EXCHANGE RATES STABLE- Republic of Cuba government-operated Cajas de Cambio S.A. (CADECA) sold the Convertible Peso, equal to one U.S. Dollar, for 23 Pesos and purchased the U.S. Dollar for 21 Pesos, as it has for the last three weeks. CADECA purchased and sold the U.S. Dollar for 23 Pesos from August 1997 through 10 February 1998. CADECA ended the month of February 1997 purchasing the U.S. Dollar for 21 Pesos and selling the U.S. Dollar for 22 Pesos. CADECA ended the month of February 1996 purchasing the U.S. Dollar for 26 Pesos and selling the U.S. Dollar for 26 Pesos. In February 1995, the U.S. Dollar could be purchased on the unofficial market for 45 Pesos. The official international exchange rate of one Peso to one U.S. Dollar, in effect for more than thirty years, remained unchanged. The government maintains a fixed exchange rate for its international dealings and a more flexible exchange rate for domestic use. The Peso and the U.S. Dollar circulate freely in the Republic of Cuba.
OBSERVATIONS FROM A BUSINESS EXECUTIVE- A senior-level executive of a non-United States-based company, which has commercial dealings within the Republic of Cuba, reported the following observations: "1994 was the year in which the Cuban economy bottomed-out. Today, Cuban managers, and especially the negotiators, are much more confident. They do not seem to need or want foreign investment with the same level of urgency as they did four years ago." . . . "One year ago, Cuban negotiators would have calculators, pads, pencils, and one telephone for ten people. Today, they have computers, access to the Internet, and cellular telephones." . . . "Virtually every foreign company operating in Cuba today, or seeking to operate in Cuba today, is doing so because of a feeling that normalized relations between Cuba and the United States are near and a venture that may not be immediately profitable, or as profitable as expected, will have sizable returns once Cuba and the United States relations are normalized."
U.S. DOLLAR RETAIL STORE SALES EXCEED US$700 MILLION IN 1997- Republic of Cuba government-operated U.S. Dollar retail stores reported 1997 revenues of approximately US$700 million compared to US$640 million in 1996 and US$580 million in 1995. The stores are operated by various Republic of Cuba government-operated companies such as Cimex, TRD, Cubalse, Cubanacan, Universal, and others. On average, if a product costs a store US$1.00 to purchase, the product will be sold for US$2.40 to the consumer. The price will be reduced if the product does not sell quickly. The government of the Republic of Cuba reports that more than 60% of the products sold in the U.S. Dollar retail stores are imported.
SUGAR HARVEST UPDATE- Sources within the Ministry of Sugar of the Republic of Cuba reported that low production and declining international raw sugar prices may result in the sugar harvest being the lowest in fifty years. The sources report that the 1997-1998 sugar harvest (November to May) could produce 3 million tons of raw sugar to 3.5 million tons of raw sugar. Exports would, therefore, range from 2.25 million tons of raw sugar to 2.75 million tons of raw sugar. The Republic of Cuba exported annually an average of 6.5 million tons of raw sugar to 7.0 million tons of raw sugar from 1987 through 1991. The economic crisis in Asia may result in an expected 1998 worldwide raw sugar shortage becoming a 1 million-ton worldwide surplus. International raw sugar prices decreased from US$.12 per pound in January 1998 to US$.095 per pound on 27 February 1998. If the Republic of Cuba were to export 2 million tons of raw sugar at US$.10 per pound versus US$.12 per pound, the resulting loss would equal US$40 million. Mitigating some of the economic damage, the Republic of Cuba's main import, oil, has declined in price approximately 20% during the last five months.
SHERRITT ACQUIRES 37.5% INTEREST IN CUBACEL FOR US$38 MILLION- Toronto, Canada-based, Sherritt International Corporation, the largest foreign investor within the Republic of Cuba, announced that it had acquired a 37.5% interest in Empresa de Telefonos Celulares de Cuba S.A. (Cubacel) for approximately US$38,250,000.00. Established in 1991, Cubacel is a joint venture cellular telephone operation between Mexico-based Telecommunications Internacionales de Mexico (TIMSA) and Panama-based, Republic of Cuba government-operated, UTISA, a company that also is 1) the Republic of Cuba-based representative of DHL, the international air courier service, and 2) markets two-way radios and pagers (voice and tone) within the Republic of Cuba. A wholly-owned subsidiary of Sherritt International Corporation, Sherritt International Communications, Inc., purchased 75% of the shares of TIMSA thereby giving Sherritt International Communications, Inc., a 37.5% share of Cubacel. Cubacel has a twenty-year exclusive contract to provide both analog and digital cellular service within the 800 MHZ band throughout the Republic of Cuba. Cubacel has services in the a) city of Havana, b) city of Villa Clara, 270 kilometers east of Havana, c) city of Cienfeugos, 250 kilometers southwest of Havana, d) resort area of Varadero, 140 kilometers east of Havana, e) on the highway between Havana and Varadero, f) city of Matanzas, 100 kilometers east of Havana, g) city of Santiago de Cuba, 750 kilometers east of Havana, and h) city of Moa, 900 kilometers east of Havana, where there is substantial nickel plus cobalt mining in which Sherritt International Corporation has a joint venture. Cubacel reports that it has approximately 1,800 subscribers who sign one-year contracts. The monthly fee is US$40.00 and per minute local usage is US$.40 peak and is US$.30 off-peak. Long distance rates range from approximately US$2.45 per minute to US$6.00 per minute, in addition to local per minute usage charges. The average monthly customer invoice is US$500.00.
ETECSA OWNERSHIP STRUCTURE UPDATE- Currently, the ownership structure of the Empresa de Telecomunicaciones de Cuba (ETECSA), the Republic of Cuba government-operated domestic and long distance telephone company, is reported to be as follows: 51% is owned by Republic of Cuba government-operated Empresa Telofonica de Cuba; 29.29% is owned by Italy government-operated STET International; 6% is owned by Republic of Cuba government-operated Banco Financerio Internacional (BFI); and 13.71% is owned by Panama-based, Republic of Cuba government-operated UTISA, a company that itself is 1) a partner in Empresa de Telefonos Celulares de Cuba S.A. (Cubacel), a joint venture cellular telephone operation with Mexico-based Telecommunications Internacionales de Mexico (TIMSA) 2) is the Republic of Cuba-based representative of DHL, the international air courier service and 3) markets two-way radios and pagers (voice and tone) within the Republic of Cuba. According to non-United States-based sources, Toronto, Ontario-based, Sherritt International Corporation, the largest foreign investor within the Republic of Cuba, discussed the purchase of a 6% interest in ETECSA for approximately US$100 million. In December 1996, Sherritt International Corporation issued CA$675 million (approximately US$473 million) in convertible debentures. The funds are expected to be used for "base infrastructure," telecommunications, and sugar, but not tourism. Mr. Ian W. Delaney, Chairman of the Board of Sherritt International Corporation, recently said that the company expected to invest CA$50 million to CA$100 million in telecommunications.
SHERRITT POWER CORPORATION UPDATE- Toronto, Canada-based, Sherritt Power Corporation, a subsidiary of Sherritt International Corporation, the largest investor within the Republic of Cuba, reported that it had filed a prospectus for its offering of CA$150 million (approximately US$105 million) which will finance and operate power generating businesses located primarily within the Republic of Cuba. Sherritt Power Corporation is participating in the financing, construction, and operation of natural gas processing plants to process raw gas produced by the Republic of Cuba's Varadero and Boca de Juraco oil fields, as well as, electrical power generation plants to be fueled by the processed raw gas. Upon completion, the Varadero-Boca de Juraco Power Project will have two integrated gas processing and power generating facilities at Varadero and Boca de Juraco, with a combined net power capacity of 206 megawatts. The construction cost of the Varadero-Boca de Juraco Power Project is expected to be approximately US$150 million during four phases (US$35 million, US$34 million, US$59 million, and US$22 million) with construction ending in the year 2000. According to Canada-based McDaniel & Associates Consultants Limited, a reservoir consulting company, the current proven, probable, and possible reserves of the Varadero oil field and the Boca de Juraco oil field are sufficient to operate the Varadero Site for 20 years and the Boca de Jaruco Site for 11 years. The Varadero oil field was established in 1971 and to date 219 wells have been drilled and 56 million barrels of oil have been recovered. Currently, the Varadero oil field produces 17,000 barrels of oil per day. The Boca de Juraco oil field was established in 1969 and to date 252 wells have been drilled and 29 million barrels of oil have been recovered. Currently, the Boca de Juraco oil field produces 2,600 barrels of oil per day. Republic of Cuba government-operated Union Electrica of the Republic of Cuba has agreed to purchase all electrical output of the Varadero-Boca de Juraco Project at pre-determined prices (initially US.045/kWh and then US$.038/kWh) and Republic of Cuba government-operated Union Cubapetroleo (CUPET) has agreed to contribute at no cost the raw gas from the Varadero oil field and the Boca de Juraco oil field as feedstock to the Varadero and Boca de Juraco power plants. According to Sherritt Power Corporation, the Republic of Cuba spent US$1.37 billion in 1996 on fuel imports, representing 37.3% of total imports in 1996. Sherritt Power Corporation also expects to identify opportunities in Latin America, Southeast Asia, and in South Asia. Sherritt Power Corporation believes that any required services or spare parts for the facilities are widely available from Canada-based companies. Sherritt Power Corporation has requested permission from the Ministry of Finances and Prices of the Republic of Cuba to import, on a duty free basis, equipment and other goods necessary for the start-up of each of the four phases of the Varadero-Boca de Juraco Project. An Alberta, Canada-based company has designed and fabricated the components for the two gas plants. Sherritt Power Corporation expects to receive a waiver from the Ministry of the Environment of the Republic of Cuba for any pre-existing environmental contamination. The auditor for Sherritt Power Corporation is the Toronto, Canada, office of Deloitte & Touche.
KVAERNER ENERGY LIMITED PROVIDING FOUR GAS TURBINES- Kvaerner Energy Limited of Scotland has received an order from Sherritt Power Corporation to provide four MS6001 gas turbine packages, each with a thermal efficiency factor of 31.8%, for use in the Varadero-Boca de Juraco Project. Kvaerner Energy Limited has also been contracted to provide spare parts, maintenance, and repair services. The value of the four gas turbines was not disclosed.
BORALEX IN US$60 MILLION HYDROELECTRIC VENTURE- Boralex Inc., a Montreal, Canada-based company, has a project with the Ministry of Basic Industry of the Republic of Cuba to construct three hydroelectric power stations with a combined 85 megawatts on the Toa River near the seaside town of Baracoa, 993 kilometers east of the city of Havana. The project is valued at CA$85 million. The Toa river (which at its source is amongst mountains with peaks of approximately 2,000 meters) is not considered a large flow river. The project does not require a large flow river since the river has a large head. For example, a river with 10 cubic meters per second flow with a 10-meter head is equal to a 1 cubic meter per second flow with a 100-meter head. The project was initiated by a Canada-based engineering company with funding from the Canadian International Development Agency. Boralex has been involved in the project for less than one year. Boralex has completed its pre-feasibility studies and has signed an exclusivity agreement with the Ministry of Basic Industry of the Republic of Cuba. Boralex, which wants to be the builder and the operator of the project, expects to sign both a power purchase agreement and a joint venture agreement within the next six months with the Union Electrica of the Republic of Cuba. Indemnification issues remain to be resolved. Construction on the hydroelectric power station would then begin within the next eighteen months. For the project to be viable, Boralex believes that the operation must be commenced within two years. Financing for the project may be obtained from financial institutions, including, perhaps, Government of Canada-guaranteed financing. Boralex held a preliminary discussion with Toronto, Canada-based, Sherritt International Corporation, the largest investor within the Republic of Cuba. In December 1996, Sherritt International Corporation issued CA$675 million (approximately US$473 million) in convertible debentures. The funds are expected to be used for "base infrastructure," telecommunications, and sugar. Mr. Ian W. Delaney, Chairman of the Board of Directors of Sherritt International Corporation, said recently that he expected the funds to be invested within two years. Boralex (Montreal Stock Exchange, 1997 revenues of approximately US$13 million, February 1998 market capitalization of approximately US$66 million) is the sole or joint owner of eight hydroelectric generating stations in Canada and in the United States, and is developing additional projects in Costa Rica, Guyana, and Tunisia. Boralex is controlled by Cascades Inc. (Toronto Stock Exchange, 1997 revenues of approximately US$1.54 billion, February 1998 market capitalization of approximately US$442 million), which produces and converts packaging products, tissue papers, and fine papers.
ADDITIONAL PROPERTIES FOR ACCOR- Accor S.A., the France-based hospitality company (1997 revenues of approximately US$5 billion) which manages 2,400 properties (Sofitel, Novotel, Mercur, Ibis, among others) in 42 countries (including the Hotel Sevilla in the city of Havana), has announced that it will manage an additional two hotels and one apartment complex in the city of Havana, Republic of Cuba- the Miramar Hotel, the Fifth Avenue Hotel, and the Monteverde Apartments, each owned by Gaviota S.A., a tourism company operated by the Revolutionary Armed Forces of the Republic of Cuba, and a minority group of Republic of Cuba-based and non-Republic of Cuba-based investors. The Ministry of Tourism of the Republic of Cuba reported that, as of 31 December 1997, there were 33 hotels with a total of 9,000 rooms under the management of non-Republic of Cuba-based companies. Accor S.A. and United States-based Carlson Companies (1997 revenues US$13 billion) have, since 1994, had a partnership, Carlson Wagonlit Travel, which is the world's second-largest travel network with more than 4,100 locations in more than 125 countries.
CLUB MED II SHIP BEGINS WEEKLY ROUTE- The Club Med II, one of the largest passenger (439) sailing vessels in the world, arrived at the Port of Havana on 28 February 1998. The Club Med II will sail the route: Havana- Cayo Largo- Gran Cayman- Isle de la Juventud- Havana on a weekly basis through April 1998. Club Mediterranee S.A. is operating the route in conjunction with Gaviota S.A., a tourism company operated by the Revolutionary Armed Forces of the Republic of Cuba. Since 1997, Club Mediterranee S.A. has managed a resort in Varadero, 140 kilometers east of the city of Havana.
VICE PRESIDENT OFFERS TOURISM UPDATE- H.E. Dr. Carlos Lage, a Vice President of the Council of State of the Republic of Cuba, said that the tourism sector is now and would remain in the future the country's largest source of U.S. Dollars, generator of new employment opportunities, a creator of sources of financing, and a creator of markets for domestically-produced products and services. In 1997, the tourism sector produced gross revenues of US$1.54 billion from 1,170,000 tourists (57% from Italy, Canada, Spain, France, and Germany). In 1990, the tourism sector had gross revenues of US$250 million. In 1988, less than 300,000 tourists visited the Republic of Cuba. In 1987, the Republic of Cuba accounted for 3% of the tourists visiting Caribbean Sea-area countries. In 1997, the Republic of Cuba accounted for 7% of the tourists visiting Caribbean Sea-area countries. According to Vice President Lage, the tourism sector within the Republic of Cuba increased at an annual rate of 19.3% from 1990 through 1997, compared with 4.3% for the Caribbean Sea-area countries as a group. The Vice President reported that in 1997, fifty percent of the revenues were generated by extra-hotel products and services, compared with 28% in 1990. However, sources within the Ministry of Tourism of the Republic of Cuba continue to report frustration with the inability to increase the demographics of the tourists visiting the island. These sources believe that the arrival of France-based Accor S.A., the increasing presence of Club Mediterranee S.A., and the operation of a new golf course, will, hopefully, lead to an expansion of the tourism demographics. The Ministry of Civil Aviation of the Republic of Cuba reported that the tourism sector generated gross revenues of US$160 million in 1997, with tourists accounting for 99% of international passengers and 31% of domestic passengers. The Ministry of Culture of the Republic of Cuba reported that in 1997 the tourism sector generated gross revenues of US$23 million, or 92% of its total U.S. Dollar revenues. The Republic of Cuba expects to receive 10 million tourists in the year 2010, generating profits and tax revenues of US$5 billion, which would be twice the U.S. Dollars generated by the entire economy in 1997. The Republic of Cuba has 179 hotels of varying quality (most are two-star and three-star) with 27,400 rooms. As of 31 December 1998, there were 23 joint ventures, of which 21 had been established. The tourism sector within the Republic of Cuba directly employs approximately 71,000 workers out of a total national workforce of approximately 4,500,000.
NEW FREE TRADE ZONE ANNOUNCED- H.E. Octavio Castilla, Director of the National Office of Free Trade Zones of the Republic of Cuba, announced that the 4.37 square hectare (1 acre equals .40469 hectares) shipyards in located in Santiago de Cuba, the island's second-largest city, 900 kilometers east of the city of Havana, will become a Free Trade Zone. Another Free Trade Zone is expected to be established in 1998 in the city of Cienfeugos, 250 kilometers southeast of Havana.
GOVERNMENT TO COLOR GASOLINE- Senior-level sources within the government of the Republic of Cuba reported that government-provided gasoline would be treated with a dye to distinguish it from gasoline sold to Republic of Cuba nationals for Pesos and to Republic of Cuba nationals and non-Republic of Cuba nationals for U.S. Dollars. Police will use a special dip stick to determine the source of the gasoline in a vehicle. Police will have the authority to issue fines and to impound vehicles. Subsidized gasoline sold for Pesos is available on an extremely limited basis. Republic of Cuba government-operated CUPET service stations sell diesel gasoline for US$.45 per liter (one liter equals .26418 gallons), regular gasoline for US$.60 per liter, and special gasoline for US$.90 per liter. Republic of Cuba government-operated Black Gold service stations sell diesel gasoline for US$.55 per liter, regular gasoline for US$.70 per liter, and special gasoline for US$1.00 per liter. Gasoline can be purchased on the black market in the city of Havana for 50% of the prices at the CUPET service stations and Black Gold service stations; and can be purchased on the black market in the provinces for as little as 10% of the prices at the CUPET service stations and Black Gold service stations. Republic of Cuba-based economists estimate that as many as 50% of all vehicles in the Republic of Cuba use gasoline purchased on the black market.
NATIONAL BANK OF MEXICO SIGNS AGREEMENTS- The National Bank of Mexico has signed agreements with Republic of Cuba government-operated People's Savings Bank of the Republic of Cuba. The agreements will permit the facilitation of money transfers and letters of credit. Mrs. Mercedes Cueli, Director of International Relations of the People's Savings Bank of the Republic of Cuba, said that banking reforms within the country in 1997 permitted the expansion of relations with financial institutions in other countries.
CAT SCAN MACHINE ASSEMBLED IN CUBA BEGINS OPERATION- The Holguin General Hospital, 750 kilometers east of the city of Havana, has taken delivery of a Cat Scan machine assembled within the Republic of Cuba. More than ten years ago, Republic of Cuba government-operated companies began assembling nuclear x-ray machines with some parts produced within the Republic of Cuba, but the majority of the parts purchased from Germany-based companies. The Cat Scan, known within the Republic of Cuba as the "Someton," costs approximately US$280,000.00 and 330,000.00 Pesos to assemble, compared to approximately US$750,000.00 on the international market. Germany-based Seimans AG and Germany-based Brucker Cat Scan machines can be found in the Republic of Cuba.
NTO GIVES MIDNIGHT REPRIEVE TO LATE INCOME TAX FILERS- The National Tax Office (NTO) of the Republic of Cuba extended its office hours to midnight on 1 March 1998 to accommodate several hundred last-minute self-employed income tax filers. This is the second year that self-employed Republic of Cuba nationals, with the exception of self-employed farmers, must file income tax returns. The progressive income tax rate ranges from 0% to 38%.
1997 COFFEE EXPORTS AT US$50 MILLION- Mr. Isidoro Fernandez, President of Republic of Cuba government-operated Cuba-Cafe S.A., reported that the 1997-1998 coffee harvest (August to February) was approximately 19,000 tons of partially-processed beans, a 7% increase from 1996. Cuba-Cafe S.A. reported exports of 6,200 tons of partially-processed beans in 1997, compared with 5,125 tons of partially-processed beans in 1996, and less than 5,000 tons of partially-processed beans in 1995. Mr. Fernandez reported that 1997 export revenues were approximately US$50 million.
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USCTEC SPEAKING SCHEDULE- Mr. John S. Kavulich II, President of the U.S.-Cuba Trade and Economic Council, has been confirmed to participate at the following events: 4 March 1998 to 6 March 1998- London, United Kingdom, and Paris, France, speaking to various private groups, meetings with executives of non-United States-based companies, and interviews with media organizations. 11 March 1998- "CUBA: What if...?" Washington International Trade Association (telephone: 202-293-4193). 19 March 1998 to 21 March 1998- "A Dialogue with Cuba," Center for Latin American Studies at the University of California at Berkeley (telephone: 510-642-6456). May 1998 (Tentative)- Tulane University, New Orleans, Louisiana, one-day presentation at The Cuban Studies Institute (telephone: 504-862-8000 extension 2601).
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