Commentary

What Cuba’s “Tourism Revolution” Could Mean For Puerto Rico

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By Aria Chehreghani: 

The thought of a “time-capsule” country filled with Cuban cigars, antique cars, and pristine beaches came to the minds of many after the rapprochement of diplomatic relations between the United States and Cuba. Americans, however, are still prohibited from traveling to Cuba for the sole purpose of tourism and can only legally travel if they receive special permission from the Treasury Department if engaging in activities such as education or humanitarian projects.

According to statistics from the University of Havana, the thaw in travel restrictions has led to a 36 percent increase in visits by Americans to Cuba. Those reports say that 51,438 Americans visited Cuba from January 1 to May 9 in 2015, compared to 37,459 from that same period in 2014. The Cuban government predicts that 10 million Americans will visit each year once all the travel restrictions have been lifted. Overall tourism in Cuba has increased by 14 percent, making Cuba the second most popular tourism destination in the Caribbean after the Dominican Republic. Considering how plans are underway for commercial flights between the two countries – from ferry services departing Miami and Carnival Cruise Lines offering island travel packages – it comes as no surprise that the number of tourists will dramatically increase.

But what does Cuba’s “tourism revolution” mean for the economic health and stability of other Caribbean islands? A Caribbean Hotel & Tourism Association report describes the risk as a “ripple effect” and that islands closest to Cuba will feel the greatest effect due to Cuba’s close proximity to the U.S. For example, Puerto Rico’s tourism industry could face a significant economic shock. Tourism contributes more than $7 billion annually to the Puerto Rican economy – 90% of the island’s visitors come from the U.S.

Puerto Rican tourism organizations are planning for the potential competition posed by U.S. tourism to Cuba. Mari Jo Laborde, chief marketing officer for the Puerto Rican Tourism Company, told Reuters that the company plans to produce 5,000 hotel rooms by 2020. Additionally, luxurious hotel brands such as the Ritz Carleton Reserve recently opened in Dorado and construction is underway to open a Four Seasons resort in Fajardo. Regardless of all these new additions, a Cornell report from the School of Hotel Administration says that Cuba’s Tourism Minister Manuel Marrero plans to produce more than 78,000 new hotel rooms by 2020.

A shock to the tourism industry could not come at a more challenging economic time as Puerto Rico continues to struggle out of $72 billion in debt. In August, the island defaulted for the first time in history after paying only $628,000 for a $58 million debt bill. On December 16, Congress’ omnibus budget deal offered no debt assistance to Puerto Rico – the island must pay over $900 million by January 1 to avoid another default. This is a particular concern for U.S. financial institutions and investors: according to investment research and management firm Morningstar, more than half of all U.S. municipal-bond funds are invested in Puerto Rico bonds.

Puerto Rico has the opportunity to mitigate the effects of Cuba’s “tourism revolution” while there are still some travel restrictions in place. There are some critical concerns that need to be addressed:

  • U.S. Congress should consider an appropriate response to ameliorate Puerto Rico’s debt crisis. One path would be to consider having Puerto Rico file under Chapter 9 of the U.S. Bankruptcy Code. Resident Commissioner for Puerto Rico Pedro Pierluisi has introduced a bill to that effect.
  • Puerto Rico and other Caribbean islands need to solve the sargassum seaweed crisis, which is a likely result of climate change. A large inflow of the foul-smelling seaweed could lead to a decline in tourism, increase in fish deaths, and coastal dead zones. Officials recently called for anemergency meeting for the 15-nation members of the Caribbean Community (CARICOM) to strategize a response, but these meetings should also involve associate and observer members such as Puerto Rico.

Puerto Rico is an integral territory of the U.S. that is home to over 3.5 million American citizens. The U.S. would do well to assist Puerto Rico during the island’s economic turbulence and help brace them for the coming shock posed by Cuba’s “tourist revolution.”  

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Aria Chehreghani is an intern at the Stimson Center. 

 

Photo credit: Trish Hartmann via flickr

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