Bacardi and the Long Fight for Cuba

by Gjelten, Tom

  The rum business was proving to be one of the brighter spots in an otherwise underperforming Cuban economy. In 1972 New York Times correspondent Herbert Matthews returned to Cuba and visited the old Bacardi factory in Santiago, a place he knew from his earlier friendship with Pepín Bosch. Matthews sampled the product and wrote that in his opinion the managers had learned from the problems they had encountered shortly after the enterprise was expropriated by the Cuban state. “As a rum drinker,” Matthews concluded, “I would say the quality is as good as it was.” His judgment no doubt irritated Pepín Bosch, but their friendship had deteriorated years earlier anyway.

  What Matthews did not discover on that quick visit to the old Bacardi factory, however, was how often the veteran workers there had tangled with state authorities over their rum production goals. The efforts by Mariano Lavigne and others to promote Cuban rum exports to the socialist bloc were apparently successful, because within a few years the demand in those countries for the product was high. State authorities repeatedly pressured the management of the rum enterprise to boost production. At the old Bacardi factory, however, they faced stiff resistance from Lavigne himself and from Humberto Corona, the production chief. Both men courageously stood up to government officials who wanted them to cut the rum-aging process short and dilute the aged rum to make it stretch further, just as Che Guevara had urged years earlier. Corona, who had learned his craft under the Bacardis, argued that changing either the aging process or the rum-blending formulas would damage the quality. When Cuban journalist Leonardo Padura interviewed former Bacardi workers in Santiago in 1988, they told him that Corona’s “unending zeal” in the late 1960s and the 1970s blocked what would have been “the definitive ruin” of Santiago’s rum-making heritage:With all his might, Corona opposed the triumphalist plan to double rum production. Although laudable on the surface, that idea would have brought the premature depletion of the old rums. Humberto Corona refused to allow even the production of one liter of rum beyond what the formula established, and he thereby saved the future of the rum industry in Santiago.

  One by one, however, the old-timers from the Bacardi era retired or passed from the scene. Mariano Lavigne died in 1977, having worked nearly sixty years in the rum business. He remained active until the end and was buried as a Cuban hero, with an elaborate funeral procession that began at the door of the old Bacardi factory, where hundreds of rum workers paid him homage, and ended at the Santa Ifigenia cemetery under a canopy of branches and flowers. His old Bacardi colleague Alfonso Matamoros had long since retired, having chafed at the increasing regimentation of the rum-making operation. Gone were the days when he was trusted with a key to the rum factory and had the freedom to come and go as he pleased. The new system was bureaucratic and controlling, and Matamoros was just one more rum worker expected to follow the regulations imposed by the Ministry of Industry.

  Under socialist administration, the entire rum-making procedure was defined as a series of component steps, which were then spelled out in great detail and set down as a series of work standards. Production practices that were informal in the era of Bacardi family management were formalized and listed in a handbook, as if the manufacture of rum could be so regularized that no special expertise was necessary. The technical norms to be followed in washing corks and gluing labels were described in almost as much detail as were the guidelines for aging the aguardiente or filtering the base rums, with as little as possible left to human judgment. The idea of judging a rum blend by its smell or feel on one’s hands, as done by Daniel Bacardi or Mariano Lavigne, gave way to the procedure specified in the handbook: “When the blending and adjustment of a certain type of rum is to be carried out, first request from the corresponding aging warehouse the desired quantities according to the indicated date....” The old factory on Matadero Street was now part of Administrative Unit 1, a subdivision of the Santiago Beverage Combine, which in turn was under the Provincial Directorate of Beverage and Liquor Enterprises. Santiagueros, however, never called it anything but the Bacardi factory.

  Chapter 20

  Family Business

  The old man showed up at the Bacardi building in Miami just before noon, smartly dressed in a white linen suit of the type long favored by Cuban gentlemen. Even at ninety, bald and leaning on a cane, he carried himself with a slight swagger. Peering over his horn-rimmed glasses, the man spotted his great-nephew, José Argamasilla Bacardi, and ordered him to have a drink with him in the company bar.

  “Tío, it’s too early!” Argamasilla would say. “I have to work!”

  “Come on, just sit down. Don’t worry about it.”

  Emilito Bacardi Lay, the oldest son of Emilio Bacardi Moreau and María Lay, was never one to worry much about working. He had shown great courage and patriotism at the age of seventeen when he left home to join the Cuban mambí rebels who were fighting for Cuba’s freedom from Spain, but in the years that followed, “Colonel” Bacardi served the family rum business mostly by sharing old war stories with company clients. A rainy day would revive aches from long-ago combat injuries. “Ohhh,” he groaned, “that’s the machetazo they gave me at Calimete,” and for the hundredth time he told of the day he was bloodied by a Spanish bayonet. He told the stories at the Bacardi bar in Havana and later in Miami, where he lived with his second wife, Zoila, in a high-rise building overlooking Biscayne Bay. In exile, the stories sometimes took on a twist, with the colonel launching into a tirade against Fidel Castro, the Bacardis’ new enemy. “If only the mambises could come back to life waving their machetes,” he said, “Fidel would soon see how we could fight.” Bacardi boss Pepín Bosch, married to Emilito’s cousin Enriqueta, would spot him in the company bar and bring some visitor over to meet him. Emilito would invariably pretend to be annoyed, but he loved the attention.

  After an hour or so at the Bacardi building, Emilito—as he had been called since he was a boy—usually went off to have lunch with his half sister Marina. His other half sisters—the sculptress Mimín, Adelaida (Lalita), and Amalia, the youngest—were living by then in the Bahamas, New York, and Madrid. Emilito’s two full sisters, Carmen and Mariíta, had settled in Puerto Rico and Pennsylvania respectively.

  As grandchildren of Facundo Bacardi Massó, the company founder, and his wife Amalia Moreau, Emilito and his sisters were part of the third Bacardi generation. So were his cousins Luis, Laura, and María Bacardi, the son and daughters of Don Emilio’s brother Facundo Jr., as well as Joaquín “The Brewer” Bacardi, the sole surviving son of Emilio’s brother José. Then came the Schuegs—Lucía, Jorge, Víctor, and Enriqueta—the children of Emilio’s sister Amalia and his business partner Enrique Schueg. All these Bacardis had grown up with their grandfather’s company in Cuba, and they or their children, nieces, and nephews now owned almost all the stock. They were the Bacardis whom Pepín Bosch and other company executives had to serve.

  By the 1960s, the Bacardi business comprised five companies with operations from the Bahamas to Brazil, but it remained a family enterprise, bound together by personal relationships among relatives. Pepín Bosch’s success as the top Bacardi executive was in large part the result of his positioning of the firm internationally and his clever arrangement of commercial relations between the Bacardi companies, but it was also due to his understanding of the Bacardi family and his careful management of family relations over the previous twenty-plus years. He did not necessarily admire all his wife’s relatives, and he could be autocratic in dealing with them, but not for a moment did he lose sight of the reality that he was directing a family business as well as a modern industrial operation.

  In turn, the Bacardis themselves were dependent—both financially and emotionally—on the family rum company. While they had all been wealthy in Cuba, they had given up their bank accounts and their possessions when they left. Some had savings outside Cuba, but others did not and looked to Pepín Bosch to find them a job, even if it was in a distant country. For many, the quarterly dividend checks from the
ir Bacardi stock were an important income source, at least in the beginning. Under the circumstances, the family business was run in a way that distinguished it from companies where the stockholders’ only common interest was to see growth in the share price. Recognizing the family’s strained financial situation, Pepín Bosch decided the various Bacardi companies should distribute as much as half their net earnings as dividends. It was a debatable move in light of the loss of the Cuba assets and, more seriously, the revenue from the Hatuey breweries. A firm with the demonstrated growth potential, the expansion plans, and the new capitalization requirements that Bacardi had in the early 1960s would logically have chosen to retain a higher percentage of its earnings for investment purposes, but Pepín Bosch needed to give priority to Bacardi family needs.

  Similarly, the firm’s continued association with Cuba and the exile cause—through its patronage of the anti-Castro RECE operation, for example—did not make obvious sense in terms of Bacardi business strategy, only in the context of its family identity and character. The Bacardi-Cuba tie was never mentioned in company advertising, and with each passing year fewer people outside of the Cuban exile community were even aware of the connection. Within the family, however, it was unquestioned, at least in the early years. Zenaida Bacardi, one of Don Emilio’s granddaughters, praised Pepín Bosch’s direction of the Bacardi family enterprise in a 1974 essay addressed to Don Emilio, more than fifty years after his death. “You have a successor who follows your path,” she wrote, “one who sees in your factories not just a means of making a profit but a way to raise high the name of Cuba [emphasis added].”

  Those lines were written nearly fourteen years after the confiscation of the Bacardi properties in Cuba. The question was, How long would the family history and nationalist political agenda continue to matter in the Bacardi enterprise, given business and competitive pressures? Each successive Bacardi generation was likely to feel less Cuban and more American. Some family members did not trust their relatives or harbored suspicions about their motives or plans, and all the normal family jealousies inevitably arose. Once the Bacardis realized that they would not be returning to Cuba any time soon and that their century-old rum company would have to compete in a global marketplace, they had to clarify their corporate identity. What exactly did it mean for them to be a family business? Should Bacardi be any different from its rival liquor firms?

  Pepín Bosch was just the third man to lead Bacardi after the firm’s 1919 incorporation, following Emilio Bacardi and Enrique Schueg. He held on to his leadership position for more than thirty years in spite of his intimidating personal manner, because he gave family members what they wanted—steadily growing dividend checks—and because he was virtually irreplaceable. The interconnected structure of the various Bacardi companies, as devised by Bosch and his lawyers, was so complicated and unusual that no one but Bosch could really claim to understand it. Though they shared the same stockholders, each of the five Bacardi companies had its own president, directors, and board chairman, and officially they were independent entities. The closest thing to a holding company in the Bacardi organization was an informal group of seven key family members who met periodically under Bosch’s leadership to discuss business developments and make key strategic decisions for the Bacardi empire as a whole.

  Bosch had presided over the parent company in Cuba, and in exile family members continued to defer to his leadership, giving him leeway to set Bacardi policies as he saw fit. In 1962 Bosch arranged for the sale of 10 percent of the equity in the Bacardi Corporation, the family’s Puerto Rico-based operation, to the public. The limited offering in one of the five Bacardi companies left the business still family owned for all practical purposes, but for the first time it created a market for Bacardi shares and thus established a valuation for at least part of the Bacardi empire. Family members would have a better sense of what their shares were worth and could even sell a few of them if they felt compelled to do so. The public offering also meant that the Puerto Rico company, which produced all the Bacardi rum sold in the United States, would have to issue regular financial reports. The figures that came out showed a booming business. Yearly net rum sales for the Puerto Rico company increased 56 percent from 1962 to 1965 and another 215 percent over the next ten years. By 1974, based on the market price of its publicly traded shares, Bacardi Corporation alone was worth as much as $330 million. The value of the Bacardi business empire as a whole could not be determined because the remaining companies were still privately owned, but Bacardi family members had gotten the message Pepín Bosch hoped they would get: They were doing well under his stewardship. When Bosch chose to install his son Jorge as president of Bacardi Corporation in San Juan, there was no protest, nor was there when he sent his second son, Carlos, to Bermuda to run Bacardi International.

  For his part, Bosch let it be known that he expected the family’s automatic support. Not one for false modesty, Bosch told all who would listen that he believed the Bacardis should be grateful to him for what he achieved on their behalf. “I made every one of them millionaires,” he boasted to a Miami friend. “When they came here, they were con una mano adelante, otra atrás,” an expression meaning “with one hand in front, the other in back” and suggesting they were essentially naked, with nothing to their name.

  The unraveling of the family business ties began only after the death of Bosch’s wife, Enriqueta Schueg, in October 1975 after a long struggle with cancer. As the daughter of Amalia Bacardi Moreau and Enrique Schueg, Enriqueta had been at the center of family and business affairs for more than fifty years. It was she who had hoisted the Cuban flag over the new Bacardi distillery in Santiago in February 1922, standing alongside her ailing, white-haired uncle Emilio, and it was to her, not to her prickly husband, that the Bacardis turned when there was family trouble. A warm and gentle woman, she tended to the extended Bacardi family with the same care and patience that she gave to her beloved Bacardi gardens in Santiago, Havana, and Puerto Rico. After her death, family members said things about each other that they would not have dared say when she was alive, and no one emerged who could play the same unifying and conciliating role.

  Pepín Bosch was devastated by his wife’s death. She had been his compañera for fifty-two years, and he depended on her to help him in all the family negotiations, for which he had little patience. Bosch was now seventy-seven, and with Enriqueta gone he decided it was finally time to turn responsibility for the Bacardi empire over to someone else. Though his two sons each had executive experience, neither had shown much interest in the top position, and neither had the proven leadership or management skills to run a business operation as large as Bacardi had become. Bosch decided he needed to hire a professional chief executive who could work, at least in the beginning, under his direct supervision. Accustomed to acting on his own, and becoming more willful with each passing year, Bosch did not bother to inform key family shareholders before moving to recruit his replacement. It was a big mistake.

  Decision making at Bacardi had always been shaped by the voting of shares in family blocs, according to lines of descent. The three Bacardi partners at the time of the company’s 1919 incorporation—the brothers Emilio and Facundo Bacardi and their brother-in-law Enrique Schueg—had each taken 30 percent of the shares, with 10 percent going to the heirs of their late brother José. A half century later, the Bacardis were still voting their shares in those same four blocs. Pepín Bosch was able to count on the votes of the Schueg bloc, and the descendants of Emilio and José Bacardi had usually supported him,22 giving him effective control within the company. After the death of Enriqueta Schueg, however, the old loyalties began to shift, most notably when the news of Bosch’s hiring plans emerged. First to defect was Enriqueta’s nephew Edwin “Eddy” Nielsen, the son of her sister Lucía. Nielsen was president of Bacardi Imports, the company with the exclusive right to sell Bacardi rum in the United States. He was considered a star executive in the family, and when Nielsen signaled that Pepín
Bosch could no longer be sure of all the Schueg votes, others in the family began to switch as well.

  Nielsen had never opposed Bosch on a key issue, but after consulting with other family members, he told Bosch that bringing in an outsider was not a good idea. Nielsen said the prevailing family view was that if Bosch wanted to turn executive responsibilities over to someone else, the job should go to a family member or someone close to the family. Bosch reacted angrily. In his view, the Bacardis were questioning his judgment of what was best for the family business, after all he had done over the years to make them wealthy. Enriqueta was no longer there to calm him down, and in a fit of pique Bosch announced he was quitting. “I’m looking now for a new job,” he told the New York Times.

  That impetuous response was entirely in keeping with Bosch’s nature. His strong convictions and unwavering self-confidence served him well when he was standing up against Cuban dictators or leading his company boldly through its darkest days, but Bosch could certainly be obstinate. Once offended, he did not forget. Within weeks of announcing his resignation from Bacardi in the spring of 1976, he was gone. His departure was another big turning point for the company, less dramatic than its separation from Cuba but momentous nonetheless.