Cuba pins hopes on closer ties with China and Venezuela

Dec 30, 2004 01:00 AM

Cubans are bidding farewell to 2004 with the hope that the economic growth reflected in official statistics and new, closer trade ties with China and Venezuela will bring an improved quality of life.
President Fidel Castro and his socialist government can drink a toast to the new links with the Venezuelan government of left-leaning President Hugo Chavez and stronger cooperation with "market socialist" China, achieved during the visit by President Hu Jintao.

Castro, now fully recovered from the injuries sustained when he fell in October, signed long-term agreements with Chavez and Hu that will boost the development of strategic industries like nickel and oil.
Analysts maintain that the magnitude of these agreements and Venezuela and China have lessened the importance that the Caribbean island places on its relations with the European Union (EU), an economic partner that, in Havana's view, makes too many political demands on human rights.

Now, as it prepares to confront a second four-year term of US President George W. Bush in the White House, Cuba is entering the new year armed not only with these major cooperation agreements, but also a defence system fine-tuned in mid-December with the biggest military exercises of the last 20 years.
Rogelio Valdes, a 65-year-old retired communications sector worker, watched the manoeuvres on television, and confessed that he doesn't really believe much anymore in the danger of a US military attack on the island.
"But then again, I've stopped celebrating Christmas as well," he added with a sigh of resignation. Valdes always spends New Year's Eve with his children. "If it weren't for them, I wouldn't be able to celebrate the occasion. I don't have enough money for a special dinner," he said.

His complaint is a common one. His pension of 150 pesos, while equivalent to $ 150 at the "official" exchange rate, is actually worth less than $ 6 at the actual exchange rate of 26 to one, and is not nearly enough to cover the basic needs of himselfand his wife, a 59-year-old homemaker. The same holds true for the average salary of roughly 260 pesos ($ 10) a month.
"Everything is very expensive," said Valdes, adding that his telephone, gas and electricity bills "are not very high, but they add up at the end of the month." While recognising that essential services like health care and schooling are free of charge, he still describes his living standards as "poor".

There are statistics that back up his claims. Insufficient income and nutrition are among the most serious problems affecting daily life in Cuba, according to a study conducted in 2003 by the National Institute for Economic Research. But in his year-end report to the Cuban national assembly (parliament), Economy Minister Jose Luis Rodriguez said that the average daily nutritional consumption in 2004 was 3,305 calories and 85.5 grams of protein.
According to Rodriguez, these rates are above the minimum required levels established by experts at the UN Food and Agriculture Organisation (FAO). He also added that government spending on schools and assistance for the most vulnerable sectors of society had increased in 2004, and calculated that the average income -- combining both salary and incentives provided to workers -- was 354 pesos, without taking into account the free services provided by the state.

For the second consecutive year, the government used a methodology that factors in social services like health care and education that are provided free of charge to the country's 11.2 mm inhabitants when calculating this past year's economic growth. According to the government's estimate, Cuba experienced a 5 % increase in gross domestic product (GDP) in 2004 -- two percentage points higher than the growth predicted by the Economic Commission for Latin America and the Caribbean (ECLAC), despite the series of adversities faced by this Caribbean island nation over the past year.
In addition to natural disasters, like Hurricanes Charley and Ivan in August and September, respectively, and a lengthy drought considered the worst in decades, the country had to contend with a further tightening of the embargo imposed by the United States for over 40 years and a dramatic rise in oil prices on the world market.

Economists predict that the restrictions on travel and money transfers to Cuba adopted by the Bush administration in May will continue to negatively affect both the living standards of the population and the national economy in 2005.
"It is obvious that there is less money entering the country in the form of remittances, while the decision to raise prices in the stores that operate in hard currency, as a response to Bush's measures, have led to a drop in sales," said an economist.
In spite of all this, and contrary to the forecasts, Cuba achieved its goal of receiving 2 mm tourists in 2004.
"The challenge now will be to maintain this level with fewer visitors from the United States and markets like Canada and Europe that could have very likely reached their peak," noted thesame source.

With regard to oil, the discovery of a new deposit off the north coast, only 55 km from Havana, has inspired optimism in a sector that is still considerably dependent on imports from Venezuela and Mexico. As a result of that reliance, the Cuban government has watched with growing concern as oil prices hit a record high of $ 56 a barrel in October, while experts forecast an average price of over $ 40 for 2005.
"For Cuba, this rise in prices poses major challenges, because it is estimated that an increase of $ 1 a barrel could raise the country's expenditures on oil by almost $ 45 mm in just one year," said Rodriguez. In 2004, Cuba's domestic oil equivalent production (including natural gas) was 3.9 mm barrels, reflecting a 4.3 % drop from 2003.

The newly discovered deposit, with potential reserves of some 14 mm tons, was discovered through joint operations with the Canadian company Sherritt International, which has a concession for the exploration of four blocks off the island's north coast.
Cuba's oil production is concentrated in an area 200 km long and between 10 and 20 km wide off the north coast of the western provinces of Havana and Matanzas. Official reports state that the proven reserves in this area total more than 100 mm tons, and risk exploration contracts have been signed with companies from Spain, Canada, France, Sweden and other countries, as a means of pursuing energy independence. Up until now, however, most of the deposits discovered have produced heavy crude with a high sulphur content, which has led to the need for major investments in upgrading power plants to enable them to burn domestic oil.

In the meantime, a cooperation agreement with Venezuela, expanded during Chavez’s Dec. 13-14 visit to Havana, will continue to guarantee a daily supply of 53,000 barrels of crude oil and derivatives, roughly one-third of the island's needs, at the same preferential rates offered to other Caribbean nations.
There are also negotiations underway for the establishment of a joint venture involving Cuba, Venezuela and China for the production of stainless steel in Venezuela, as well as Venezuelan co-ownership of a refinery in Cienfuegos, in central Cuba. The refinery's construction was left incomplete after the dissolution of the Soviet Union, Cuba's primary trade partner from the 1960s until the late 1980s.

With respect to the nickel industry, another major economic sector on the island, preliminary agreements were signed with China that will considerably boost Cuba's output, while ensuring the Asian giant a source of this essential raw material for its steel industry.
Cuba, one of the world's leading nickel producers, forecasts production of 77,000 tons in 2005, and is confident that the highly favourable price of roughly 14,000 dollars a ton will be maintained throughout the year.

Source: IPS-Inter Press Service
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