Volume 7 Number 12 A Target Research Publication December 1999

Dispute over future of Habanos said close to operations with the leading cigar company in the world, giving it better access to technology, Cuban boy increases U.S.- major deal with Altadis capital and markets. Altadis reportedly would Cuban tensions Cuban sources say state cigar monopoly become the exclusive agent for marketing the Habanos and French-Spanish tobacco giant WASHINGTON — The ugly tug-of-war leading Cuban cigar brands. Altadis have reached a tentative accord to form between the Cuban government and Cuban The exact management structure of the a wide-ranging joint venture. Reportedly, exiles in the United States over the fate of 6- arrangement is unclear. Habanos will retain Altadis would purchase a 50% stake in year old Elian Gonzalez has left the U.S. control of cigar production operations and Habanos for $500 million. government in the middle of a firestorm of would funnel money to tobacco growers, There also are reports that the deal would controversy and overshadowed most other which are not part of the deal, through settle outstanding debts Habanos owed to dealings between the two countries. prefinancing accords. Altadis has financed Altadis. Sources say these debts could be as The boy was picked up by fishermen after such arrangements in the past. high as $100 million. Habanos reportedly the boat in which he was riding in a bid to Habanos had profits of $64 million last would contribute its network of Casas del reach the United States sank, drowning his year. One problem the venture will seek to Habano tobacco shops to the venture. mother and step father. Ordinarily, under the address is that although cigar production Altadis, the result of a merger between terms of U.S.-Cuban migration accords, he continues to rise, sales have slumped in the Spain’s Tabacalera and France’s Seita, would would have been returned to quickly past year and inventories have grown. The make significant investments in Cuba’s tobacco because he did not reach U.S. soil. However, industry this year will produce 160 million growing sector and cigar producing facilities. he was transported to a hospital, which had to 170 million cigars for export, well under The deal would integrate Habanos’ the effect of allowing him to remain in the the 200 million target. United States. Initially, officials did not realize that his father was alive and in Cuba because INSIDE THIS ISSUE OF CUBANEWS Gonzalez reportedly told officials that his mother and father were “gone.” Fear of arrest prevents Castro from PDVSA considering move into Cuba By the time anyone realized his father was attending WTO meeting in Seattle that could prove risky alive, Gonzalez ha been granted conditional Despite what he said was a desire to go, Venezuelan oil company Petroleos de permission to remain in the United States by stayed away from the WTO Venezuela (PDVSA) is considering a number the Immigration and Naturalization Service meeting,INSIDE citing a plot to detain him. of joint ventures with Cuban state oil (INS) and was living with relatives in Florida. See Politics on Page 2. company Cupet. Cuban officials launched a campaign to See Business & Trade on Page 6. have the boy returned to Cuba, arguing that Focus on improving efficiency to the father should have custody of the child and Soberon says Cuba succeeding in claiming that his mother had removed Elian mark 1999-2000 sugar harvest from Cuba without his father’s knowledge. Cuba began the 1999-2000 sugar obtaining longer term credits The campaign included a number of harsh planting season after a delay caused by Cuba has obtained medium- and long- speeches from President Fidel Castro and a rains. Officials said boosting efficiency will term credits for totaling $500 million over series of increasingly large demonstration in be the focus this year and next. the past two years, according to Central Bank front of the U.S. interests section in . See Sugar & Agriculture on Page 4 President Francisco Soberon. Cuban officials, including National Assembly See Business & Trade on Page 7. President Ricardo Alarcon gave a series of Agriculture Minister could be victim interviews expressing determination that of Politburo shake-up Restoration of Old Havana Gonzalez be returned to Cuba, while oppo- nents of the Castro regime in the United States Agriculture Minister Alfredo Jordan progresses but challenges remain urged the INS to grant him political asylum. may be fired as a result of poor perfor- The reconstruction of Havana is progress- U.S. officials sought to stay out of the mance of the agricultural sector. ing despite shortages, other challenges Continued on page 2 See Sugar & Agriculture on Page 5. See Construction on Page 11. Elian Gonzalez ... scheduled for Dec. 13 were still on track as CubaNews went to press. POLITICS Continued from page 1 Castro also has accused Cuban exiles in dispute as much as possible, with President Bill Miami of offering Gonzalez’s father $2 million Fear of arrest prevents Clinton saying that the case should be decided in order to move to the United States and Castro from attending according to the law. Immigration experts in remain there with Elian. general supported the Cuban position, arguing Some analysts say Castro is using the WTO meeting in Seattle that the father’s parental rights should incident to repair some of the damage he By Ana Radelat outweigh other considerations. suffered during the Iberoamerican Summit in WASHINGTON — Cuban President The INS met with the boy’s father November and subsequent decision not to Fidel Castro said he prepared “feverishly” Dec. 13. Experts said that resolving the attend the World Trade Organization meeting for the World Trade Organization case by sending Gonzalez home before a in Seattle out of fear he would be arrested. ministerial meeting in Seattle, but decided hearing scheduled for Jan. 23 before an Latin American and Spanish leaders during the not to take the trip because of “insur- administrative law judge to decide Elian’s Iberoamerican summit met with dissidents mountable difficulties,” including the final status would be the most effective way repeatedly and issued a series of statements threat of his arrest. to resolve the issue. However, the boy’s calling for greater democracy and respect for Few world leaders accepted the family on Dec. 10 filed for asylum, a move . Although the summit’s invitation tendered by Boeing, Bill Gates legal experts said may not carry much final communique criticized the U.S. embargo and other hosts of the WTO event to weight because their guardianship of and attempts by the U.S. government to apply attend the Nov. 30 -Dec. 3 event. But, Gonzalez is not settled. If the return is not U.S. laws overseas, the summit was seen by until the last minute, Castro was expected arranged before the hearing, sources say many as an embarrassment to Castro. His to travel to Seattle because the WTO appeals could stretch out for a year or decision not to attend the WTO meeting also ministerial meeting would have given him more. was seen as a defeat as he claimed publicly that a high-profile platform to discuss favorite Castro appeared to be scoring points in he had been eager to go. topics, including the failures of capitalism the confrontation. Some observers were After a week of the dispute, U.S. govern- and dangers of globalization. surprised by his vehement reaction, but given ment officials began to send signals Gonzalez “With no pause to rest I devoted that the law may be on Castro’s side and that will be returned to Cuba. State Department myself entirely to reading materials related many legal analysts expect Gonzalez to be officials reportedly were livid the INS allowed to the upcoming meeting of the World returned to Cuba, the Cuban president him to remain in the United States at all and Trade Organization and to studying the appears to have much to gain by building the say the case could impact hundreds of custody complex themes I would need to address,” incident up so that his expected victory cases in which U.S. children were taken to Castro wrote Rep. Jim McDemott (D- appears all the more impressive. foreign countries by parents in the course of WA) in a letter explaining his 11th-hour Cuba also has implied migration accords custody disputes. decision to skip the event. with the United States could be scrapped if the The dispute reportedly prompted the Castro had been invited to speak at dispute is not resolved to Cuba’s satisfaction. Cuban government to reject a shipment of the University of Washington. Moreover, Doing so could touch off another wave of humanitarian aid from U.S. aid organization McDermott had planned a congressional rafters from Cuba. Migration talks previously Americares. reception for the Cuban leader and the U.S. Chamber of Commerce had orga- CUBANEWS is published 12 times per Customer Service: nized a dinner for Castro and the other year by Target Research, L.L.C., © 1999. P.O. Box 19690 members of the Cuban delegation. Alexandria, VA 22320 Contents may not be reproduced, But Castro determined that: “It would republished or stored in electronic retreival Phone (800) 376-3324 or (703) 684-4317 systems by any means without prior written Fax (703) 684-4059 soon be evident that the U.S. government permission of the publisher. Violators risk Editorial Offices: was opposed to my presence at the criminal charges and civil fines of up to meeting in Seattle. I was certain that the $20,000 per offense. ISSN 1073-7715 611 Pennsylvania Avenue SE #341 Washington, D.C. 20003 State Department would not grant me a Editor/Publisher – Jason Feer Phone (202) 543-5076 • Fax (202) 546-8929 visa. Therefore I did not even bother to Contributing Editor – Armando Portela Email [email protected] apply. I did not wish to be subjected to Subscription Cost: $399/year this humiliation.” To subscribe, mail this coupon to the customer service address or fax it to (703) 684-4317. A State Department official said the Name government had never indicated it would Title deny Castro a visa. Cuban officials Company reportedly met with U.S. officials to discuss Castro’s possible attendance and Address some administration officials had indi- City State Zip Code cated that the United States would be Phone Number Fax Number Continued on page 3

December 1999 CUBANEWS 2 WTO meeting ... The Cuban delegation to the WTO special group,” Leahy complained. meeting included Foreign Trade Minister “Castro’s grip on power is not going to be Continued from page 2 Ricardo Cabrisas and Foreign Minister weakened by keeping Americans from hard pressed to deny Castro’s request. Felipe Perez Roque. traveling to Cuba.” In his long letter to McDermott, At the dinner for the Cuban delega- Dodd and Leahy attempted to attach a Castro also referred to efforts to have him tion hosted by the Chamber of Com- similar measure to a spending bill last arrested if he set foot on U.S. soil. Rep. merce, Perez Roque chided chamber summer, but were defeated on a 55-43 Lincoln Diaz-Balart (R-FL) said he wrote President Tom Donohue for promising to vote. The sponsor’s supporters, however, to “numerous” federal and state prosecu- “work on the U.S. government” for were encouraged by the number of senators tors, asking them to arrest Castro for the changes in U.S. policy if the Cuban who voted for change. Moreover, Rep. Feb. 1996 shoot-down by the Cuban air foreign minister would “work on the Mark Sanford (R-SC) plans to introduce a force of two U.S. civilian planes. Citing as Cuban government” to bring about similar bill in the House, opening the precedent the arrest of former Chilean change in Cuba. debate in a chamber that is considered President Augusto Pinochet, Diaz-Balart According to a Cuban transcript of more hostile than the Senate to easing and other lawmakers asked Attorney Perez Roque’s remarks, the foreign minister sanctions on Cuba.. General Janet Reno to “seriously consider” told Donohue: “We believe that this While the U.S. government does not the indictment of Castro for the shoot irrational situation is not the responsibility bar U.S. citizens from traveling to Cuba – down. of the two governments. It is absolutely a prohibition that would likely be ruled “Unless the attorney general indicts and totally the responsibility of the U.S. unconstitutional – it does require most the Cuban dictator, the United States government, which has to move forward Americans to obtain approval from the government, in the court of public and make the pertinent decisions.” Perez Treasury Department’s Office of Foreign opinion, will appear to have turned its Roque also said he could not “make a Assets Control (OFAC) in order to spend back on justice, on the survivors and the commitment to go back and work on Fidel money there. families of these innocent victims, and because I think the way he does and what I In January, President Bill Clinton will allow Fidel Castro to literally get express here are his ideas.” broadened the categories of Americans who away with murder,” said Rep. Bob “The fact that Fidel has led the Cuban are eligible for travel to Cuba and stream- Menendez (D-NJ). people for 40 years is our business, it lined the procedure to apply for travel Castro determined that “there was shouldn’t concern you. The United States licenses. Academics, performers, athletes unquestionably a plot, backed by the State didn’t worry about how long King Hussein and professionals who want to attend Department, against my traveling to ruled Jordan or how long King Juan Carlos international conferences on the island Seattle.” rules in Spain,” Perez Roque added. have benefited under the liberalized rules. Castro wrote McDermott that, a few The Cuban foreign minister, however, Journalists and Cuban-Americans on once- days before the Seattle meeting, two State assured Donohue he could “work together a-year humanitarian visits to Cuba are Department officials warned Dagoberto with the Chamber of Commerce, an allowed to travel to Cuba under a “general Rodriguez, head of Cuba’s North Ameri- organization we respect...although we are license” without applying to OFAC for can Department, “of the possible conse- not 100% in agreement with them.” permission. All U.S. travelers to Cuba are quences of the trip, using the same limited to spending $183 per day on argument as the Cuban-American expenses. extremist mob and thus washing them- Senators make bid to To facilitate travel, the U.S. govern- selves of the matter like Pontius Pilate.” end restrictions on ment recently decided to allowed airports Castro warned that any “attempt to travel to Cuba in New York and Los Angeles to offer forcibly hold him in Seattle,” would result WASHINGTON — Just before direct charter air service to Cuba. Before in the “inevitable consequence” of a Congress adjourned for its winter recess, the action, only Miami International “bloody armed conflict between Cuba and several lawmakers launched a campaign Airport offered direct flights from the the United States.” aimed at lifting U.S. travel restrictions on United States to Cuba. A State Department official called Cuba. New York’s Kennedy International Castro’s accusations “ridiculous” and said Sens. Chris Dodd (D-CT) and Patrick Airport inaugurated its new service on the Cuban leader and all other heads of Leahy (D-VT), who visited Cuba this year, Dec. 3. Run by New Jersey-based Marazul state, are protected by the Vienna introduced a bill that would allow Ameri- Charters, the flights will leave New York on Convention from involuntary detention cans to freely travel to Cuba and lift Friday mornings with a return flight when they are traveling abroad. Since spending restrictions for travelers. scheduled before dawn every Saturday. assuming power, Castro has several times “Cuba...a country 90 miles away that Although Clinton has eased restrictions traveled to the United Nations in New poses about as much threat to the United on travel to Cuba, analysts say that at least York. The Cuban leader, however, has not States as a flea does to a buffalo, is off 15,000 Americans visited the island been to any other American city since limits unless you are a journalist, govern- illegally this year. Most traveled through 1959, when Castro met with then-Vice ment official or member of some other the Bahamas or Mexico. President Richard Nixon in Washington.

December 1999 CUBANEWS 3 Legal uncertainty blocks the appeals court again decides against the Brothers to the Rescue plaintiffs. “Once SUGAR & AGRICULTURE efforts to reestablish we hear from the court we’ll make a direct phone service determination,” Alfonso said. AT&T Focus on improving earned more than $30 million from calls to By Ana Radelat efficiency to mark 1999- Cuba before phone links were cut. WASHINGTON — U.S. telecommu- Meanwhile, attorney’s for the Brothers 2000 sugar harvest nication firms eager to reestablish direct to the Rescue families have targeted about Cuba began the 1999-2000 sugar long distance service to Cuba continue to $150 million in frozen Cuban funds held planting season in early December after a be frustrated by legal efforts to seize U.S. by Chase Manhattan Bank. Most of the two week delay caused by intense rains in payments to the Cuban telephone com- money represents payments owed the the main producing areas. pany to satisfy a judgment against Havana. Cuban government for telephone traffic to In spite of a significant decline in Direct service to Cuba was terminated Cuba before the 1992 Cuban Democracy production during this decade, the sugar in February by Havana after a Florida Act allowed U.S. companies to pay Cuba industry remains the backbone of the judge initiated garnishment proceedings for this kind of trade. island’s economy in terms of employment against payments the U.S. telecommunica- President Bill Clinton, citing diplo- – accounting for about one in 10 jobs tions companies make to Cuban telephone matic concerns and the possible rights of nationwide – and in terms of export company Etecsa, which is a joint venture other U.S. claimants to the money, has revenues, though low sugar prices wiped between a Cuban state company and Italy’s used his authority to protect Cuba’s out the gains in volume achieved by the STET. The direct U.S.-Cuba telephone blocked funds. most recent harvest after a record setting service was initiated in 1994. Therefore, to help the Brother’s to the low harvest in 1998. Last August, the 11th Circuit Court of Rescue plaintiffs and the family of New The government is usually reluctant to Appeals in Atlanta overturned a decision Jersey girl killed in a terrorist incident who release reliable information on the that the payments to Etecsa could be won a judgment against Iran, Sens. Frank economy. But most planting seasons begin garnished to satisfy a $187.5 million Lautenberg (D-NJ) and Connie Mack (R- with officials issuing information on judgment against the Cuban government FL) tried in the last Congress to pass estimated production, cost reduction goals for the 1996 shoot down of two Brothers legislation that would strip the president of and timing of the harvest. Sugar Industry to the Rescue planes, in which four Cuban his authority to protect foreign assets. The Minister Gen. Ulises Rosales del Toro in a exiles were killed. Judge Lawrence King, White House, however, was able to block recent conference in Havana said the who made the original ruling allowing the the legislation. government expects the 1999-2000 garnishment of the funds, had temporarily In its efforts to quash legislation that harvest to produce between 300,000 and seized about $6.2 million in payments, would erode the president’s power, the 600,000 tons more than the 3.78 million mostly money owed by AT&T and MCI to White House offered to support a bill that tons of the 1998-1999 harvest. This Etecsa for service to Cuba. would pay each of the three families would put production at between 4.1 and Lawyers for the family members of the involved in the Brothers to the Rescue suit 4.4 million tons. This would be equiva- downed pilots, however, have asked for a about $750,000 in federal funds to settle lent to an 8% to 16% increase over the rehearing of the case, arguing that the their claim against the Cuban government. last season. appeals court erred in determining that Ron Kleinman, an attorney for the These figures are unusual because Etecsa is a private company, instead of an Brothers to the Rescue plaintiffs, said the rather than focusing on achieving a specific agent of the Cuban government, which offer was unacceptable because it would figure as has been the case in previous would make it liable for paying the involve payments from U.S. taxpayers years, the government by allowing that judgement. instead of Cuba. “Any settlement has to production could fall anywhere within a The U.S. telecommunications compa- punish Cuba,” Kleinman insisted. range is reducing the pressure to attain nies who provided service to Cuba before An aide to Mack indicated the Brothers specific levels of output. Also, officials say the cutoff have since February either to the Rescue plaintiffs are open to another the focus of this year’s harvest will be on rerouted their calls through third countries solution: payments to the plaintiffs could reducing costs and increasing efficiency in or used satellites. Only Sprint, which did be made annually from interest paid on the sector. not receive an order of garnishment from Cuba’s frozen funds, allowing the White Goals for this year include keeping King, has continued to provide direct House to continue to protect the principal grinding mills operating at 80% of capacity service to Cuba. from seizure. About $6-$8 million dollars or higher, increasing the yield of sugar per While they’re still making money from in interest accrues each year on Cuba’s ton of cane by reducing losses at processing U.S. calls to Cuba, most of Sprint’s frozen funds. The White House has not plants and getting cane from the fields to competitors would like to once again have responded to this proposal, but it would mills more quickly, and reducing the direct access to the Cuban market. Gus seem to create the same concerns that amount of sugar cane damaged by fires Alfonso, a spokesman for AT&T, said the prompted the Clinton administration to used to clear fields before harvesting. company would probably begin negotia- block efforts to seize the principal. Continued on page 5 tions with Havana to restore the service if

December 1999 CUBANEWS 4 Sugar harvest ... Unless the industry can boost yields from cane – last year’s ratio of sugar produced as BUSINESS & TRADE Continued from page 4 a percentage of the total weight of sugar The government also plans to reduce cane was 11.21% – next year’s harvest U.S. tour operator eyes the number of urban residents mobilized should produce about 4.1 million tons. post-embargo Cuba for the 2000 cutting season from 40,000 Any increase above that figure will By Douglass Norvell this year to just 14,000. Officials have depend on a number of factors. Increasing U.S. tour operator Apple Vacations of concluded that the inexperienced workers the efficiency of mills by 1% would add Elk Grove, IL is laying the ground work to are more trouble than they are worth. They roughly 50,000 tons of sugar over the 90- move U.S. tourists to Cuba once travel hope to make up for the lost workers by day grinding season. Reaching the 80% restrictions on U.S. citizens are lifted. boosting production by professional goal set by the government, up from 74% As one of the largest operators in the agricultural workers and farm machinery. last year, would boost output by 300,000 United States, Apple serves about 900,000 This last goal may be problematic as the tons. tourists a year, mostly to destinations in the industry suffers from an aging fleet of Increasing sugar production per ton of and Mexico. harvesters, a shortage of spare parts and cane by 0.1% would boost production by Specializing in beach vacations, Apple sporadic fuel shortages. 50,000 tons. Reducing losses by 1% would is growing at about 10% per year and sees Obtaining adequate supplies of sugar also add 45,000 tons. cane remains one of the biggest problems Cuba as a good potential fit with their facing the industry. Starting in 1996, the other destinations. government launched a campaign to Agriculture Minister Apple hopes to build on existing replant at least 900,000 acres per year in could be victim of relationships with hotel chains that are order to replace the exhausted plantations already doing business in Cuba. Apple and increase the volume and quality of Politburo shakeup sends groups to Super Club in Jamaica, sugar cane. Theoretically the costly effort HAVANA —Politburo member and which has a property in , and also –replanting one acre of sugar cane costs Agriculture Minister Alfredo Jordan is on to other resorts operated by the Melia an average of $301 – would yield an extra tenuous ground and may be fired as a Group, which operates a number of hotels 450,000 to 500,000 tons of sugar in each result of poor performance of the non- in Cuba. successive harvest thus increasing raw sugar agricultural sector. Although final When Cuba opens up, Apple plans to sugar output by 1.4 million tons over four number are not out, sources say produc- begin to operate flights out of Chicago, years. tion of key foodstuffs like eggs, meat, Philadelphia and Detroit. In each of the The first results of the effort were seen chicken, rice, beans and vegetables have three cities, Apple sees a weekly ‘lift’ of in the last season, when 3.78 million tons not reached targets this year. three hundred and forty, that is, two flights were produced, or 554,000 tons above the Although the agricultural policies of one hundred and seventy seats each. In disastrous 1997-1998 harvest. The increased adopted by the government come from the tour industry, a lift is a seat (filled or sugar production came from a rise in yields higher levels than Jordan, he is seen as not) moving from one destination to to 13.7 tons to 14.4 tons per acre, up from likely to take the fall for the failures. another. 12 tons to 13 tons per acre acre a year Meanwhile, there also are rumors that Alec McNish, vice president of Apple, earlier, an improvement largely attributed to Miguel Diaz-Canel Bermudez will be thinks that 90% of travelers to Cuba will the better quality and higher yields of cane promoted to the Politburo in the near be attracted by the island’s inexpensive from the newly planted fields. future. vacations and the remaining 10% will be But officials say the increase in A young engineer in his late 30s, up- market tourists with a strong interest yieldsthis year was only seen in eight out white, and currently first secretary of the in world affairs. of the 14 provinces, while all others (CPC) Villa Apple expects Cuba to compete with showed no change or reductions in the Clara province, the reports are that Diaz- the Dominican Republic and Cancun, availability of sugar cane. The provinces Canel will replace former Foreign both currently served by Apple. Cuba is that registered gains were Holguin, Minister Roberto Robaina. He has a one-half hour closer to the cities Apple Guantanamo, Granma, , reputation for efficiency, loyalty and serves than Mexico or Santo Domingo. , Pinar del Rio, Las dedication. McNish thinks it will be a year after Tunas and Sancti Spiritus, which Defense Minister Raul Castro restrictions are lifted before U.S. tourism to together account for about 50% of sugar reportedly is supporting the promotion Ciuba begins to take off. But within three or production. and is said to believe he would be a useful four years, McNish believes Cuba will The upcoming harvest is expected to addition in order to help improve the become a major destination for U.S. tourists. involve 113 mills, down from 114 last efficiency of government administration. The U.S. government recently decided to season. Analysts expect the area devoted to In October 1997 during the V allowed airports in New York and Los Angeles sugar cane to be about the same in 2000 as Congress of the CPC Diaz-Canel was to offer direct charter air service to Cuba. it was last year, or about 2.66 million acres. nearly elected to the Politburo but lost out Before the action, only Miami International to other candidates at the last minute. Airport offered direct flights to Cuba.

December 1999 CUBANEWS 5 PDVSA considering move Fidel Castro, who welcomed him to Cuba as a which never entered full commercial service hero after he was released from jail in the mid- for any significant period of time. Cuban into Cuba that could 1990s after serving part of a sentence for sources say the refinery will need at least $200 prove risky leading a failed coup attempt in 1992. million in new investment to build a catalytic HAVANA & CARACAS — Venezuelan In recent months, Chavez has pressed for cracker and a vacuum distillation unit. state oil company Petroleos de Venezuela Cuba’s inclusion under the San Jose Accords, Cuban officials say PDVSA is a preferred (PDVSA) is considering a number of joint an agreement under which Mexico and partner in any venture involving Cienfuegos ventures with Cuban state oil company Cupet. Venezuela provide crude and products to a because of its experience dealing with heavy The most interesting possibility would involve number of Central American and Caribbean sour crude. The refinery is attractive to exporting 70,000 b/d of Venezuelan crude to countries under favorable terms. Mexico PDVSA because of its central location in the Cuba’s Cienfuegos refinery. rejects the attempt and Chavez has said he will Caribbean and because it would be a conve- As part of the venture, PDVSA would 14 invest $5 million for modifications that would Imports Crude Oil Imports and Domestic 12 Production (million tons per year*) allow the facility, built in the 1980s with Soviet assistance, to process Venezuelan crude. The 10 upgrade would also allow Cuba to run 20,000 8 b/d of its own crude at the facility. Most Cuba Domestic Production 6 crude is heavy and sour and is usually burned without refining in the island’s power plants. 4 PDVSA has been interested in the facility 2 for years and has held periodic talks with 0 Cupet regarding possible joint ventures or a 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 purchase of the facility. However, in the past *To convert to barrels per day, multiply by domestic production by 6.3 barrels per ton and divide by 365 days. Multiply imports by 7.3 concerns that a deal could harm the company’s operations in the United States have always seek to supply fuels and oil to Cuba through nient location for sales into the United States. prevented any real progress. PDVSA, which other mechanisms. Venezuela for many years Cienfuegos also boasts a marine terminal owns U.S. company Citgo, is one of the top shipped crude to Cuba under a deal in which capable of handling large oil tankers and five fuel retailers in the United States and the the Soviet Union supplied Venezuelan Cupet is working on a pipeline that will link United States is by far the company’s largest customers in Europe and PDVSA supplied the facility with the Varadero oil fields. market for crude and products. Cuba. However, oil sales to Cuba have been Ciefuegos also is linked by pipeline to the The election of Hugo Chavez as president troubled because Cuba owes PDVSA a tanker terminal at Matanzas. of Venezuela late last year, however, may have reported $20 million for previous purchases. At the end of October, Cuban officials an impact on Venezuelan thinking on the It is unclear what impact the minimal said output for the year so far is running at subject. Chavez professes great admiration for PDVSA investment would have on the facility, about 35,700 b/d, ahead of the target of

Cuban Petroleum Industry Infrastructure and Main Oil Fields

Havana Matanzas (supertanker terminal) 109 Mariel h m h h 5 1 6 2 4 3 8 7 Cienfuegos 14 mh Cabaiguan m 12 11 h 13 h Nuevitas

Oil Fields Antilla h 1 – Boca de Jaruco 8 – Cantel 2 – Martin Mesa 9 – Guasimas Santiago Guantanamo Bay 3 – Yumuri 10 – Camarioca de Cuba Oil Pipeline 4 – Puerto Escondido 11 – Pina Refinery 5 – Cruz Verde 12 – Cristales m h h m 6 – Varadero 13 – Jatibonico h Oil or Product Terminal 7 – Varadero Sur 14 – Jarahueca

December 1999 CUBANEWS 6 34,500 b/d. For 2000, the government’s Swiss company focuses Soberon says Cuba target is 43,100 b/d. Production in 1998 was just under 29,000 b/d. Officials claim 2000 on energy savings succeeding in obtaining oil production could top 55,000 b/d. By Douglass Norvell longer term credits The government plans an offshore Eneco, a Swiss company specializing in HAVANA — Cuba has obtained licensing round for foreign oil companies energy controls and solar panels, is involved in medium- and long-term credits for totaling next year. The government has divided a joint venture with Cuban company, Eicisoft $500 million over the past two years, 112,000 square kilometers of deep water to produce solar panels and install devices in according to Central Bank President areas in the Gulf of Mexico into 59 blocks. hotels that conserve electricity. Francisco Soberon. Most of the areas are in waters of less than Eneco’s solar panels warm water for use in Although Cuban officials refuse to discuss 2,000 meters though some extend as deep as showers and dishwashers and are less interest rates for these credits, banking 4,000 meters. The governments of Mexico, suseptible to technical problems than other sources say Cuba must pay a premium of 2% Cuba and the United States in 1977 signed panels. Invented 20 years ago, Enco’s solar to 3% for longer term loans because of the a treaty delimiting the area. panels have been installed in Guadeloupe, perceived additional risk of lending to the Building interest in the very deep areas Martinique, France and Spain. island. Cuban officials say the figure still does may be difficult as many of the world’s leading Eneco also manufactures energy regulation not meet Cuba’s needs for access to long-term deep water specialists are U.S. companies devices that are being installed in hotels. In sources of foreign capital, but Soberon said it barred from investing in Cuba. There are some four and five star hotels, an Eneco device is an improvement over years prior to 1998. deep water companies, such as Brazil’s activated by the room key shuts off most of the The Cuban banking sector has succeeded Petrobras and Shell that may be interested. power in a room when a guest leaves. In the in increasing its capital base, he said, Cuban officials say they are trying to make Riviera Hotel, the prototype installation primarily because local banks are offering the blocks as attractive as possible by offering reduced energy consumption by 40% to 50%. higher interest rates, which has attracted 30-year concessions and limiting the state’s Eneco expects to install the systems in most of greater deposits. Soberon said local banks will take to taxes on income. The exploration Gran Caribe’s 80 hotels in Cuba. make about $1.4 billion in loans this year, up period will be at least six years, say officials. In three star hotels, the system shuts off from $1 billion last year. Venezuelan officials say Cuba imports the air conditioning when a guest leaves the Foreign banks, which may not take $580 million a year worth of fuels. The joint room, resulting in energy savings of up to deposits from Cuban citizens and face a venture reportedly also would allow PDVSA 70%. Six of these systems have been installed number of restrictions on the business they to enter Cuba’s domestic market. in smaller hotels in the Horizontes chain. can transact, have increased their participa- tion in the Cuban market. Spain’s Caja Oil output by field and production company (b/d) Madrid, the first foreign bank to win a license in Cuba as part of a joint venture with local institution Banco Popular de Ahorro, made Field/Area* 1990 1998 1st Half 1999 $28 million in loans in 1999. Western Production Unit 2,625 6,456 9,690 Several other Spanish banks, such as Caixa Boca de Jaruco 2,485 1,852 1,537 Galicia, reportedly have sought licenses for Martin Mesa 90 36 34 similar ventures. Soberon said that Spanish Yumuri 50 13 165 banks, including Banco Bilbao Vizcaya, Puerto Escondido - 4,552 7,950 Argentaria, Sabadell, Caixa Madrid and Cruz Verde - 3 4 Probanca account for well over half of the Central Production Unit 8,593 20,620 22,970 foreign banks doing business in Cuba. Varadero 6,440 18,502 - Varadero Sur 147 101 - Cantel 1,465 541 - Leisure Canada set to Guasimas 242 786 - begin work on hotel Camarioca 133 113 - HAVANA — Leisure Canada and Cuban Otros 166 577 - partner Gran Caribe Hotels have completed Majagua Production Unit 423 1,823 1,657 the regulatory process for gaining approval to Pina 29 1,599 1,382 begin construction of the first hotel of six Cristales 302 178 179 planned at Jibacoa on Varadero beach. Jatibonico 78 38 37 The approval process took three years to Jarahueca 14 8 9 complete. Leisure Canada officials say Brujo - - 50 construction will begin in early January. In Total 11,641 28,889 34,317 addition to six hotels, the resort will include *Rows in bold are production for the Cupet companies operating in those areas. two 18-hole gold course, a time share Source: Planning department of Cupet. development and a marina.

December 1999 CUBANEWS 7 Cuba’s rum and liquors which is run by Cuban executives. The market commands an astonishing 30% joint venture includes all Havana Club of all local hard currency sales as well as a industry showing products and grants Pernod Ricard significant share of peso sales. substantial improvement exclusive marketing rights internationally Production of all of these brands are and in Cuba. In addition Pernod Ricard decentralized but are still nominally By Domingo Amuchastegui has the exclusive franchise for marketing under the overall supervision of the Cuba for many years was a vacation more than 140 imported products in Union de Bebidas y Refrescos, which is spot famous for its rum, fruit drinks and Cuba, including wines from Spain and part of the Food Industries Ministry other beverages. The luster on that image France, a line of liquors, gin and cognac. (Minal). faded after the 1959 revolution, but in HRL has eight distribution centers in A recent competitor in the local rum recent years, the liquor industry has Cuba and facilities in Havana, Varadero, and liquors market is the Sugar Ministry, experienced a boom as rising exports, Cienfuegos, Moron and other locations. which operates distilleries at 24 sugar foreign investment and tourism have With 1998 sales of more than $100 mills. This is an important part of the spurred production. million dollar (over a million cases) in 50 government’s efforts to open the sugar While there were limited investments countries in 1998, Havana Club is a industry to foreign capital. While foreing in the distilling sector during the 1970s, growing threat to the dominance in investment in the core sugar production investment in liquors virtually ceased by many world markets of the Puerto Rican sector is not permitted, the government the early 1980s. By 1989, most equip- brand Bacardi. About 70% of Havana is trying to encourage investors to ment used in the production of alcoholic Club sales were white or silver rums. participate in projects that use sugar beverages dated from the 1940s and Among the most important markets were derivatives or by products. Several 1950 and the domestic industry could Spain (220,000 cases), Italy (150,000), French firms reportedly have invested in not meet demand from local residents for Germany and Mexico (60,000), Bolivia operations to make derivatives such as many products. and Canada (15,000). torula, furfural, and sorbitol, as well as Since 1989, however, there has been a Other Cuban brands of rum, such as distilleries in Santiago de Cuba and flood of investment into nearly all areas Caribbean Club, Bucanero, and Compania Camaguey of the beverages business. While the deal Ron Bocoy are restricted from moving The Sugar Ministry’s goal is to between Cuba and French company aggressively into exports by the terms of compete with brands sold by the Union Pernod Richard is the most widely the Pernod Richard deal. Compania Ron de Bebidas y Refrerscos in the hard publicized because it became the center Bocoy was founded in 1930 in Havana currency market and compete for export of a hotly-contested trademark protec- and produces four types of rum under markets once the marketing restrictions tion case involving a Cuban exile family the Legendario brand. It has a long included in the Pernod Richard deal are and the U.S. courts, there have been a tradition of craftsmanship and claims it is lifted in 2002. host of other deals involving companies better than Havana Club. The factory Already here have been some sales of from France, Canada, Spain, Italy, and consists of an aging solera with a capacity the new aguardiente Vacilon to Spain. The Switzerland. The aim of these deals has of 30,000 liters in white oak barrels of Sugar Ministry’s most popular rum brand been to increase production to meet local 180 liters each. It also can age 100,000 is Mulata, which sold 50,000 cases on the demand and the needs of the tourist añejos rum for seven years. Daily produc- local market in 1998. It is produced at industry, as well as stimulate exports. tion averages 250-300 cases. Annual eight distilleries located near sugar mills. The flagship brand in the rum output is around 100,000 cases. The sugar industry and its marketing industry is Havana Club and related Other brands of rum sold on the agency Tecnoazucar are spending heavily brands. About 80% of this rum is made local market include Paticruzado, Yucayo in a number of distilleries around the in recently upgraded facilities in Santa Extraseco, Pinilla, Puerto Principe, country. The largest distillery in Cuba, Cruz del Norte, Cardenas, and Santa Decano, Cubanacán, and Jardines del Rey. located at the Antonio Guiteras sugar mill Clara. In Santiago de Cuba, a number of In addition, several brands of aged cane is expected to face stiff competition from boutique Havana Club products also are liquor or aguardiente also are being products that will be produced at mod- produced. marketed with success. Some of these ernized facilities adjacent to sugar mills in , where the brands have made some tentative sales Guantanamo and Cienfuegos provinces. largest distillery is located, has 11 storage abroad, primarily in Spain, Germany, A Spanish-Cuban joint venture called facilities (naves) for aging rum in oak Italy and Mexico. Alcoholes Finos de Cana (ALFICSA) is barrels. Each nave has a capacity of 3,000 Domestic sales of rum and modernizing a distillery near the town of vats, each holding 170 liters. aguardiente are rising quickly, mostly due Aguada de Pasajeros adjacent to the The French-Cuban joint venture to higher sales to tourists. Cuban Antonio Sanchez sugar mill. The $1.8 selling Havana Club products worldwide distributor Corporacion Cuba Ron in million modernization will allow the operates through Havana Club Interna- 1998 sold 95,000 cases onto the local facility to produce 80,000 liters per day tional under the direction of French hard currency market and expects to sell of liquor, most of which will be ex- executives, while local sales are handled 165,000 cases this year. The liquor ported. by Havana Rum and Liquors (HRL),

December 1999 CUBANEWS 8 Labiofam ready to Tax collections said on Income taxes accounted for $7.94 billion during the first nine months of the year. Other market vaccines against target for 1999 levies accounted for the rest. infectious equine anemia HAVANA — Officials at tax agency ONAT officials say compiance with filing ONAT say collections through the first nine HAVANA — Cuban biotechnology requirements by companies is 96.7% this year, months of the year are progessing well and company Labiofam and the Harbin up from 95.8% last year. However, this does they say they expect to meet targets for 1999. Institute of China have developed the first not appear to include Cuban state firms, According to official figures, tax collections vaccine against infectious equine anemia. many of which do not pay taxes or file returns through September totaled $10.24 billion at By the end of this year or beginning of late. Officials say ONAT has received more an official rate of one peso per dollar. Collec- the next, this vaccine is supposed to enter than 20,000 late filings, with tax liabilities opf tions in hard currency were $115 million. Tax commercial production and be available for of 590 million pesos. revenues are running at about 82% of targets export. Of more than 187,000 individuals who for 1999, which totals about $12.47 billion. Labiofam officials say results from tests pay income taxes, 121,000 of whom are self ONAT has a separate target of $12.7 billion. of the vaccine already have been presented employed, compliance was 94.5% for Taxes are levied on foreign companies, at international veterinary meetings and payments in pesos and 92.5% for payments in joint ventures, the self employed and Pan American Health Congress held this dollars. Around 32,000 people who work in that have large hard-currency incomes, such as year. transportation also pay taxes, as do 10,000 artists and athletes. Retirement taxes also are Marketing studies indicate that Latin people who rent property. levied on Cuban companies with employees. America offers the best market for the vaccine initially. Labiofam produces a wide variety of FACTS & STATISTICS pharmaceuticals and medical preparations. One of its more successful veterinary Trade between Cuba and selected Latin American products is Labiomed, a treatment for and Caribbean countries and Spain 1990-1998 infectious digestive infections of dogs, (all figures in millions of US dollars) cattle and other animals. Labiofam produces approximately 95 % Country 1990 1993 1997 1998 of all veterinary products consumed in Spain 274.0 242.10 663.30 715.50 Cuba. Other products include pesticides to Venezuela 68.90 150.80 456.20 359.50 control mosquitoes and an innovative rat Mexico 194.90 311.10 379.00 343.20 poison called Biorat that is not toxic to Argentina 126.20 67.20 164.30 99.40 many other animals. Biorat is sold in 15 Panama 10.30 23.40 91.80 82.60 countries, including Vietnam, where it is Brazil 208.00 30.20 61.30 64.50 produced under license. Brazil, Uganda and Colombia 15.50 63.60 55.00 45.30 Mongolia reportedly are interested in Dom.Republic 0.10 11.90 57.20 43.70 manufacturing Biorat and are currently said Ecuador 2.80 97.30 4.00 14.10 to be holding talks with Labiofam. Chile 0.50 3.40 24.20 12.10 Leading exports to Latin America, Caribbean and Spain 1998 Food 77.2 Retail sales for Tiendas Tabacco 78.2 Habana register sharp Steel and Iron 37.6 Health care products 23.6 increase in 1999 Construction materials 16.6 HAVANA — Hard currency retail Textiles 12.2 chain Tiendas Habana reported 1999 sales Other 16.7 through Nov. 15 of more than $9.3 million Total 262.1 dollars, mainly to tourists. The figure Main imports from Latin America, Caribbean and Spain 1998 reportedly exceeds company forecasts or Fuels and lubricants 427.1 the entire year. Profits as of the middle of Chemicals 320.2 November reportedly were $3.3 million. Raw materials 77.6 Sales last year were just over $4.54 and Machinery 70.7 profits were $1.9 million. The most Food 43.9 popular items were tobacco, rum, coffee Wood 30.0 and local handicrafts. Other 118.0 Local economists say they expect retail Total 1,087.5 sales for hard currency to top $1 billion Sources: National Office of Statistics. Center for the Study of the Cuban Economy. this year nationwide in all sectors.

December 1999 CUBANEWS 9 Treasury reportedly Spanish-Cuban venture of doors: one for garages and the other a security grate that rolls down to cover shop denies license application to sell security doors windows of commercial establishments. from scientists HAVANA — Just in time for the rise The company plans to sell the doors to in violent crime, local firm Micalum has HAVANA — The U.S. Treasury tourist projects, foreign companies and begun production of the first metal security Department has denied applications for hard-currency shops. doors manufactured in Cuba. licenses to travel to Cuba from around Micalum is a Cuban company. The first doors from the company’s 20 biotechnology researchers, Cuban However, the design of the doors was factory in are due to sources say. Reportedly, the scientists provided by Spanish firm Dimam, which hit the market before the end of the year. wanted to travel to an international also has a stake in manufacturing and The company is producing two kinds meeting at one of Cuba’s leading biotech selling the products. research institutions, the Centro de Ingenieria Genetica y Biotecnologia IN THEIR OWN WORDS (CIGB). “He’s been a killer, he’s a criminal, and I don’t think you should reward people who have Cuban officials said the U.S. scien- done what he’s done.” tists were forced to cancel their trip after the Treasury Department denied their Possible U.S. presidential candidate Donald Trump on Fidel Castro and lifting the U.S. embargo applications. No explanation was given, speaking to veterans of Assault Brigade 2506 who participated in the . but the U.S. government has said it opposes scientific exchanges that could “While there have been some reports that trafficking syndicates use Cuban territory for aid Cuban work on germ warfare. The moving drugs, we have yet to receive any confirmation that this traffic carries significant Cuban government has adamantly quantities of cocaine or heroin to the United States … We also looked closely at the use of denied it is working on biological agents Cuban waters and airspace for transit of drugs to the United States, as the term “major drug with military applications. transit country” is understood to apply to the land, waters, and airspace of a country over Reportedly, some U.S. applicants which sovereignty may be exercised, consistent with international law and United States were permitted to travel to the confer- practice. Although we have detected what appears to be some air and sea activity consistent ence, Biotecnologia Habana 99. with trafficking patterns, this activity has decreased significantly since last year and indicates a corresponding decrease in drug flow.“ President Bill Clinton in a letter to Congress explaining why the administration decided not to Castro releases include Cuba on the annual list of countries producing or transporting drugs for consumption in the multimedia CD of United States. speeches “There are 20% or 25% of our society that survives on a little more than luck…But what HAVANA — Destined no doubt to worries me is that close to 80% of the population grows poorer every day. It’s not a galloping be a hit, at least in Cuba, President poverty, no one is dying of hunger in the streets. This is a country that still is capacble of Fidel Castro has released a CD-ROM producing three million tons of sugar and the government maintains the vital minimums. But containing all of his speeches delivered nor is it a poiverty that is going to change from one day to the next. It is a gradually declining at the first eight Ibero-American poverty. Over the course of this decade, we have seen a palpable empoverishment.” summits accompanied by music by Dissident Elizardo Sanchez in an interview conducted during the Iberoamerican summit. composer Frank Fernandez. Foreign Ministry spokesman “At this summit we reiterate our commitment to strengthening democratic institutions, Alejandro Gonzalez said the disk was political pluralism, the state of law, respect of human rights and fundamental liberties, “an excellent idea, sponsored by the including the right to development.” Council of State,” that combines the “We reiterate our firm rejection of all measures of unilateral character with extraterritorial “wonders of technology” with contents effect that are against international law and the commonly accepted rules of free trade. We of “priceless documentary value.” The agree that this type of practice constitutes a serious threat against multilateralism. In this CD-Rom, priced at $19 each, also context we reiterate once again our exhortation to the government of the United States of includes images of Castro, print and America to end the application of the Helms-Burton Law in compliance with the resolutions audio versions of speeches and allows of the General Assembly of the United Nations.” users to search for specific words or phrases. Excerpts from the final communique of the Iberoamerican summit in Havana in November. The CD-Rom was unveiled at a news conference in Havana attended by “There will be the absence of a personality of tremendous importance but the revolution 30 Cuban officials and 500 reporters will not disappear. No one should expect a change in any sense.” accredited to cover the ninth Ibero- National Assembly President Ricardo Alarcon on how things in Cuba will change after Fidel Castro American Summit. leaves the scene.

December 1999 CUBANEWS 10 gutting the original building. In March, the concrete in order to compensate for the lost CONSTRUCTION former Hotel Florida reopened on the old concrete. Local experts say many amateur city’s primary pedestrian street, Calle Obispo. restorations, as well as some of the well- Restoration of Old The 21-room hotel retained the traditional known projects, were built with sub standard Havana progresses but colonial patio and courtyard. At the southern concrete for this reason. One Cuban historic end of the Plaza de Armas, the former preservationist who works at the National challenges remain residence of a count opened in 1998 as the Center for Conservation, Restoration, and Bradley K. Violetta and Joseph L. Scarpaci new Hotel Santa Isabel. Museum Sciences said recently, “On any job Cuba’s multi-million dollar restoration of Habaguanex, whose profits from running site, we have to factor in theft. In addition, if some of Havana’s old neighborhoods is finally hotels, restaurants, and dollar-shops are we experiment with chemical additives that starting to bear fruit as some major projects redirected back into Old Havana, operates resist weathering from sea salt, rain, heating, are nearing completion or have already both of these hotels. Although no balance and drying, then we also have to factor the opened. sheets have been published during its five theft of the additive. So in the end, we simply Restoration and engineering company years of operation, Habaguanex remains one use very little newer products that would Habaguanex, run by renowned Cuban of the few Cuban organizations able to keep make our buildings withstand the forces of architect and Havana City Historian Eusebio its earnings without National Assembly nature. Otherwise, we would have to have a Leal and the company’s real estate and oversight. foreman standing over laborers all the time.” construction companies, Aurora and Fenix, The restoration program has provided Engineer and university professor Vitervo are leading the effort to restore the old town. badly-needed jobs. Leal recently said 3,000 O’Reilly, one of Cuba’s leading concrete The companies already have been construction workers are employed in 163 experts, says that despite the problems, the involved in the restoration of the Hotel restoration projects. use of cement is indispensable for restoration Parque Central and Dutch company, Golden Cuban architects are also working with projects. He says Cuban scientists have come Tulip, is running the five-star hotel. joint-venture and locally financed projects in to understand how to prevent the destructive Habaguanex also is working on the restora- Habana Vieja. For instance, local architects effects of salt water on concrete in Old tion of the Hotel Telegrafo. Two blocks south submitted numerous designs for Parque Havana through the use of additives. The is the heavily scaffolded Gran Hotel, which Central Hotel. In the end, a feasibility and Ministry of Construction (MICONS) has set has been gutted and only the facade will be design project submitted by a Spanish outfit, up a commission to study the use of additives saved. The same gut-and-preserve approach is allegedly to the tune of half a million dollars, that can extend the life of concretefor up to also evident with the Lebanese-financed won the design competition. 70 years. Hotel Saratoga. One non-hotel structure One of the major problems facing the Concrete that lasts even half that time undergoing renovation is the once-splendid renovation program is a lack of building would be welcome, especially since construc- Marti Theater built at the turn of the century. materials, the high cost of imported goods and tion projects built in the 1960s are showing The neo-classical structure is slated for persistent problems with theft at building sites. structural strain. reopening in 2001. Residents of Old Havana frequently pick Another major problem restoration The government and Habaguanex have over building sites to gather materials such as experts are facing is the destructive impact of been trying to strike a balance between sand to make their own cement for home steel reinforcing bars that were used in historic preservation of the exteriors of old improvement projects or repairs. Recently, original construction and in subsequent buildings in order to blend in with surround- residents have been able to buy some 20-kilo restorations. Steel reinforcing bars can expand ing buildings and the necessity of building bags of cement for about 50¢, but supplies at six to eight percent in volume as they rust, modern amenities into projects. this price are scarce. On the black market, the which can cause large chunks of concrete to However, in many cases preservation has same material brings $2.50. split off from buildings. Oxidation increases taken a back seat to other considerations. In Cuba used to import significant amounts as the rods are exposed to air and salt water the case of the Parque Central, for instance, of cement and still imports and exports after slabs of concrete break off, which can the original proposal called for preserving the cement, however, its main foreign supplier, often reduce the load-bearing ability of entire facade and maintaining a six-story Mexico’s Cemex in 1995 stopped most support columns. Hurricane Irene exacer- height restriction in order to ensure compat- shipments out of fear its investments in the bated precarious structural conditions with ibility with the surrounding area. However, United States could be threatened by U.S. high winds that ripped through Havana and when Parque Central opened its doors in sanctions. Today, the building trades rely Matanzas provinces on Oct. 14 and 15th. 1998, only a small corner facade withstood primarily on cemtn factories in nearly every Several old buildings collapsed as a result of the wrecking ball. A swimming pool graces province. Most fuel for the factories comes the storm. the top floor, but it is on the ninth and not from Cuba’s domestic oil industry, which sixth story as originally specified. In addition, produces heavy, sour crude that is burned to Bradley K. Violetta is civil engineer and the traditional Havana colonnaded walkways make cement. project manager for Master Builder are considerably taller than others in the Theft of cement on construction sites is a Technologies in Cleveland. Joseph L. Scarpaci vicinity. problem. This in turn has led construction is Professor Urban Affairs and Planning at Not all hotel projects have involved crews to use too much sand when blending Virginia Tech.

December 1999 CUBANEWS 11 pected to be generated using local crude forecasts for the second half onward are MARKETS & ECONOMY and natural gas, a ratio that is expected lower as the first stage of the new to increase to as much as 70% by the Australian laterite plants are scheduled Even as the government announced end of 2000. to dump 45,000 tons on world markets that GDP growth will exceed 5% in at a fraction of current world average 1999 (up from 2.5% to 3.5% expected Sugar production costs. at the beginning of the year) and that Experts foresee a supply deficit of steady 5% to 6% growth is expected in Raw prices plunged 15% toward the end of November as a result of an 10,000 to 21,100 tons in 2000, down coming years, prices for a leading from a 25,000 ton deficit this year, export, sugar plunged to below 6¢ per oversupplied market that is betting heavily on strong purchases from compared to a 18,500 ton surplus in pound and the price of oil, continued to 1998. soar. Russia. Traders and analysts foresee a fifth The Minister of Basic Industry, Of great concern to Cuban analysts Marcos Portal recently announced that are forecasts that the combination of consecutive year of surplus that differ- ent sources estimate could range from the country’s nickel output will stand at low sugar prices and high oil prices roughly 68,000 tons, the same as in could persist for much of the coming 3.92 million tons to 6.74 million tons worldwide in the 1999-2000 season, 1998, but below the original target of year and threaten the island’s economic 73,000 tons. Heavy rains in eastern recovery. compared to a 6.1 million tons surplus during the 1998-1999 season. The good Cuba and technical problems in mines About 80% of the island’s economy are blamed for the lower production. At depends on exports of sugar, nickel and news is that most sources agree the situation should improve in the 2000- the current world price through Novem- tobacco and tourism revenues. Although ber the announced output would be the number of tourists visiting the 2001 season. The International Sugar Organiza- worth roughly $400 millions. island has been rising quickly, profit Portal also disclosed that in recent margins in the tourism industry are low tion (ISO) has estimated a 4.765 million ton surplus from this harvest, years some $350 million have been and the government must share those invested in the nickel industry, about earnings with foreign partners in many which would raise total world stocks to 20 million tons by August 2000. Other $100 million of which came from cases. foreign investors. Last year, the foreign trade deficit sources estimate the stock overhang at a record 33.7 million tons. Cuba also is analyzing proposals to represented a record 46% of the total complete and operate the Camariocas volume of trade and the gap could be ISO analysts also expect raw sugar prices to drop in January. nickel plant, which is currently 85% widening in spite of the effort to revive completed. Originally projected to the economy. According to the Futures for March 2000 delivery averaged 6.55¢ per pound in November, produce 30,000 tons per year, this plant Economy Minister Jose L. Rodriguez, was built in the 1980’s with Soviet the soft prices for Cuban exports meant up from 6.83¢/lb in October while spot prices average 6.53¢/lb this month from assistance and halted at the beginning of a loss of $200 millions in revenue in this decade. Russian metals giant just the first six months of 1999. 6.91¢ in October. Both futures and spot prices dipped below 5.9¢/lb in late Norilsk is one of the parties discussing So far the GDP growth seems to be the completion of the project. supported by a modest physical growth November for a six-month low. Prices of the production as well as by some are partially recovered from the April necessary improvements in efficiency in nadir of 5.44¢/lb on the spot market RUMOR OF THE DAY the economy, especially in the sugar but are still a far cry from the 11¢ to 12¢ prevailing in early 1998. HAVANA — There are rumors sector. A significant increase in domestic that Israel’s BM Group is acting as a oil and gas production over 1998 levels Nickel front for U.S. interests trying to is helping the economic healing. As invest in the Cuban real estate previously reported, by the end of 1999, Prompted by labor conflicts, rising market. The Israeli group already 50% of Cuba’s electric power is ex- stainless steel demand and a lack of faith has significant investments in real that low-cost Australian estate and agriculture despite the projects will begin produc- Sugar-Oil Ratio – November 1999 fact that Cuba and Israel do not 1 (Tons of oil one ton of sugar would buy) tion as scheduled, nickel have diplomatic relations. The 0.95 prices broke the $3.62 per company and a Cuban partner recently 0.9 pound barrier ($8,000/ton) SPOT FUTURES (March 2000) opened a $200 million office 0.85 in November, producing development project in Havana. 0.8 skepticism that this level Sources say BM also was an 0.75 would be sustained. intermediary in the recently- 0.7 Analysts seem optimist revealed deal to allow Cuban jews to 0.65 over the outlook for the emigrate to Israel. 123458910111215161718192223242930 first half of 2000, but

December 1999 CUBANEWS 12