Leaked Documents Show Cuban Military Sitting on Billions of Dollars Amid Humanitarian Crisis

Even as Cubans have been dying because of shortages of medicines and supplies at hospitals, and the government claims it doesn't have the money to buy them due to U.S. sanctions, companies run by Cuba's military have stashed away billions of dollars, according to financial records obtained by the Miami Herald.

Gaviota, a company that runs tourist hotels and is just one of many owned by the military, is sitting on about $4.3 billion in its bank accounts, the documents show.

That's almost 13 times the $339 million the government said it needed to buy medications to supply Cuban pharmacies annually. The country's healthcare system lacks 70% percent of the essential medications to treat most illnesses, Cuba's prime minister said earlier this month.

As the country has plunged into its most profound crisis since the end of the Soviet Union's subsidies in the 1990s, a multi-headed conglomerate known as GAESA, owned by the Cuba's Revolutionary Armed Forces, has been holding on to hundreds of millions of dollars that enter the island yearly -- and using it in ways that have dramatically worsened the lives of Cubans and increased the country's debt.

For the first time, a rare leak of GAESA's internal financial records reveals how much the military has diverted the country's badly needed hard currency to its enterprises. GAESA keeps this financial information secret and even guards its accounts from government comptrollers, making what the documents reveal even more significant.

The documents challenge the government's claims that it lacks the money to alleviate Cuba's growing humanitarian crisis.

A Terrible Year

In 2024, Cuba's economy hit rock bottom.

The electrical grid collapsed several times, leaving the entire island in the dark. Gas shortages were so severe that a man in Güines, a town near Havana, Cuba, posted a video of himself on social media carrying the body of a dead friend in a three-wheeled bicycle to a funeral home because no cars were available.

Other videos on social media show people picking up food scraps from the garbage. Laments by people mourning relatives who died for lack of medication and essential supplies at Cuban hospitals are now commonplace. Mountains of trash engulf even Havana tourist hotspots like El Vedado.

During a Communist Party meeting earlier this month, Cuban leader Miguel Díaz-Canel blamed U.S. sanctions -- the government's favorite whipping boy -- for the crisis.

Experts on the Cuban economy don't dismiss the impact of the decades-old U.S. embargo on the island's economy. But they say the blame also lies with the decades of government mismanagement, an obsolete centrally planned economy, shrinking aid from political allies, botched monetary policies and a slow recovery from the COVID pandemic.

That analysis, however, misses the crucial role of the Cuban Revolutionary Armed Forces in the country's abrupt impoverishment.

In recent years, GAESA -- short for Grupo de Administración Empresarial S.A.-- has expanded its control of the island's most profitable businesses, including tourism, retail, telecommunications and money sent to Cubans by families abroad. GAESA has made the crisis worse by siphoning billions of dollars from the country's foreign currency revenues to relentlessly build new hotels despite the deteriorating situation.

And it keeps its money separate from government coffers.

That has effectively stripped other ministries of the resources to pay for healthcare, education, garbage collection, and even repairing the country's creaking electrical grid.

"There are many factors that have led to the current crisis but this is one of the most notable and explains the blackouts," said Pavel Vidal, a Cuban economist who teaches at the Pontificia Javeriana University in Colombia.

To Vidal, spending vast amounts on building hotels while the rest of the economy "is falling apart" undermines the premise that Cuba works under a centrally planned economy and "is evidence that for a long time, there have been two parallel governments."

Financial Statements

One balance sheet from July shows that two GAESA-owned companies -- Almest, which invests in hotels, and Gaviota, which manages hotels and other tourism-related businesses -- had a net worth of 22,7 billion Cuban pesos.

That's almost 13 times what the government invested in its public health system and social assistance programs in 2023, according to figures from the National Office for Statistics and Information.

The 22.7 billion-peso figure would amount to just short of $1 billion in dollars if using the government's exchange rate for state enterprises, currently set at 24 pesos to the dollar.

Notably, the document states that Gaviota, the tourism holding company that manages 115 hotels and other businesses like car rentals and a travel agency, had $4.3 billion in its bank accounts as of July. The money was readily available because it was recorded as "assets on hand." The figure is one of the few listed in dollars.

Gaviota's financial records show the company has 88.6 billion pesos in assets, including 51 billion in "long-term or permanent investments." The company declared 16.6 billion pesos in "net worth."

Gaviota also reported having 1.7 billion pesos' worth of food in its inventory.

The figures are significant because in a recent report to the United Nations, the Cuban Foreign Ministry blamed the U.S. embargo for depriving the government of the $250 million it needs each year to maintain the electrical grid and the $129 million it needs to provide medical supplies annually to its hospitals.

And yet the documents obtained by the Herald show the Cuban military has more than enough money on hand to cover both dire needs.

Loans and Public Money

Cuba's military created Almest in 1994 to "provide real estate and leasing services to entities of the Ministry of the Revolutionary Armed Forces" and act as "principal investor" for GAESA's hotels, according to a 2020 University of Matanzas study. Almest is also responsible for maintaining Gaviota's hotels.

The financial statements reviewed by the Herald show Almest has spent significant public money to build hotels while giving back little in taxes and other contributions, despite Cuban officials' claims that tourism investments ultimately benefit the population.

Almest's July balance sheet shows the company received 668 million pesos from the state's budget. The company also reported 4.7 billion pesos from "state investments/public sector" as part of its capital.

However, it only reported two million pesos in taxes and contributions to the national budget.

While Cuban authorities frequently blame the lack of credit from foreign banks for some of the country's acute shortages, the leaked documents reveal that Almest likely received a loan from foreign sources to build hotels. However, the documents do not specify who extended the credit.

The July balance sheet shows the company is repaying a long-term loan of 45 billion Cuban pesos, which is about $1.9 billion using the 24-pesos-per-dollar exchange rate.

It is unclear whether the Armed Forces also uses Almest as the ultimate owner of the land and hotels. The company reported assets worth 56.5 billion pesos, including 20 billion in permanent investments in "buildings and constructions," and 50 billion pesos in liabilities.

A building Frenzy

Sanctions imposed by the U.S. in recent years, mainly during the Trump era, were designed to stop the military from plundering the country's resources and hit many of its revenue streams, including remittances from abroad and tourism.

The Trump administration halted cruises to Cuba and travel by Americans to the island for "people to people" exchanges that it argued was akin to tourism. And the Biden administration eliminated visa waivers to enter the United States for travelers visiting Cuba, following the island's designation in 2021 as a state sponsor of terrorism.

GAESA and several of its companies, including Almest, have been blacklisted by the U.S. Treasury and the State Department.

Despite the sanctions, the company has remained busy.

Between 2021 and 2023, even as the COVID pandemic was devastating the health system and shuttering tourism, 36% of all government investments went to building hotels and the tourism industry, according to estimates using official figures by Mauricio de Miranda Parrondo, a Cuban economist who teaches at the Pontificia Javeriana University.

In comparison, only 2.9% of investments went to agriculture, 1.9% to healthcare and social assistance programs and 1.3% to education.

This year through September, the National Office for Statistics and Information reported another 17 billion pesos were invested in "business services, real estate and rental activities" and about seven billion pesos in hotels and restaurants. In the same period, the government only invested 1.2 billion pesos in public health and social assistance programs.

Based on Cuban official data, Emilio Morales, a Miami consultant who has closely tracked GAESA's dealings, estimates that hotel investments could have been as high as $24 billion between 2008 and 2022.

Cuban economists long ago started questioning that strategy, which began after Americans flocked to Havana during the Obama administration's brief warming of relations with the island, and the government realized it didn't have enough hotels to cater to high-spending tourists.

However, the construction spree to add 23,000 hotel rooms by 2030 continued -- even when it became the country had more pressing needs and already had many more hotel rooms than it was filling with tourists.

In 2023, tourism revenue fell about 62% compared to 2019, according to data published by the National Office of Statistics and Information. During the first semester of 2023, 7 out of 10 rooms in hotels run by the government were empty.

As of October, the country received 1.8 million international visitors this year, well short of the 4.2 million that traveled to the island in 2018.

Military Expansion

The accounting documents seen by the Herald offer only a glimpse of GAESA's true reach, since they only include data for two of its many companies.

Since 2008, coinciding with Raúl Castro first term as Cuba's president, GAESA has taken control over several companies, including CIMEX, which operates stores, gas stations and other businesses; Habaguanex, an Old Havana hotel and store chain; ETECSA, the state telecommunications company; Grupo Palco, which offers events services, handles real estate and provides maintenance to foreign embassies, and Almacenes Universal, a logistics company that operates the Mariel Special Development Zone, which was established to attract foreign investment.

GAESA's finances are even more opaque because several of its companies are registered abroad.

Morales said GAESA controls most foreign currency entering the island through its Banco Financiero Internacional, which it has managed since at least 2016. Money from remittances and from the salaries foreign governments pay for Cuban medical missions go to that bank. Cuban state enterprises and many foreign companies on the island must open accounts with the bank if they want to operate in dollars, he added.

The Herald has also reported on secret documents that show GAESA taps into remittances from abroad through its companies, Fincimex and Orbit.

The result is a parallel economy, Morales said, that operates with no oversight and is under the control of few people-- likely trusted generals and members of the Castro family -- who profit from resources that are supposed to belong "to the people."

"The most significant thing here is the transformation of a system of governance in Cuba from what was -- if it ever was -- a socialist or communist country to a mafia," he said. "They got the money, and the government has to knock on their door to ask for it."

© 2024 Miami Herald.

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