels buzzing with free wi-fi and attentive staff.
Old murals celebrating Cuba’s great writers and thinkers have been re-painted. A chocolate museum and an immaculately restored historical pharmacy on the pedestrian-only streets keep the walking tour guides busy as they dodge street performers and sellers of old magazines and fresh flowers.
Like Disneyland and Whistler, having one common owner slightly dilutes the impression of diverse operations. The same Habaguanex poster promoting Valentine’s Day (El Dia Del Amor) was in all the bars, money-changing centres, galleries, cathedral entrances and hotels.
Like Granville Island – another local version of public land developed for profit – Old Havana works for the locals first, which makes it so appealing for tourists. When they renovated an old colonial complex that used to house 10 families, then got taken over by 50 families, Project Fenix moved 10 of those families back into the renovated rooms.
Project Fenix is just one part of Cuba’s push to save itself financially through tourism. We were told that 85% of current tourists are from Canada, though most of them forgo Havana’s clumsy charm in favour of the white sand aquamarine beaches of Veradero 140 kilometres away.
Like so many other jurisdictions, Cuba is being forced to straighten up and fly right financially. As it gradually sheds uneconomic sectors and public-sector employees who have nothing to do, it’s no doubt picking up lessons from Habaguanex on using the market to guide the next steps.
Amid the truly depressing lack of consumer infrastructure (a city of 50-year-old belching vehicles and myriad bicycle varieties with not one bike repair store!), Project Fenix is illustrating what’s possible when economic decisions are made based on consumer demand, not on the whim of a central planner. •
