HAVANA, Cuba. – On a daily basis, including on weekends, young Hector pedals dozens of miles on an old bicycle which probably dates to the 1990s, when schools and work centers gave out when communism in Eastern Europe collapsed and the Cuban economy collapsed with it.
Hector is a delivery boy for two Old Havana restaurants which provides home delivery; he survives thanks to the tips he gets from clients. He starts working around Noon, and he doesn’t get home until very late, way past 11:00 pm. At that time, he showers, eats dinner and goes to sleep, for the next morning, he must be at the produce market on Egido Street at dawn where occasionally he also works in the mornings unloading merchandise from trucks for 25 pesos an hour.
In spite of the country’s crisis, between both jobs, this young man, who has a degree in tourism operations, makes more money than if he had a state job, but much less than what he earned before as sales agent selling tourism packages at the Packard Hotel.
In March of 2020, international borders were closed due to the pandemic, tourists stopped traveling to Cuba, hotels were closed, and, like half of the 75.000 tourism-industry workers in the country, Hector was laid-off. At the time, he owed 600 Cuban pesos to the government employment agency that, as intermediary, contracted him in 2016 for the Spanish hotel chain Meliá, and two years later, in 2018, for Iberostar.
“They wanted to reassign me to a farming job, earning 430 Cuban pesos a month (less than US$20), without the monthly stimulus paid in CUCs, and with no guarantee that they would restore me to my tourism sales position, and I said no. They had already paid me two months of the four they should have paid me for the work stop, in compliance with Labor Ministry’s Resolution 20. When I refused to be relocated, they asked me to reimburse them the two-months payment that I had received while waiting for re-assignment. I wasn’t going to do it because, after all, Gaviota (the state employment agency) broke the contract and the law and the whole nine yards. But things are very tough and maybe one has to give in,” said a very tired and frustrated Hector, who is about to give up.
According to testimonies from other Packard Hotel workers, at the end of March 2020, the intermediary employment agencies ACOREC, S.A. (Commercial Contracting Agency) and Gaviota S.A., summoned half of the hotel employees to an “information meeting” in order to notify them that, as of April, their work contracts with Iberostar Hotels and Resort would be terminated. Employees were informed, also, that they would then be at the disposal of the Ministry of Labor and Social Welfare as “laid-off” or “available” workers, two peculiar ways in which the Cuban government labels workers it has fired so as not to call too much attention to the unemployment phenomenon.
Although nowhere in the contracts between the state employment agencies and the workers is there any mention of a transfer of contractual obligations to the Ministry or Labor or any other state entity outside of the Ministry of Tourism; and although Ministry of Labor Resolution 20/2015 stipulates in Article 17 a commitment to guarantees and indemnifications in case of termination “at the request of the foreign company, or due to structural or activity changes, or financial problems,” the employment agencies disavowed their obligations and with no regard to years of employment, as required by Resolution 20, they sent workers home with only a two-month payment at minimum-wage levels (first month at 100%, second month at 60%), a payment the agencies requested be reimbursed to them in July 2020 as an essential condition for placing workers in the “employment pools”.
Damaris, who worked as a waitress at the Packard Hotel since its inauguration in late 2018, and as a maid in other Havana hotels prior to that, is presently unemployed. She participated in the information meeting called by ACOREC and tells Cubanet what happened there:
“We had been told already that people were being fired. Workers at other hotel chains had been summoned to meetings and also were sent home; at the Paseo del Prado hotel, those at the Habana Libre, at the Manzana Kempinsky, all of them were firing staff. Our meeting was held on March 26, and there we went; it was totally disrespectful, no one said anything, there were no explanations, we were called to sign papers indicating we agreed to transfer our contracts to the Labor Ministry. That’s when many of us said no; we said our contract and Resoution 20 clearly stated that they (ACOREC) had to indemnify us according to the number of years we had been at the job, and since my contract spanned over five years, I had to be paid salary equivalent to six months.”
“I was among those who said ‘No’ and sat home waiting, but many others accepted their farming reassignments because they were guaranteed reinstatement once tourism picked up again. I said, ‘No agriculture for me, I am waiting out my six months in compliance with my contract.’ After two months (in June), they stopped depositing money in my account; it was pittance, but it was something, only 200 Cuban pesos a month (US$8 at the official exchange rate), and no stimulus payments in hard currency. In July, they called me at home, to ask me to return the two months’ worth of salary they had paid me because, according to them, I had not accepted the work offered me by the Labor Ministry.”
“Contrary to what they said, they were obligated to pay me, not to transfer me to the Labor Ministry. What can I do? Nothing. I have to give them back that money even if I don’t want to, it’s abusive. I have to pay it because if not, they will not hire me again, and I need to go back to work,” says Damaris. Her testimony agrees with Hector’s with respect of the abusive nature of the firings.
“They told me to return the money because if I didn’t, they would not hire me again when tourism returned to normalcy. I know that the money is negligible when you take into consideration the present circumstances, and I also know that it’s blackmail, about which we can do nothing: I allow myself to be blackmailed or I keep on pedaling. They broke the contract, but since they are military men, they can do what they please. I had been at Iberostar for over a year, I earned good money, there were no complaints about my work. I became unemployed as a result of the pandemic, I am not responsible. The government said it would pay those that were left jobless, but it lied. When all is said and done, they even want to charge us for becoming unemployed,” said Hector.
According to Article 18 of the Labor Ministry’s Resolution 20/2015, indemnifications should have been paid all at once, “in whatever amount it totaled after multiplying the salary established in the contract (…) by the years of service on the worker’s labor record.” That norm establishes payment of “one month’s salary for every month up to a year of service”, “four months’ salary for between one and five years of service”, “six months’ salary for between five and 10 years of service”, and “one year’s salary for more than 10 years of service”.
What They Are Saying at Iberostar and Gaviota S.A.
According to information provided by a source linked to both Gaviota S.A. and Iberostar, Between March 26 and October 2020, the time of the last staff readjustment, at least 198 employees were terminated at the Packard Hotel alone. Packard Hotel is managed by the Spanish chain via a signed agreement with the military company Gaviota S.A., which belongs to the Entrepreneurial Administration of the Armed Forces (GAESA), who owns that facilities.
Terminations exceeded 50% of official total staff at that time, which was just short of 400 employees, and they affected both administrative personnel –which was reduced to only 20% of the workers employed- and service personnel, all of which generated a strong reaction against the firings within the hotel, to which GAESA responded with punishment and termination of other workers –accused of “antirevolutionary”- to serve as a lesson for the rest who had not been affected but had joined the protesters in solidarity with their claims.
However, this unemployment, which has affected more than 35.000 tourism workers in the whole country – and almost an equal number of indirect personnel, according to reports published in the official press- is not affecting the income from contracts, in US dollars, of the employment agencies.
In fact, there are indications that, all this time, Iberostar has kept making restitution payments to ACOREC and Gaviota S.A. in US dollars for the total wages of laid-off workers, even though the workers only received from those intermediary agencies salaries for two months in Cuban pesos. The hotel chain later demanded reimbursement for the difference.
An officer of Iberostar’s office in Cuba, contacted by Cubanet and interviewed under condition of anonymity, for fear he would be expelled from the country for giving information to independent journalists, assured us that, although the Spanish company proposed the staff-termination plan due to financial shortfalls, with the understanding that the indemnification schedule would be followed because they were committed under contracts and the verbal assurances made to the employees when the plan’s implementation started, it was ACOREC and Gaviota who unilaterally stopped making the corresponding payments to the newly unemployed, even though these employment agencies continued to receive payment (from Iberostar) in US dollars corresponding to each worker that was terminated.
This Iberostar officer states: “Not only did they decide to stop issuing payments (to the workers) without consulting us, but we have kept paying the agencies beyond the six months stipulated in the contracts, a period that should have ended in September 2019.” And he adds:
“This involved not only the Packard, but every one of our hotels here in Cuba, where we employ 1.200 people (under contracts with the employment agencies), all of whom have been left without work, either definitively or temporarily. This means we are talking about almost half-a-million US dollars deposited every month for ghost workers, for workers we no longer have, who have gone home empty-handed. They (ACOREC and Gaviota) say that the adjustments affect the agencies because they are responsible for the workers, but the truth is that they are not paying the workers, that they have sent them to the Labor Ministry to find employment or to jobs available in the agricultural sector.”
However, as far as we’ve been able to learn from this official, Iberostar has not filed a formal complaint against ACOREC or Gaviota to recover the money paid to them and for the breach of contracts. This, in turn, has resulted in a total neglect of the workers who were terminated due to the hotel closings caused by COVID-19.
Based on information from other sources, most of them linked to Gaviota S.A. and to the Spanish hotel chains Iberostar and Meliá, and the French chain Accor –which runs the lavish Paseo del Prado Hotel- the silence and lack of reaction on the part of these foreign companies, in the face of what they themselves describe as fraud, can best be explained by recognizing that they are waiting for GAESA’s decision as to which of them will be granted the rental rights to several real estate property in Vedado, Playa, Old Havana and Havana Central, in the nation’s capital, as well as contracts to manage various hotels now under construction, among them the K Tower –aka Lopez-Calleja Tower- a hotel in the La Rampa area of town, 42 floors high with 600 rooms, slated to become the tallest building in Cuba.
Although GAESA indicated initially in 2018 that the military itself would manage it with “its own resources”, at a cost calculated then at US$90 millions but which today will exceed US$150 millions, the truth is that with the pandemic crisis, the resulting decrease in income from tourism, the military entrepreneurial conglomerate has been wooing foreign investors to get involve in project implementation as well as the eventual management of the hotel, according to a top official at Gaviota S.A.’s investments department.
“They weren’t counting on a pandemic and now the dream has become a nightmare. They either halt the project, or they hand it over to Iberostar, which is the most likely scenario. The folks at Meliá are complaining hard because it’s true that Cuba has been abusive toward them; they’re going to erect the K Tower right in front of the Habana Libre Hotel, which is managed by Meliá, and to top it all, the Cubans have not allowed the closing of the Habana Libre for repairs. They’ve had to shut down one floor at a time, because half of the building is in ruins. The old man (Miguel Fluxa, Iberostar’s president) was here, he met personally with Luis Alberto (Rodriguez Lopez-Callejas, president of GAESA), and everything seems to indicate they will hand it over to Iberostar,” according to the source.
What do the employment agencies say about the terminations?
In compliance with the norms established by the resolutions of the Ministry of Labor and Social Welfare, and by other entities that govern the methods that foreign companies must observe when paying the intermediaries as well as the contracted workers, no enterprise in Cuba can ever pay workers directly.
Instead, they are obligated to deposit the funds in US dollars directly into the bank accounts that the employment agencies keep at Banco Financiero Internacional (BFI), which is owned by GAESA, so that later on, GAESA can issue salaries not in the foreign currency –US dollars- but in Cuban pesos. GAESA applies the exchange rate to the US dollar to calculate salary amounts in Cuban pesos. The intermediary employment agencies create those tariffs in order to keep in its coffers over 90% of what the foreign company deposited in their BFI accounts. Such pillaging as well as the intermediary services of the state employment agencies must be agreed upon by any businessman that decides to invest in Cuba.
For example, in keeping with the categorization put forth in the registry guidelines that the Cuban employment agencies use, which are approved by diverse resolutions of the Council of State starting in 2011 and until today, the monthly salaries made in Cuban pesos, until December 2020, ranged from a minimum of 165 Cuban pesos for an unskilled worker, to a maximum of 465 for Cubans who qualify as administrative personnel. Regardless, foreign companies are required to deposit great sums of money in US dollars in the employment agencies’ accounts that are much higher than the abusive salaries they pay.
AVERAGE MINIMUM WAGES SET BY EMPLOYMENT AGENCIES IN CUBAN PESOS (CUP) FOR EACH WORKER CONTRACTED, AND THE EQUIVALENT IN US DOLLARS
Thus, for a worker who receives a monthly salary of 150 Cuban pesos (some US$6), the foreign company pays the Cuban government –for the “use”, “lease” or “rental” of manpower- US$ 282 (7.000 Cuban pesos at the official exchange rate). And for a worker that receives a salary of 460 Cuban pesos per month, the employment agency receives close to US$ 700. In other words, in every case it siphons more than 90% of a salary that, were it not for the intermediary employment agency, would go to the worker directly.
Zoraya Medrano, former accountant in the commercial department at Gaviota, explained to CubaNet the way in which the intermediary agency issued salary payments while she worked there before leaving Cuba in 2016. She described a financial ploy which allowed US$ 400 –of the thousands deposited monthly in the Fondos FAR (Armed Forces funds) account at Banco Financiero Internacional- to cover the salaries in Cuban pesos to 12 engineers, eight specialized technicians, four secretaries, two IT specialists, and one translator.
Attorney Yohanna Cruz, former executive at the employment agency Gaviota S.A., who today lives outside of Cuba, also gives us details about her experience in these matters, which could throw further light on the fate of both salaries and indemnifications that were owed to the terminated tourism workers:
“There are tables that establish salary categories, and, depending on the category, foreign companies deposit the agreed funds. These amounts and the actual salaries the employment agency pays workers are never the same. For example, a waitress or a housekeeping assistant earns from the agency no more than 230 Cuban pesos per month. However, that does not mean that the foreign company deposits US$ 230, no way: in 2016, the minimum deposit that foreign companies had to make for each worker was around US$ 300. Of that, the sum of US$ 15, changed into Cuban pesos, is what a maintenance worker made. There is a section in each agreement that no one reads or that people think won’t be enforced, committing the foreign company to pay a compensation fee or a fine for each worker it terminates for company-related reasons, unrelated to the worker’s performance, and that is where Gaviota and ACOREC take advantage to extort more money from Iberostar or from whomever, as a result of the pandemic. In the end, the employment agency is making more money now from each worker whose employment it terminates than from workers it hires, although, in the employment contracts, a lot of money is diverted to bribes, to buying specific job assignments, and everything else that we know goes on there,” affirms Cruz. The veracity of her testimony is reinforced by similar information provided by other officers who worked for other agencies.
In the official press, everything seems hunky-dory. They speak of only 15.134 tourism workers who have been “reassigned”; about another 600 that have opted for self-employment, and 1.812 that rejected the jobs they were offered. In reality, the problem could be worse. Gathering from the information we’ve been able to consult extra-officially from the employment agencies and from the Tourism Ministry, we could be talking about more than half of all tourism workers that were under contract and who have been fired and left to fend for themselves.
Editor’s Note: Terminated workers’ names have been changed to prevent retaliation against them.