If you think the Cuban government runs Cuba, you’re only half right. The real power isn't held by a traditional ministry or a civil service. It's held by a sprawling, secretive military conglomerate called GAESA. This isn't just a business. It’s a shadow state. While the average Cuban struggles to find basic meds or eggs, this military-led beast manages billions in revenue from tourism, retail, and international trade.
Most tourists sipping a mojito in Old Havana have no idea their money goes straight to the generals. GAESA, or Grupo de Administración Empresarial S.A., operates under the Ministry of the Revolutionary Armed Forces. They own the hotels. They own the gas stations. They even own the stores where Cubans have to buy imported food in foreign currency. It’s a closed loop that keeps the military wealthy while the rest of the island deals with the worst economic crisis in decades.
This isn't just about money. It's about who actually calls the shots. When you look at how the island functions, the civilian government often feels like a front for the business interests of the military elite.
Why GAESA is more powerful than the Cuban state
In most countries, the military is a drain on the budget. In Cuba, the military is the budget. Since the 1990s, the Cuban leadership realized that to survive the collapse of the Soviet Union, they needed to turn their officers into CEOs. They didn't just want to defend the borders. They wanted to own the market.
Today, GAESA is estimated to control at least 60% of the Cuban economy. Some experts think that number is even higher when you look at how many "civilian" companies are actually subsidiaries of military holding groups. They operate with zero transparency. No public audits. No legislative oversight. If a general decides to build a luxury resort instead of fixing the power grid, there's nobody to tell him no.
This creates a massive disconnect. You have the Ministry of Public Health begging for basic supplies, while GAESA-owned Gaviota—the tourism wing—finishes construction on five-star hotels with infinity pools. It’s a lopsided reality that's becoming impossible for the local population to ignore.
The Gaviota empire and the tourism trap
If you’ve traveled to Cuba, you've likely stayed in a Gaviota hotel. They're everywhere. From the white sands of Varadero to the cobblestone streets of Havana, Gaviota dominates the sector. They partner with international chains like Melia or Iberostar, but make no mistake about who owns the land and the buildings.
The military uses these partnerships to bring in hard currency. That cash doesn't go into the national treasury to pay for schools or roads. It stays within the military’s banking system. This is why you see brand new Mercedes buses driving tourists past crumbling apartment buildings where the residents haven't had running water for days.
The military also controls the "dollar stores" or MLC stores (Moneda Libremente Convertible). These were supposed to be a temporary fix to bring in foreign currency. Instead, they’ve become a permanent fixture of inequality. Cubans receive their salaries in local pesos, but if they want to buy shampoo, milk, or meat, they often have to go to a GAESA-run store that only accepts cards loaded with foreign money. It’s a rigged game.
The man who built the shadow state
You can't talk about GAESA without talking about the late General Luis Alberto Rodríguez López-Calleja. He wasn't a household name outside of Cuba, but inside the halls of power, he was arguably the most influential man on the island. He was Raúl Castro’s former son-in-law, which certainly helped his rise, but he was also a ruthless and efficient manager.
López-Calleja turned the military into a corporate machine. He consolidated power by bringing shipping, port management, and even the Mariel Special Development Zone under his wing. When he died in 2022, many wondered if the empire would crumble. It didn't. The system he built was too entrenched. The generals who inherited his portfolios aren't just soldiers anymore. They’re shareholders in the nation’s survival.
The military’s grip on the economy is a survival strategy. If the military controls the food, the fuel, and the money, they don't have to worry about a coup or a popular uprising. They are the only ones with the resources to keep things running—or to shut them down.
How US sanctions actually feed the military beast
There's a weird irony in how international relations play out here. The US government has tried to squeeze GAESA for years. The "Cuba Restricted List" bans Americans from doing business with military-owned entities. The goal is to starve the generals of cash.
But here’s the problem. GAESA is so integrated into the economy that it’s almost impossible to avoid them. When the US restricts travel or remittances, it often hurts the small, private entrepreneurs more than the military. The private B&B owner loses guests. The military-owned hotel just waits for tourists from Russia, China, or Canada.
The generals are experts at shell companies. They use offshore accounts and complex ownership structures to bypass Sanctions. They’ve had decades of practice. While the private sector in Cuba is suffocating under red tape and a lack of supplies, GAESA has the logistical muscle to import whatever they need.
The rise of the new private sector and the military’s response
In the last couple of years, the Cuban government started allowing small and medium-sized private businesses (MSMEs, or pymes). For a moment, it looked like a crack in the wall. People started importing goods and opening shops. But don't be fooled into thinking this is a free market revolution.
The military keeps a very close eye on these businesses. In many cases, the people getting licenses to run these "private" companies are former officials or family members of the elite. It’s a way to privatize the profits while keeping the control in the same hands. If a private business gets too big or too successful, the state has plenty of ways to rein them in.
This "parallel state" ensures that even if the political system changes, the economic power stays with the military. It’s a model similar to what you see in Egypt or Myanmar. The uniform might come off, but the hand stays in the till.
What this means for the future of Cuba
Cuba is at a breaking point. Inflation is triple-digit. The youth are leaving in record numbers. More than 400,000 Cubans arrived at the US border in the last two years alone. That’s a massive brain drain and a demographic catastrophe.
The military's response has been to double down on their business model. They're betting that they can outlast the crisis by controlling the few remaining profitable sectors. But you can't run a country on tourism and remittances forever if the lights don't stay on and the people can't eat.
The tension between the civilian government—led by President Miguel Díaz-Canel—and the military leadership is a poorly kept secret. The civilian side gets the blame for the blackouts and the bread lines. The military side keeps the cash and the hotels. It’s a recipe for internal friction that could explode if the economic situation doesn't improve soon.
Next steps for understanding the Cuban economy
Don't just look at the political headlines. Look at the balance sheets. If you want to understand where Cuba is headed, you have to follow the money.
- Watch the construction. Keep an eye on hotel projects in Havana. If GAESA is still building luxury towers while hospitals are failing, their priorities haven't shifted an inch.
- Track the MLC stores. The price and availability of goods in these military-run shops are the best barometers for how much pressure the generals are actually feeling.
- Research the supply chains. Many "private" importers are forced to use military-controlled ports and logistics. The "private sector" in Cuba isn't truly independent as long as GAESA owns the dock.
The military conglomerate isn't just a part of the Cuban story. It is the story. Until there is a clear separation between the armed forces and the national economy, the "parallel state" will continue to be the only state that actually functions on the island. Get used to it. The generals aren't going anywhere.
