Chronicle on Cuba - January 2006

Economy

January 2: The Cuban government's announcement that Cuba's gross domestic product (GDP) had grown by 11.8 percent in 2005 came as a surprise to a good many Cubans, who had just lived through a year of hardships provoked by a severe energy crisis, a continuing drought, several hurricanes and the stepping up of US sanctions against this socialist Caribbean island nation. Cuba experienced high growth and finished the year with a balance of payments surplus of 800 million dollars, but in order for this to translate into development, the country needs to expand its productive base in order to create more jobs and provide better salaries, said an economic researcher who spoke with IPS on the condition of anonymity. One of the reasons for these impressive results is the fact that the Cuban government began in 2004 to include expenditures on social services like education and health in its GDP calculations. These sectors are normally excluded, because they do not generate revenues, but Havana devotes considerable resources to providing these services free of charge to all of the country's 11.2 million inhabitants. Moreover, this year's GDP calculation included a sizeable amount for the "export of social services to a number of countries," particularly Venezuela, commented sources from ECLAC (UN Economic Commission for Latin America and the Caribbean). (IPS, 2/1/06)

January 2: Fidel Castro heralded 2006 as the "year of the energy revolution", although he has yet to provide details of his energy revolution. Several pointers have been given, including an increase in exploration for and production of crude oil. Spanish-Argentinian oil company Repsol YPF has said that it intended to make another effort in 2006 to make a commercial find in Cuban territorial deep waters. A year ago, Canadian companies Sherritt and Pebercan reported the discovery of a 100-mil bbl deposit of crude oil in shallow waters off northern Cuba. Sherritt is responsible for much of Cuba's current 67,000 b/d production of crude--all of it very heavy--which is about four times what the country produced a decade ago but well short of consumption of about 211,000 b/d, much of it now supplied by Venezuela. Other elements that Castro has indicated would be part of his energy revolution are the closing of power plants that date from the Soviet era and construction of new ones to run on gas produced in association with crude oil. Punitive tariffs are also to be imposed on large volume domestic consumers of electricity so as to cut back sharply on demand in an effort to eliminate the blackouts that have plagued Cubans for years and whose increased frequency led in 2004 to very rare--if limited--outbreaks of public protest. (Platts Commodity News, 2/1/06)

January 2: More than a year after the Cuban government replaced the US dollar with a convertible peso, the greenback remains in the hearts and hands of the Cuban people. Prices for most goods are still listed in dollars. Tens of thousands of families still get handouts from US relatives in dollars, much of it funneled in by visitors to skirt the Cuban state bank's 10% cut for conversion. Taxi drivers, private restaurants and those with rooms to rent still accept payment in US currency. "We have more trust in dollars," said a partner in an Old Havana paladar, one of the private but heavily regulated eateries some Cubans are allowed to operate in their homes. Anyone who can afford to save money does so in US dollars, he added. (Los Angeles Times, 2/1/06)

January 3: Cubadeportes (Cuban Sports) closed the year 2005 with more than 6,300 sports trainers working in 52 countries in America, the Caribbean, Asia and Europe. Alberto Puig, Cubadeportes general manager, told local reporters that Mexico, Ecuador, Dominican Republic, and Venezuela are among the most favored nations, and the most requested specialities include baseball, boxing, track and field, and combat sports in general. (Prensa Latina, 3/1/06)

January 4: Cuba began this year’s sugar cane harvest which, according to officials and operators, is expected to match the historical minimum of 1.3 million tons of raw sugar processed in 2005. It was not clear, however, whether the harvest had already begun in any other of the island’s 13 sugar cane-farming provinces. (Reuters, 5/1/06)

January 4: Cuba is negotiating a Free Trade Agreement with the Common Market of the Southern Cone (MERCOSUR) by virtue of which the island could become an associate member of the South American bloc. The agenda of the negotiation, scheduled to begin in March, was drafted by Uruguay, which held the MERCOSUR presidency for the last six months. (Reforma, 4/1/06)

January 5: Cuban Defense Minister Raul Castro said it was necessary to exploit more land near urban areas for agricultural production, provide incentives for these farmers and balance out the prices of these farm products. The brother of Cuban leader, Fidel Castro, said during a meeting with the largest urban agricultural producers that, considering the fact that 75 percent of the Cuban people live in cities, it makes sense for food to be grown on land in and around those urban areas, the Granma official daily reported. The urban-area harvest of vegetables, herbs and spices in 2005, including urban farms, intensive gardens, plots of land and family gardens, totaled 4.1 million tons, according to official figures. (EFE, 5/1/06)

January 6: Venezuela plans to keep oil sales to Cuba steady at roughly 90,000 barrels a day this year because the island has discovered petroleum of its own, Venezuela's oil minister said. "We expect to keep that level of sales unchanged given that Cuba is discovering more oil and that's a good thing," Oil Minister Rafael Ramirez said Venezuela, the world's fifth largest oil exporter, increased oil sales to communist-led Cuba to 90,000 barrels a day last year, up from roughly 53,000 barrels during previous years. (Business Week, 6/1/06)

January 6: A gross misappropriation of state funds by local government officials was uncovered in the Cuban province of Holguín, in the easternmost end of Cuba. The fraud case involved the forgery of official documents that allowed those implicated to steal over 6 million Cuban Pesos, roughly US$300 thousand. According to Juventud Rebelde, the official newspaper that first ran the story, the scam was carried out more than two years ago by managers of the state-run Municipal City Maintenance Company of Holguín, “who made several bogus purchases of ornamental trees, only to appropriate of the funds.” (World Data Service, 6/1/06)

January 9: Cuba has received 12 locomotives and 80 buses from China as part of a government plan to improve the communist island's transportation service, the official daily Granma reported. The 2,500 horse power, DF7G-C diesel-electric locomotives arrived in Havana's port over in a 15 million dollar deal with the Asian giant, Granma said. It was the first time China exported locomotives to Latin America. The Chinese buses join pressure cookers, light bulbs, refrigerators, TVs and bikes in the deluge of Chinese products flooding Cuba. From exporting appliances to investments in Cuba's nickel and oil, China is becoming a big player on the island — its second-largest trade partner as of September, up from fourth place in 2004, according to Cuba. (AFP, The Seattle Times, 9/1/06)

January 11: Cuba received substantial rainfall during tropical storms in 2005 but that doesn’t mean the problem of drought is over. There is an overall trend of less rain, especially in the eastern part of the country. Ramon Perez, director of the National Climate Center of the Meteorology Institute, warned that drought is becoming more frequent. He cited Camaguey and Guantanamo as the provinces where this natural phenomenon is most evident. Perez notes that several regions of the country have recorded a deficit in rainfall for several consecutive years. In May 2005, the water level at the nation’s reservoirs dropped to 26.7 percent capacity. As a result, 2.6 million people —over 20 percent of the country’s total population— had to be provided with water through tanker trucks during the worst moments. Losses in agriculture and other sectors of the economy as a result of the drought amounted to 1.35 billion dollars in 2005. (Granma, 11/1/06)

January 13: The number of Czech tourists who traveled to Cuba in 2005 was 7,427, a dynamic increase according to Cuban diplomatic sources in Prague. "As compared to the previous year’s figures, the Czech Republic became the world’s country with the highest dynamic growth rate in terms of the number of tourists visiting the island," added the sources. Cuba also registered a high number of visitors from Poland and Hungary. (EFE, 13/1/06)

January 15: China became Cuba's second-largest trading partner after Venezuela in 2005, but Chinese companies worry about collecting payment for their increasing sales of durable goods to the island, a Chinese diplomat said. A $500-million (US) Chinese investment in Cuba's nickel industry, announced more than a year ago, is still under negotiation, China's commercial counsellor in Havana, Yang Shidi, said. China's growing influence on the Cuban economy is evident on the streets and in the shops, where Chinese goods such as toys, clothes and sports equipment have replaced imports from other countries. Spanking new air-conditioned buses made by China's Yutong Bus Co. Ltd., the first of 1,000 sold to Cuba, make a sharp contrast with the vintage American cars still motoring along Cuban streets. China is selling Cuba television sets, electric cookers, rice steamers and light bulbs. Cuba wants to buy one million Chinese refrigerators as part of its energy-saving plan to replace decades-old household appliances. Twelve diesel locomotives arrived by ship from China a week ago to upgrade Cuba's railway system. "Two-way trade has reached record levels and we hope it will continue to expand steadily," Mr. Yang said. The sales to Cuba are financed with millions of dollars in credits extended largely by the exporting companies themselves, Mr. Yang said. “China is a market economy and the companies take their own decisions and risks (…) The worry the companies have is how they will get paid for the growing sales," he said. (Reuters, 16/1/06)

January 15: Fidel Castro thanked China for new locomotives and buses that will help improve local transportation on the island, emphasizing the increasingly close ties between the two countries. Castro said the locomotives are a symbol of friendship between Cuba and China, adding that China has become the "principal locomotive" of economic development in the world, according to Cuba's Communist Party daily Granma. The arrival of the 12 new locomotives and the 80 buses purchased from China was reported by Cuban media. Of those buses, about 300 will be used for tourism and transport of construction workers, students and social workers from one province to another, Castro said. The remaining 700 will be for inter-province travel for the general population. Castro said that it had been impossible to devote money to the island's railway system during the 1990s, but that dramatic improvement in the Cuban economy allowed for the recent purchase of the Chinese equipment. The Cuban leader said the Chinese locomotives were superior to those manufactured in the United States and much more affordable. Each Chinese locomotive cost 37 percent of what a similar one from the United States would have cost, Castro said. Castro pointed out some “malicious concerns” of international press agencies over China's trade relations with Cuba, aimed at distorting the increasing presence of Chinese products in the national market. (AP, Prensa Latina, 15/1/06)

January 17: Fidel Castro unveiled a network of small power generators in Pinar del Rio province, the first step in a vast plan to overhaul Cuba's inadequate electricity system and end chronic outages. "The new system has been installed (...) Pinar del Rio will not have power outages again," Castro said in a speech in the capital of the western-most province, the first to be equipped. The new strategy is part of an ambitious plan that also calls for replacing millions of inefficient electric stoves, refrigerators and other household appliances, some of them made in the United States and in use since before Castro's 1959 revolution. Cuba has bought generators from Spain's Grupo Guascor for 100 million euros ($120 million). It has contracted 4,158 generators with a combined capacity of 712 megawatts, Castro said. Last year it ordered 344 diesel generators from Hyundai Heavy Industries Co., South Korea's largest shipbuilder, in two contracts worth $460 million for delivery by the end of 2007. In another effort to save energy, Cuba's communist government raised heavily subsidized electricity rates by as much as 333 percent in December. [Fidel Castro’s speech] (Reuters, 17/1/06)

January 18: A Cuban Health Care Ministry report announces that the biotechnology industry, as well as vaccine and health care service exports to other countries, will soon become the main revenue sources for this country. The report maintains that medical exports are about to exceed the US$1,800 million generated annually by the tourist industry, until now the principal source of foreign currency for this nation. (BBC, 18/1/06)

January 19: A blackout that paralyzed most of Havana for barely 24 hours, made Fidel Castro cancel a TV broadcast where he was supposed to talk about the electricity crisis that the island has been experiencing since last year. Two days before, the Cuban leader announced an “energy revolution” in Cuba at the inauguration of the first emergency power generation project in Pinar del Rio. Cuban official media published a brief note explaining the cancellation of Castro’s attendance to the official TV program “The Round Table”. (AFP, La Jornada, 19/1/06)

January 20: Fidel Castro underscored the value of the energy revolution underway in Cuba during the official TV show “The Round Table”. In an address broadcast on nationwide radio and television, the Cuban leader gave a detailed explanation of the government's strategy to increase power generation efficiency while steadily reducing the costs. "Thermoelectric plants are prehistoric," he said. As an example he cited the difficulties that surrounded the construction and start-up of the Antonio Guiteras plant located in the western province of Matanzas. The plant costs approximately 100 million dollars a year to keep operating. Castro recalled the serious failures at the huge power plant during 2004, noting that it went off the power grid 22 times. Castro reassured the people that by May 1, all Cuban families that receive electricity services—over 95 percent of the population—will no longer use kerosene or liquid gas to cook. "We will keep that promise," said Castro. (Periódico 26, 20/1/06)

January 21: Fidel Castro called on Cubans to conserve electricity as part of his government's new program to cut energy spending by $1 billion a year. Castro took to the airwaves for a second consecutive day, using a roundtable television show to discuss the island's energy situation. "We cannot falter in this. At this time, the main task is to save energy," Castro said. During his more than four-hour appearance on national television, the Cuban leader said his "energy revolution" program, slated to take effect May 1, would focus on replacing old generators at power plants and introducing more energy-efficient domestic appliances in Cuba. Castro also discussed the blackout that paralyzed most of Havana, barely 24 hours after he inaugurated the first emergency power generation project in Pinar del Rio, where he announced plans for an "intensive research project and the development of the use of wind and solar power." The government's new energy plan envisions a 60 percent increase in the Cuban thermo-electric power system's 2.94 million kilowatts per hour of generating capacity. Most of the island's electricity is currently generated with obsolete technology that had been provided by the former Soviet Union. (AFP, 22/1/06)

January 22: Fidel Castro announced that the minimum wage will be increased from 100 to 225 pesos as of May 1st. The Cuban leader made the statement at a special TV appearance before Communist Party, union and grass-roots leaders and Revolutionary Armed Forces and Interior Ministry members. Castro announced that the minimum wage hike will benefit one million 657 thousand workers who earned from 100 to 224 pesos. The new moves builds on the pension hike announced recently and will benefit more than 3 million retirees, pensioners and low salary workers. Fidel Castro also revealed that pensions will likely be raised more than once in the future as well as the value of the Cuban peso and the convertible Cuban peso until the day in which the ration book will disappear. He added that retirees will not lack any of the household appliances that the Cuban government is purchasing to improve the people's quality of life and to save electricity. (Radio Habana Cuba, 22/1/06)

January 24: The presence of illegal vendors who loiter at and around the front of some foreign-currency-only stores in Havana was denounced by the official weekly Trabajadores, which called upon the population to confront them "anytime, anywhere." Among the steps taken to fight the black-market transactions, the management of the "Ultra" store-chain, in the densely-populated district of Centro Habana, has implemented an "employee watch" system to keep the vendors at bay during service hours. (EFE, 24/1/06)

January 30: Cuba is planning to take advantage of current high sugar prices in the world market with an increase of its sugar production of over 1,3 million tonnes for 2006. "They are planting 150,000 acres (60,705 hectares) in an intensive way, and for the first time in years buying appropriate amounts of fertilizers and herbicides”, a source said. "The Sugar Ministry announced that the process of reducing the number of sugar mills is over and are planning to use at least 70 sugar factories for 2007," the source added. (Reuters, 30/1/06)