Sunday, March 11, 2007

Month One Cuba Libre

Month One Cuba Libre

By now the majority of Cubans have reversed the effects of starvation and other privations of the former government and are on the mend. With full stomachs it is easier to smile and dance in the streets and clock in at work in their new jobs. Havana is filled to capacity with venture capitalists and corporate CEOs scrambling to establish a toe-hold in Cuba for their operations. As Cuba reaches its 30th day of liberty, the transitional government is signing hundreds of contracts with private foreign corporations to mine, broadcast, provide fiber optics cable, satellite, provide power, occupy space in Havana and elsewhere and the list could go on and will when I can get around to it but you get the idea. Besides the fees generated for the Cuban government, those occupying Cuban locations will immediately have to begin paying their site-value tax unless they are under the Economic Victims Compensation Act which grants them a number of years of site-value tax relief.

Probably within one year every inch of business Real Estate in Havana will be GONE! For the most part the people have just stayed in their dilapidated housing but many places on the island are at least presentable now with paint, nails, wood and other supplies flooding into Cuba. Many Cubans begin renting rooms to tourists, offering taxi service, guided tours complete with English/Spanish interpretation and other services that cater to the burgeoning tourist and business demand. In addition, the construction industry is desperate for more man power and has taken to luring the workers from other construction sites with bribes like free worker housing, free meals and healthcare as well as the standard 401K/vacation benefits available at any decent company found in the west. Because Cubans are living on land location worth $0 they pay no tax and therefore begin to accumulate more and more wealth over and above that required to maintain themselves like food, drink, etc. Now corporations are looking for new places to operate since the traditional business district is occupied to capacity. The residential areas on the periphery will be the first Real Estate sold from a Cuban family to business investors. At this point a 1/8 acre plot could range from between ½ and 1 million dollars instantly making the family very wealthy. They will of course relocate to new development farther outlying that, though not as convenient as closer in, again puts their residence’s site-value tax at or near zero. But the business that just purchased the previous property obviously has a valuable site since they pay big so their site-value tax would be very high. Note that the new Cuban residence itself may be a grand hacienda but because the tax in based on the value of the location site and not the improvements the owners pay little tax. Likewise, the business is free to improve his new site to accommodate the most efficient use of the land but is not taxed for the building – just the location. So that usually means building up and down if geologically possible to create as much business space as possible.

Here is where the Cuban people through their government will have to make decisions regarding revenue versus historic architectural preservation. Sites zoned for sky-scrapers will have by far the highest site-value taxation revenue generated but could never be considered “historical architecture.” But many areas of Havana, where possible, should be zoned to strictly adhere to architectural controls for history preservation since this generates billions in tourism. Of course it will generate less site-value tax revenue so Cubans will need to strike a balance but not cut their nose off despite their face.

Because Cuba has full employment, every Cuban can keep every penny he earns and has free company health care, a new social condition emerges never before seen on the earth in recorded history. There is virtually no crime. Because all Cubans are being paid so well and there are so many good opportunities, crime literally doesn’t pay. You can earn far more per hour doing legally available work than in any criminal endeavor. Cubans are too busy earning wealth, investing some where they see fit and ferreting away the rest free from the greedy hands of government. Cuba will work so well under this system that you will not recognize the place in one year. In 5 years Cubans will be the wealthiest people on the planet. After ten years hopefully the rest of the world will be asking how they can continue to be so stupid and not adopt the Cuban model. Clearly anyone who reads these economic outlines can see that this is the only sensible approach to creating a peaceful and prosperous Cuba. First you have to dream about what a perfect place would be like, which is everybody working in high paying jobs with low personal overhead. Then you have to devise a plan to get from where you are now to where you want to be. Then you have to make it happen. Cuba is a blank slate filled with desperate people wanting a better way. Let’s show them how to make it happen.

Tomás Estrada-Palma

2 Comments:

Blogger Rob said...

Tomas,

Great article. I posted an excerpt with a link to the article here http://havanajournal.com/business/entry/news-from-30-days-after-post-communist-cuba-fiction/

Keep me posted on any other articles like this.

Rob Sequin

Publisher

http://HavanaJournal.com

2:01 PM  
Blogger Tomás Estrada-Palma said...

Thanks Rob!

Will do buddy.

6:06 PM  

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