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Posted June 21, 2012 by publisher in Business In Cuba

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HJ Publisher: Original title is Risky Business: Investing in Cuba Is More Than Just a Financial Gamble. This is a well written, thoroughly researched article by the author. The information is balanced and factual… two difficult things to do when writing about Cuba. I also thank him for including me in his research.


Investment risk can mean a number of different things. This past fall, British businessman Amado Fakhre took a particularly severe type of loss: His freedom.

October, 2011: Fakhre, the Lebanese-born, Havana-based CEO of Coral Capital—which claimed to have invested $75 million in Cuba, with more than $1 billion worth of projects in the pipeline—is woken at dawn and arrested by Cuban authorities. Coral Capital’s offices are shuttered and declared a crime scene. Fakhre has been held without charges ever since.

April, 2012: Coral Capital’s COO Stephen Purvis, is picked up by Cuban government agents as he prepares to walk his children to school. He too, has been held without charges, and no mention has been made of either case in Cuba’s state-run media.

Before their disappearances, Fakhre and Purvis seemed to have no shortage of confidence in Coral’s ventures.

“We’re not virgins at this,” Purvis told a reporter, regarding the Bellomonte Golf Club, a 650-acre property under development at the time of his arrest.

Indeed, Purvis and Fakhre were not beginners—Coral Capital was formed in 1999 to invest in Cuba and successfully restored Havana’s Hotel Saratoga, where rates climb as high as $900 per night. They also opened the island’s first Land Rover dealership, which was admittedly a work in progress (they sold a total of one car, to themselves…but these things take time).

Coral Capital was not the only foreign company paid back by the Cuban government with a complimentary stay at Villa Marista, the state security torture facility that apparently also doubles as a guesthouse.

Vahe “Cy” Tokmakjian, CEO of Ontario, Canada’s, Tokmakjian Group, which sold buses, trucks, and mining equipment to Cuba and served as Cuba’s exclusive distributor for Hyundai, was an experienced Cuba hand.

“I came to Cuba 21 years ago when the times of economic trouble began and, despite my banker’s advice, I considered I could trust Cubans; so that’s how I came here, why I’m here now and why I will continue to be here,” he told Cuba Plus, a publication produced by Vancouver’s Taina Communications in partnership with the Cuban government.

To be sure, Tokmakjian, whose company did an estimated $80 million worth of business with the island annually, continues to live in Cuba—held without charges since September 2011, when he was taken into custody by state security and his company closed. (A second Canadian, Tri-Star Caribbean CEO Sarkis Yacoubian, has been held by the Cuban government without charges for almost a year.)

What Happened?

As Fakhre, Purvis, et al (over the past two years, Cuba has sent 52 foreigners, as well as hundreds of Cuban ministers and officials to jail, and has expelled more than 150 foreign business owners and operators) have now discovered, part of the reform process appears to include President Raul Castro making good on a 2008 vow to root out the rampant corruption that has been a part of daily life for decades.

A noble goal, hampered by the fact that no clear definition exists of what, exactly, constitutes “corruption.”

A centrally-controlled command economy such as Cuba’s, with a near-total lack of transparency, ensures that “every act is fraught for anybody trying to exist, from businesspeople to the average Joe,” says a diplomatic official who agreed to speak to me anonymously.

“The Cubans have very publicly made examples of what they perceive to be corruption issues,” the source explains.

One of those, in an interesting reversal of the norm, is what might be referred to as a “maximum wage law,” which reportedly hovers around $20 per month. According to the Economist, Raul Castro “considers letting foreign firms pay market wages a step too far,” forcing companies “to break the law—and run afoul of his newfound efforts to enforce it.”

“We are somewhat in the dark here,” said a European businessman based in Havana. “If I pay my manager an extra $100 a month, as I feel I should, is that a crime against national security?”

The answer is, in a Communist country, yes. Money is power, and the inevitable income disparities that result from capitalistic concepts like bonuses collapse the order of a “classless society.”


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