ECONOMIC EYE ON CUBA©

ECONOMIC EYE ON CUBA© Index

27 March 2000 To 2 April 2000

U.S. Dollar Unchanged In Value Against The Peso- 1
OFAC Licenses Former U.S. Government Employee To Visit “Friends” In Cuba- 2
124,000 United States Citizens Of Cuban Descent Reportedly Visited Cuba In 1999- 2
Company With Cuba Business Seeks Relationship With Florida Power & Light- 3
Spain Companies Establishing Joint Venture To Use Sugar Cane Refuse In Power Plants- 4
Belgium Obtains Tourism Revenue Guarantees To Restructure Partial Cuba Debt- 5
Debt To Germany Negotiations Update- 5
Commercial Relations With Portugal May Increase- 6
Some Tourism Prices Being Decreased As Tourist Arrivals Decrease- 6
Canada Reports February 2000 Feed Corn And Wheat Exports To Cuba- 7
Did Corporacion Cimex S.A. 1999 Revenue Increase 14% Or 3.6%- 7
Rumbos S.A Reports No Change In Gross Revenues For 1999- 8
Government Financial Condition Worsening- 8
Drought Worsens Throughout Cuba- 9
Updated Speaking Schedule-9
Attachment: Second Quarter Report From Archer Daniels Midland Company
Attachment: Articles From The Province Newspaper And The Gazette Newspaper


U.S. DOLLAR UNCHANGED IN VALUE AGAINST THE PESO- Republic of Cuba government-operated Cajas de Cambio S.A. (CADECA) sold the Convertible Peso, equal to US$1.00, for 21 Pesos and purchased the U.S. Dollar for 20 Pesos since 27 January 2000.  The official international exchange rate of one Peso to one U.S. Dollar, in effect for more than thirty years, remained unchanged.  The government of the Republic of Cuba maintains a fixed exchange rate for its international dealings and a more flexible exchange rate for domestic use.  The government of the Republic of Cuba does not fluctuate the value of the Peso for commercial transactions regardless of any fluctuation with the value of the U.S. Dollar or other currencies on the international market.  The Peso and the U.S. Dollar circulate freely in the Republic of Cuba.
 
CADECA Buy 
CADECA Sell 
From / To
20
21
27 January 2000 to 26 March 2000
21
21
24 December 1999 to 23 January 2000
21
22
2 October 1999 through 23 December 1999 
20
22
13 September 1999 to 1 October 1999
20
20
 1 September 1999 to 12 September 1999
20
21
13 August 1999 through 31 August 1999
22
22
16 June 1999 to 12 August 1999
22 
21
13 April 1999 through 15 June 1999
21 
21 
15 March 1999 to 12 April 1999
20
21
4 March 1999 to 14 March 1999
21
21
19 February 1999 to 3 March 1999
21 
20
13 January 1999 to 18 February 1999

OFAC LICENSES FORMER U.S. GOVERNMENT EMPLOYEE TO VISIT “FRIENDS” IN CUBA- The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., reportedly issued a license to a former employee  (and spouse) of the United States Department of State in Washington, D.C., for the purpose of visiting former colleagues (“friends”) at the United States Interests Section in the city of Havana, Republic of Cuba.  Issuing of an OFAC license to visit “friends” within the Republic of Cuba seems to represent a departure, thus perhaps establishing a precedent, from norms followed by the OFAC for travel licenses issued to individuals subject to United States law to visit the Republic of Cuba.

124,000 UNITED STATES CITIZENS OF CUBAN DESCENT REPORTEDLY VISITED CUBA IN 1999- Mr. Eduardo Bencomo, President of Republic of Cuba government-operated Corporacion Cimex S.A., the largest Republic of Cuba government-operated U.S. Dollar-earning company, reported that 124,000 individuals of Cuban descent who are subject to United States law visited the Republic of Cuba in 1999, primarily using the travel services of Republic of Cuba government-operated Havanatur, a subsidiary of Corporacion Cimex S.A.  During each of the last five years, the number of individuals subject to United States law authorized by a general license (no specific documentation from the OFAC is required) or specific license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C. to travel to the Republic of Cuba has increased on average 9% to 11%.  During each of the last five years, the number of individuals subject to United States law traveling to the Republic of Cuba, but not authorized by the OFAC to do so, has increased on average 19% to 21%.  Approximately 22,000 individuals subject to United States law traveled to the Republic of Cuba in 1999 without authorization from the OFAC.  Approximately 92% of individuals subject to United States law visiting the Republic of Cuba in 1999 were of Cuban descent whose specific purpose was to visit immediate family members for a self-defined “humanitarian purpose” or under the auspice of a specific license issued by the OFAC.  Individuals subject to United States law of Cuban descent who have immediate family members residing within the Republic of Cuba are permitted one visit under a general license from the OFAC every twelve months for a self-defined “humanitarian purpose.”  Approximately 8% of individuals subject to United States law traveling to the Republic of Cuba under a general license from the OFAC or specific license from the OFAC in 1999 were business representatives, journalists, academicians, cultural groups, students, athletes, and humanitarian groups amongst an expanding number of categories.  The estimated number (with authorization of the OFAC and without authorization of the OFAC) of business travelers subject to United States law visiting the Republic of Cuba from 1994 through 1999 follows:
 
Year
 Estimated Number Of Business Travelers
1994
500
1995
1,300
1996
1,500
1997
2,000
1998
2,500
1999
2,800
2000 (estimate)
3,400

Individuals subject to United States law who are representatives of United States-based companies are permitted to travel on currently-operating regularly-scheduled charter flights (John F. Kennedy International Airport in New York City, New York; Miami International Airport in Miami, Florida; Los Angeles International Airport in Los Angeles, California) from the United States to the Republic of Cuba provided that they obtain a specific license from the OFAC.  General aviation aircraft may be used for travel from the United States to the Republic of Cuba provided that a “temporary sojourn” license is obtained from the Bureau of Export Administration of the United States Department of Commerce in Washington, D.C.  Any individual subject to United States law traveling to the Republic of Cuba under a general license or specific license issued by the OFAC is permitted to travel on these charter flights to the Republic of Cuba.  However, an individual subject to United States law traveling to the Republic of Cuba under the “fully hosted” general license provision is not permitted to travel on these charter flights to the Republic of Cuba.  Officials at the United States Department of State, officials at the OFAC, officers of the United States Customs Service, and officers of the Immigration and Naturalization Service, have stated that any individual subject to United States law returning to the United States after visiting the Republic of Cuba on a “fully hosted basis” is being subjected to increased scrutiny, especially high profile groups, such as individuals attending “fully hosted” conferences.  Extreme caution should be taken as there is no longer a presumption of innocence, there is now a presumption of guilt and fines can be assessedWith the OFAC providing licenses to individuals subject to United States law to travel to the Republic of Cuba in an increasing number of categories, especially for business travel, “fully hosted” travel to the Republic of Cuba is becoming, in many instances, unnecessary.  The term “fully hosted” means that all expenses within the Republic of Cuba (including travel to and from the Republic of Cuba if using a Republic of Cuba government-operated air carrier, such as Cubana Airlines) on behalf of the individual subject to United States law are paid for by an individual or entity not subject to United States law.  No direct or indirect payments are permitted. A “fully hosted” traveler may return to the United States with an unlimited amount of informational materials (books, magazines, newspapers, music tapes, etc.) and an unlimited amount of artwork. A “fully hosted” traveler may not return to the United States with any other Republic of Cuba-produced products (such as cigars, rum, coffee, tee-shirts, etc.).  The OFAC and the United States Customs Service confirm that “fully hosted” travelers should expect the following: A) A letter from an individual or entity not subject to United States law (or a letter from a United States-based law firm) confirming that the individual subject to United States law was “fully hosted” will not be accepted as “proof” that a visit was “fully hosted.”  B) The individual subject to United States law will be required to produce receipts for all daily expenses within the Republic of Cuba which demonstrate that all of the expenses were paid by an individual or entity not subject to United States law.  C) At the entry point to the United States, the United States Customs Service may make a photocopy of the passport of the individual subject to United States law.  The passport number may be entered in a permanent database.  D) The individual subject to United States law will be required to submit a signed letter confirming, under penalty of perjury, that all daily expenses incurred within the Republic of Cuba on behalf of the individual subject to United States law were paid for by an individual or entity not subject to United States law.  E) The OFAC may send a letter to the individual subject to United States law requiring additional proof that the visit to the Republic of Cuba was “fully hosted.”  Individuals subject to United States law traveling to the Republic of Cuba should only use travel agents that have been licensed by the OFACTico Travel, 161 East Commercial Boulevard, Fort Lauderdale, Florida  33334.  Telephone: (954) 493-5335 or (800) 493-8426; Facsimile: (954) 493-8466; E-mail: tico@gate.net; Internet: http://www.destinationcuba.com.

COMPANY WITH CUBA BUSINESS SEEKS RELATIONSHIP WITH FLORIDA POWER & LIGHT- Madrid, Spain-based Iberdrola S.A. (1999 revenues approximately US$5.8 billion), the second-largest power generation company in Spain, reportedly is seeking a commercial relationship (merger, purchase, stock swap, alliance, etc.) with Juno Beach, Florida-based FPL Group (the parent of Florida Power & Light, 1999 revenues exceeding US$6 billion), the largest supplier of electricity in the State of Florida.  Iberdola S.A. already has an agreement with Tampa, Florida-based Tampa Electric Company and government of Portugal-controlled Lisbon, Portugal-based Electricidade de Portugal to construct a US$400 million power plant in Guatemala.  In 1998, the three companies purchased Guatemala City, Guatemala-based Empresa Electrica de Guatemala S.A.  Also, in 1998, Iberdrola S.A. purchased Landover, Maryland-based EnergyWorks, L.L.C., a utility outsourcing company, for approximately US$50 million.  In September 1999, Iberdrola S.A., through a subsidiary, Iberdrola Ingenieria y Consultoria (IBERINCO), obtained a ten-month contract valued at approximately US$3.15 million with Republic of Cuba government-operated Union Electrica de Cuba to participate in the modernization of three 100-megawatt U.S.S.R.-constructed power generators 1) unit #6 at Santiago de Cuba’s Rente thermo-electric plant 2) unit #6 at the Nuevitas thermo-electric plant in Camaguey Province and 3) unit #5 at the Mariel thermo-electric plant in Havana Province.  IBERINCO will provide technical expertise and general contracting services, and will provide technology through Republic of Cuba government-operated Energoimport. IBERINCO also signed an agreement with Republic of Cuba government-operated INEL, an engineering subsidiary of Union Electrica de Cuba for unspecified projects in Spain and in the Americas.  IBERINCO recently participated, with Europe-based TLMACE, in the modernization of unit #5 at the Camaguey thermo-electric power generator, a project financed by the Republic of Cuba-based Havana Finance Company (a joint venture between Madrid, Spain-based Caja Madrid and Republic of Cuba government-operated Banco Popular de Ahorro).  Mr. Alfredo Lopez, Director of Union Electrica de Cuba, reported that the company is proceeding with a three-year US$167 million plan through 2000 to upgrade eleven U.S.S.R.-constructed 100-megawatt generators and three 125-megawatt Czechoslovakia-built generators, accountable for 45% of the Republic of Cuba’s installed capacity.  A subsidiary of Iberdrola Electric, Iberdrola Ingenieria y Consultoria signed a contract in 1998 with Union Electrica Cubana to modernize a 125-megawatt generator at the October 10th thermo electric plant, located in Nuevitas Camaguey, 550 kilometers east of the city of Havana. The company said the project, in which other foreign companies will participate, would be financed by Havana Finance Company.  Mr. Lopez He said that eight of fourteen contracts had been signed with Europe-based companies, which included contracts to converting the existing generators to use less expensive, and more efficient, fuels, as well as, automating various procedures, etc.

SPAIN COMPANIES ESTABLISHING JOINT VENTURE TO USE SUGAR CANE REFUSE IN POWER PLANTS- Madrid, Spain-based Azucarera Ebro Agricolas S.A. and Spain-based Union Fenosa Energias Especiales, reported that they would establish a joint venture within the Republic of Cuba to develop sugar cane refuse co-generation power plants within the Republic of Cuba and in other countries.  The companies reported that initial studies indicated that up to 1,000 megawatts could be generated from sugar cane refuse within the Republic of Cuba.  Azucarera Ebro
Agricolas S.A., the fifth-largest sugar producer located on the European continent, signed an agreement in 1999 with the Ministry of Sugar of the Republic of Cuba to conduct a power generation feasibility study toward establishing a joint venture in 2000.  The Ministry of Sugar of the Republic of Cuba is promoting the importance of developing by-products production and electricity generation to counter lower revenues as a result of continuing low international raw sugar prices and to insure the survival of the sugar industry.  H.E. Tomas Benitez, First Vice Minister of the Ministry of Basic Industry of the Republic of Cuba, recently reported that negotiations were underway with four non-Republic of Cuba companies to establish co-generation facilities to produce sugar cane refuse-based electricity.

BELGIUM OBTAINS TOURISM REVENUE GUARANTEES TO RESTRUCTURE PARTIAL CUBA DEBT- H.E. Pierre Chevalier, Secretary of State for Foreign Trade of Belgium, reported that his 26 March 2000 to 30 March 2000 visit to the Republic of Cuba would result in increased trade, financial support, and investment.   The government of the Republic of Cuba has approximately US$17.28 million in short-term debt to Belgium of a total debt of approximately US$165.20 million.  The government of Belgium agreed to roll over the short-term debt to medium-term debt, and provide approximately US$8.36 million in new trade credits to purchase Belgium-produced products.  As consideration for the new agreements, the government of the Republic of Cuba will place a portion of the gross revenues earned by Republic of Cuba government-operated tourism companies from Belgium nationals traveling to the Republic of Cuba in accounts at Brussels, Belgium-based Belgo-Dutch Fortis Bank.  Accompanying Minister Chevalier to the Republic of Cuba were twenty representatives from twelve financial, pharmaceutical, shipping, and other companies.  The following are some of the recent highlights of Belgium-Republic of Cuba commercial activities:
 
Bilateral trade in 1999 was reported as approximately US$80 million in 1999, of which approximately US$27.65 million was exports (dairy products, chemicals, steel, machinery, etc.) from Belgium to the Republic of Cuba.  
Approximately 20,000 Belgium nationals visited the Republic of Cuba in 1999.  
Brussels, Belgium-based Transnico International, Republic of Cuba government-operated Rumbos S.A. (a subsidiary of the Ministry of Tourism of the Republic of Cuba), and Republic of Cuba government-operated Railway Union, have established Cuba and Caribe Express, a joint venture to operate a luxury train between the city of Havana and the city of Santiago de Cuba (860 kilometers east of Havana) in the Republic of Cuba.  
Belgium-based Technoblock S.P.A. (with capital from Ireland and with capital from Italy) and Republic of Cuba government-operated Grupo de Refrigeracion y Calderas (a subsidiary of the Ministry of Steel and Mechanical Industry of the Republic of Cuba, SIME) have established Technoblock International S.A., to produce automated commercial refrigeration equipment for the Republic of Cuba market and for export. 
Nivelles, Belgium-based Vigan, a pneumatic conveying manufacturer (1998 revenues US$20 million), is the source of a pneumatic ship unloader (model 1 NIV 16) with a capacity of 200 tons per hour and mounted on rails gantry that has been in operation since January 1998 at the port of Havana.  The pneumatic unloader was purchased by Republic of Cuba government-operated Union Molinera.  A similar pneumatic ship unloader was ordered by Union Molinera along with two mobile pneumatic ship unloaders for use in at the port of Santiago de Cuba, 861 kilometers east of Havana. Vigan equipment has also been installed at the Port of Cienfuegos, 254 kilometers southeast of Havana.  
Brentford, United Kingdom-based SmithKline Beacham plc (1998 revenues exceeding US$10 billion) and its United States-based subsidiary, Philadelphia, Pennsylvania-based SmithKline Beacham, have an agreement with Republic of Cuba government-operated Carlos Finlay Institute for testing, clinical trials, and marketing of a Meningitis B vaccine developed by the Carlos Finlay Institute in 1985.  The testing and clinical trials of the Meningitis B vaccine are being conducted at a Brussels, Belgium-based facility owned by SmithKline Beacham. 

DEBT TO GERMANY NEGOTIATIONS UPDATE- H.E. Dr. Carlos Lage, a Vice President of the Council of State and Executive Secretary of the Council of Ministers of the Republic of Cuba, signed a Letter of Intent with the government of Germany establishing the basis for restructuring the Republic of Cuba’s debt with Germany.  The Letter of Intent reportedly requires negotiations for the basis for the restructuring of the Republic of Cuba’s debt to Germany to be completed by July 2000. The Central Bank of the Republic of Cuba reported the value of the debt to Germany as US$220 million.  However, Germany reports that the value of the Republic of Cuba’s debt to Germany is approximately US$220 million and 830 million Convertible Rubles owed by the government of the Republic of Cuba to the former German Democratic Republic (then known as East Germany).  Vice President Lage reported that the Republic of Cuba’s debt to Germany was approximately US$100 million and 830 million Convertible Rubles.  The issue of what value(s) will be assigned the Convertible Rubles for the purpose of debt negotiations must be reconciled as the government of the Russian Federation is also seeking repayment of Convertible Ruble-based debt from the government of the Republic of Cuba.  A likely result is a different value being placed on the Convertible Ruble for negotiations with Germany, the Russian Federation, and other countries.  The Central Bank of the Republic of Cuba reported debt of US$11.2 billion in 1999, not including debt to the countries of the former U.S.S.R. and former U.S.S.R.-dominated countries.  2% of the US$11.2 billion was reported as debt to Germany.  Reportedly, 1999 bilateral trade was approximately US$103 million (US$76 million in exports and US$27 million in imports), an increase of approximately 3% from 1998 bilateral trade.  The government of Germany reported no direct investment within the Republic of Cuba by Germany-based companies from 1990 through 1997, but reported US$2.5 million in capital outflow to the Republic of Cuba in 1998-1999, of which a portion reportedly was direct investment within the tourism sector.  Hamburg, Germany-based Dresdner Bank Lateinamerika AG (a subsidiary of Frankfurt, Germany-based Dresdner Bank AG), reported that an office was expected to be established this year in the city of Havana, Republic of Cuba.  Dresdner Bank AG has announced plans to merge with Frankfurt, Germany-based Deutsche Bank AG, creating the largest financial institution in world with assets exceeding US$1 trillion.  In June 1999, Deutsche Bank AG purchased New York, New York-based Bankers Trust Corporation (which included subsidiary Baltimore, Maryland-based BT Alex. Brown Incorporated) for approximately US$9 billion.  Dresdner Bank Lateinamerika AG will be the first Germany-based financial institution to establish a representative office within the Republic of Cuba.

COMMERCIAL RELATIONS WITH PORTUGAL MAY INCREASE- H.E. Dr. Carlos Lage, a Vice President of the Council of State and Executive Secretary of the Council of Ministers of the Republic of Cuba, reported that during his 24 March 2000 to 27 March 2000 visit to Portugal he discussed 1) restructuring the Republic of Cuba’s debt to Portugal 2) elimination of double taxation and 3) increased cooperation in the tourism sector.  Bilateral trade in 1999 was reported to be approximately US$30 million, similar to bilateral trade reported in 1998.  Porto, Portugal-based Grupo Amorim and Republic of Cuba government-operated Cimex Inmobiliaria have a joint venture (with a reported value of US$30 million) to construct two 250-unit condominiums in the Miramar district of the city of Havana.  Grupo Amorim also has an agreement with the Ministry of Fishing of the Republic of Cuba, the details of which have not been disclosed.  Grupo Amorim has a reported US$20 million combined interest in at least ten hotels located within the Republic of Cuba.  In October 1998, Mr. Americo Amorim, Chairman of Grupo Amorim, reported that his company planned to construct an additional thirty hotels within the Republic of Cuba by 2003.  Mr. Amorim is also the Chairman of Corticeira Amorim, the world’s largest cork producer and exporter; controls Telecel-Comunicacoes Pessoais S.A., the second-largest mobile telephone operator in Portugal; and is one of the founders of Banco Comercial Portugues S.A., the largest publicly owned bank in Portugal.

SOME TOURISM PRICES BEING DECREASED AS TOURIST ARRIVALS DECREASE- H.E. Ibrahim Ferradaz, Minister of Tourism of the Republic of Cuba, reported that hotels would not decrease prices in defense of decreasing tourist arrivals.  The chairman and chief executive officer of a non-Republic of Cuba-based hotel company with operations within the Republic of Cuba reported that while prices for hotel rooms “may not be decreased today, normal annual price increases might be reduced and/or eliminated for the time being.”  However, prices of transportation, telephone, restaurants, and recreational activities are being decreased.  For example, in March 2000, Republic of Cuba government-operated Transtur (under the auspice of the Ministry of Tourism of the Republic of Cuba) which provided ground transportation (group charters and individual rentals and taxi service) to 40% of all tourists upon their arrival in the Republic of Cuba in 1999, reported that prices would be reduced for vehicle rentals and for taxi fares in an effort to recoup lost market share. Transtur provided transportation to 53% of all tourists upon their arrival in the Republic of Cuba in 1998.  In the text of the company’s 1999 annual report, Transtur reported that the cost of non-hotel related services within the Republic of Cuba were often considered excessive, and that “it sometimes costs less for a nights stay in an all-inclusive hotel than to rent a car or take a taxi.”  Minister Ferradaz reported that there was no change in the number of tourist arrivals for the period February 2000 compared to February 1999, but March 2000 tourist arrivals were 6% above tourist arrivals in March 1999.  Total tourist arrivals in 1999 were 1.62 million, an increase of 13.2% from tourist arrivals in 1998.  The Ministry of Tourism of the Republic of Cuba had projected an increase of 19%, similar to the annual average rate of increase during each of the last five years.  The number of tourism days increased 6% in 1999 compared to the number of tourism days in 1998.  The Ministry of Tourism of the Republic of Cuba had projected an increase of 19%, similar to the annual average rate of increase during each of the last five years.  Republic of Cuba tourism industry costs in 1999 were reported as US$.75 per U.S. Dollar earned, compared to the US$.67 planned and US$.71 reported in 1998.  Republic of Cuba gross tourism revenues were reported as US$1.3 billion in 1999, compared to US$1 billion in 1998, and US$800 million in 1997.  The 30% revenue increase for the period 1998 to 1999 does not coincide with other previously-published information.  For the first time in six years, the Ministry of Tourism of the Republic of Cuba reported no combined direct tourism revenue figure and indirect tourism revenue figures, such as the US$1.8 billion reported in 1998.  Republic of Cuba government-operated companies, many involving non-Republic of Cuba-based direct investment, are expected to source 60% of supplies used in the tourism industry in 2000, compared with 51% in 1999, and 45% in 1998.  Minister Ferradaz reported that there were no plans for tourism development outside the eight existing zones due, in part, to the cost of new infrastructure required.  He said that there were currently twenty-six joint ventures operating within the tourism sector, including twenty-four managing hotels with a combined 13,000 rooms; and another 14,500 rooms are managed and marketed by non-Republic of Cuba-based companies.  The Republic of Cuba has a reported total of 34,000 hotel rooms (primarily one star properties to three star properties based upon United States accepted criteria).

CANADA REPORTS FEBRUARY 2000 FEED CORN AND WHEAT EXPORTS TO CUBA- The Canada Grain Commission (CGC) reported that Canada exported 27,300 tons of feed corn to the Republic of Cuba in February 2000, compared to 13,900 tons of feed corn exported to the Republic of Cuba in February 1999.  The Canada Grain Commission reported that Canada exported 4,000 tons of durum wheat to the Republic of Cuba in February 2000, compared to no durum wheat exported to the Republic of Cuba in February 1999.  The CGC reported that various ports within Canada exported 14,500 tons of milling/feed wheat to the Republic of Cuba in February 2000, compared to 35,300 tons of milling/feed wheat exported to the Republic of Cuba in February 1999.
 
Month 
Feed Corn Quantity In Tons
February 2000
27,300
January 2000
27,300
January 1999
13,900
February 1999
13,900
Month
Durum Wheat Quantity In Tons
February 2000
4,000
January 2000
4,000
January 1999
-0-
February 1999
 -0-

DID CORPORACION CIMEX S.A. 1999 REVENUE INCREASE 14% OR 3.6%- Republic of Cuba government-operated Corporacion Cimex S.A., the largest Republic of Cuba government-operated U.S. Dollar-earning company has an accounting credibility problem.  The company has reported that the 1999 gross revenues of the company increased by 14%, from 1998 gross revenues of US$900 million and reported that the 1999 gross revenues of the company increased by 3.6% from 1998 gross revenues of US$900 million.  Republic of Cuba government-operated companies are increasingly providing conflicting gross revenue figures, gross profit figures, and net profit figures.  Representatives of Non-Republic of Cuba-based financial institutions continue to advise the government of the Republic of Cuba to invite non-Republic of Cuba-based independent auditors to monitor the accounting practices of Republic of Cuba government-operated companies.  Otherwise, lending to Republic of Cuba government-operated companies may become more problematic.  Corporacion Cimex S.A., originally an import-export company, currently has approximately 100 subsidiary companies including U.S. Dollar retail operations (a combined 1,200 including supermarkets, service stations, fast food outlets, photo developing, car washes, and kiosks) credit card and charge card processing, vehicle service stations, vehicle rental, cable and satellite television distribution, travel agency, and real estate.

RUMBOS S.A. REPORTS NO CHANGE IN GROSS REVENUES FOR 1999- Republic of Cuba government-operated Rumbos S.A., which had previously-announced plans for gross revenues of US$81 million in 1999 and gross profits of US$31 million in 1999, reported that gross revenues were US$64 million in 1999 and that gross profits were US$24.4 million in 1999.  Rumbos S.A. reported gross revenues of US$64 million in 1998 and reported gross profits of US$24 million in 1998.  Rumbos S.A. operates 215 facilities throughout the Republic of Cuba (ranging from a golf course to street corner kiosks), and provides reception services and other services to non-Republic of Cuba-based tour operators, non-Republic of Cuba-based travel agents, and non-Republic of Cuba-based cruise ship operators.  Rumbos S.A. reports that more than 60% of its 1999 gross revenues were obtained from operations within the city of Havana and resort area of Varadero (140 kilometers east of Havana).  Rumbos S.A. plans to invest US$10 million to US$15 million in 2000 to renovate existing facilities and to construct new facilities.  Some managers of Rumbos S.A. were dismissed in mid-1999, reportedly for corruption.  Mexico City, Mexico-based Cuba Amor [Cuba Love], a travel agency with commercial relationships with Rumbos S.A., had, according to Republic of Cuba government-operated Prensa Latina News Agency, its contracts cancelled by Rumbos S.A., for, reportedly, engaging in the promotion of “sex tourism.”  However, representatives of Cubamor reported that their commercial relationships, including three charter flights per week between Mexico City and the city of Havana, continued to operate and that the rumors were initiated by competitors.

GOVERNMENT FINANCIAL CONDITION WORSENING- H.E. Jose Luis Rodriguez, Minister of Economy and Planning of the Republic of Cuba, reported that an emergency commission has been established to implement policies to reduce oil imports and energy consumption.  Minister Rodriguez reported that an increase in international oil prices and decrease in international raw sugar prices in January 2000 and February 2000 had resulted in an additional US$38 million in energy-related expenditures.  International oil prices have increased as high as 300%, from US$11.00 per barrel less than twelve months ago to US$31.00 per barrel recently; and international raw sugar prices are approximately US$.05 per pound compared to US$.14 per pound in 1998.  An increase in international nickel plus cobalt prices and decrease in international commodity food prices have not compensated for the international price differentials in international oil prices and raw sugar prices. Oil and food account for the largest percentage of imports by the government of the Republic of Cuba.  The largest sources of U.S. Dollars for the government of the Republic of Cuba are tourism, raw sugar, and nickel plus cobalt.  The Republic of Cuba reported importing 6 million tons of oil in 1999 and in 1998, and approximately US$800 million in bulk food commodities in 1999.  The Republic of Cuba plans to export 3.5 million tons of raw sugar and 73,000 tons of nickel plus cobalt in 2000.  Republic of Cuba government-operated companies, which regularly have difficulties meeting financial obligations, are likely to have increased difficulties throughout 2000 due to 1) continuing high international prices for imports 2) continuing low international prices for exports and 3) lower net revenues from tourism.  The government of the Republic of Cuba is not a member of any international lending organizations and relies on primarily short-term financing, short-term trade credits, and medium-term trade credits, all at annual interest rates reportedly from 12% to 22%. The government of the Republic of Cuba guarantees a portion of financing and trade credits with revenues from the tourism sector.  The number of tourists visiting the Republic of Cuba reportedly did not increase, and may have decreased, for the period December 1999 through February 2000, while the tourism sectors gross rate of profit, on direct earnings of US$1.3 billion in 1999, decreased to 25%, compared to an average of 30% during each of the last eight years.

DROUGHT WORSENS THROUGHOUT CUBA- The National Weather Institute of the Republic of Cuba reported that rainfall from December 1999 through March 2000 was 80% below average.  The unusually dry, dry season (November to April) has benefited the sugar harvest and potato harvest, but damaged non-sugar agriculture and livestock.  Reservoirs are reported to be 30% to 40% of capacity due to heavy rainfall late in 1999.  Approximately 20% of Republic of Cuba farmland benefits from irrigation.
 

Updated Speaking Schedule

Mr. John S. Kavulich II, President of the U.S.-Cuba Trade and Economic Council, has accepted an invitation from Somerville, New Jersey-based Raritan Valley Community College’s Center for International Business & Education to speak at an International Trade Roundtable from 8:30 a.m. to 10:00 a.m. on Friday, 14 April 2000.  The topic of the discussion will be “Business Opportunities and Challenges of ‘Doing Business In Cuba’ and What the Future Holds For United States Businesses in Cuba.”  For information, please contact Dr. Tulsi R. Maharjan at telephone (908) 526-1200; Facsimile telephone (908) 526-3576; or E-mail at tmaharja@raritanval.edu

Mr. John S. Kavulich II, President of the U.S.-Cuba Trade and Economic Council, has accepted an invitation from the Naples, Florida-based Naples Area Chamber of Commerce to give the luncheon keynote address at the one-day Economic Summit 2000 on Economic Relations With Latin America… A Millennial Challenge For U.S. Business on Thursday, 20 April 2000, at 12:30 p.m.  The title of the luncheon address will be “U.S.-Cuba Trade… Today and Tomorrow.”  For information, please contact Mr. Gordon E. Vander Till at telephone (941) 262-6376; Facsimile telephone (941) 262-8374; or E-mail at chamber@naples-online.com
 
 

ECONOMIC EYE ON CUBA© is published each Monday for members of the U.S.-Cuba Trade and Economic Council, the largest nonpartisan business organization within the United States focusing upon the Republic of Cuba. The organization is a private, not-for-profit corporation which does not take positions with respect to United States-Republic of Cuba political relations. All rights reserved. Material may not be reproduced without written permission.