EXCHANGE RATES UNCHANGED- Republic of Cuba government-operated Cajas de Cambio S.A. (CADECA) sold the Convertible Peso, equal to one U.S. Dollar, for 21 Pesos and purchased the U.S. Dollar for 19 Pesos, as it has since 1 April 1998. The U.S. Dollar on the informal market increased from as low as 18 Pesos three weeks ago to 20 Pesos. CADECA had purchased the U.S. Dollar for 20 Pesos and sold the U.S. Dollar for 22 Pesos from 12 March 1998 to 31 March 1998. CADECA purchased the U.S. Dollar for 21 Pesos and sold the U.S. Dollar for 23 Pesos from 11 February 1998 to 11 March 1998. CADECA purchased and sold the U.S. Dollar for 23 Pesos from August 1997 through 10 February 1998. CADECA began April 1997 purchasing the U.S. Dollar for 26 Pesos and selling the U.S. Dollar for 26 Pesos. In April 1995, the U.S. Dollar could be purchased on the unofficial market for 40 Pesos, as CADECA did not yet exist. 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 government 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.
SALOMON SMITH BARNEY USES COMMERCIALS TO PROMOTE KNOWLEDGE OF CUBA- New York City-based Salomon Smith Barney (1997 revenues US$11 billion), an investment banking and securities brokerage company, and a subsidiary of CitiGroup (the chosen name of the pending merger between New York City-based Citicorp and New York City-based Travelers Group; CitiGroup will have combined assets of US$697.5 billion), is airing television commercials on CNBC and radio commercials on WINS during which an announcer states that Salomon Smith Barney can assist clients in knowing the "what will happen in Cuba after Castro." Promoting knowledge about the Republic of Cuba is becoming commonplace amongst United States-based financial services companies, United States-based law firms, and United States-based consulting companies. United States-based companies are increasingly interested in the variety of commercial dealings within the Republic of Cuba currently authorized by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C. Another subsidiary of CitiGroup, New York City-based Citibank N.A., recently purchased the 250-branch Monterrey, Mexico-based Banco Confia. Citibank N.A. reports that Mexican nationals who hold Visa credit cards and Mastercard credit cards issued by Banco Confia will not be precluded from using those products for transactions within the Republic of Cuba. The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., has permitted individuals not subject to United States law to use Visa credit cards and Mastercard credit cards for transactions within the Republic of Cuba provided that the Visa credit cards and Mastercard credit cards are not issued by United States-based financial institutions. While Banco Confia is not a United States-based financial institution, Banco Confia is now 100% owned by a United States-based financial institution.
MERRILL LYNCH MAY PURCHASE CANADIAN BROKERAGE WITH CUBA RELATIONSHIPS- New York City-based Merrill Lynch & Company, Inc., with assets of US$147 billion, is reported to be considering the purchase of Toronto, Canada-based Midland Walwyn Capital, Inc., one of the last major independent brokerages in Canada. Midland Walwyn Capital, with a current market value of approximately US$700 million, has 1,800 employees distributed amongst 170 branches throughout Canada and other countries. Information provided by Midland Walwyn Capital is distributed within the United States by a subsidiary, Midland Walwyn Capital Corporation. Midland Walwyn Capital reports that it has "undertaken an underwriting liability or has provided advice for a fee with respect to the securities of" Toronto, Canada-based Sherritt International Corporation, the largest foreign investor in the Republic of Cuba. Midland Walwyn Capital reports that "its directors and/or employees may from time to time have a position in the securities" of Sherritt International Corporation. In December 1996, Sherritt International Corporation issued approximately US$486 million of convertible debentures, which were reported to be over-subscribed at the time. The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C. authorizes companies subject to United States law to have non-controlling investments in third country companies that have commercial activities within the Republic of Cuba provided that the investments do not result in control in fact of the third country company and provided that a majority of the revenues of the third country company are not produced from commercial activities within the Republic of Cuba. [Opinion by OFAC dated 4 March 1994]. In a transaction that could have significance to the Merrill Lynch & Company purchase of Midland Walwyn, New York City-based Citibank N.A., recently purchased the 250-branch Monterrey, Mexico-based Banco Confia. Citibank N.A. reports that Mexican nationals who hold Visa credit cards and Mastercard credit cards issued by Banco Confia will not be precluded from using those products for transactions within the Republic of Cuba. The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., has permitted individuals not subject to United States law to use Visa credit cards and Mastercard credit cards for transactions within the Republic of Cuba provided that the Visa credit cards and Mastercard credit cards are not issued by United States-based financial institutions. While Banco Confia is not a United States-based financial institution, Banco Confia is now 100% owned by a United States-based financial institution. According to published reports, San Francisco, California-based BankAmerica Corporation is discussing the purchase of Monterrey, Mexico-based Grupo Financiero Banorte S.A., which also issues Visa credit cards and Mastercard credit cards.
COLDWELL BANKER INCLUDES CUBA IN MASTER FRANCHISE AGREEMENT- Parsippany, New Jersey-based Coldwell Banker Real Estate Corporation (1997 turnover US$100 billion), a subsidiary of Parsippany, New Jersey-based Cendant Corporation (1997 revenues US$5 billion), has awarded a master franchise agreement for Bermuda and 30 Caribbean Sea-area countries (encompassing 750 islands) to Cayman Islands-based Coldwell Banker Island Affiliates. The master franchise agreement includes provisions (right of first refusal) for the Republic of Cuba. The President of Coldwell Banker Island Affiliates, Mr. J.C. Calhoun, is an individual subject to United States law who resides in the Cayman Islands and is the President of Coldwell Banker Cayman Islands Realty. Coldwell Banker Island Affiliates is a company which is controlled by individuals not subject to United States law. Coldwell Banker Island Affiliates reports receiving an increasing number of inquires from individuals seeking to obtain the franchise for the Republic of Cuba, with offers in excess of US$1 million. When awarded, however, Coldwell Banker Island Affiliates reports that because of the size of the Republic of Cuba, there may be multiple franchises awarded for the country. Coldwell Banker franchises more than 2,800 independently-owned and independently-operated real estate offices with a combined 62,000 sales associates. Coldwell Banker Real Estate Corporation joins an increasing number of United States-based companies that are including the Republic of Cuba in franchise agreements, license agreements, distributorship agreements, and agency agreements for commercial activity within the Republic of Cuba.
CUBANA AIRLINES TO OVERFLY ADDITIONAL UNITED STATES TERRITORY- The government of the United States will permit Republic of Cuba government-operated Cubana Airlines to fly directly between the Republic of Cuba and Canada. The new routings will decrease the flight times of the fourteen weekly flights by thirty minutes or more, will reduce fuel consumption, and will increase funds paid to the government of the United States by Cubana Airlines. [The ECONOMIC EYE ON CUBA© reported in 1997 that the government of the United States would permit the new routings.] In 1996, the government of the Republic of Cuba filed a motion to the Montreal, Canada-based, United Nations-operated, International Civil Aviation Organization (ICAO) requesting that the government of the United States permit Cubana Airlines to overfly additional United States territory. The government of the Republic of Cuba has permitted United States-based airlines (including American Airlines, Continental Airlines, United Airlines, and Delta Air Lines among others) to overfly Republic of Cuba territory, for which the United States-based airlines paid approximately US$6 million in 1997 to the government of the Republic of Cuba, as authorized by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury. Cubana Airlines will now make payments to the government of the United States to overfly United States territory. Cubana Airlines has, since 1988, been permitted to overfly United States territory for short distances (a narrow corridor of New York State) for routings between the city of Havana and Toronto, Ontario, Canada, and between Havana and Montreal, Quebec, Canada. Cubana Airlines will now be permitted to overfly Georgia, South Carolina, North Carolina, Tennessee, Kentucky, West Virginia, Ohio, Pennsylvania, and New York State. The President of one United States-based airline said, "this is immensely significant as it removes one item from the 'abnormal' column and adds one item to the 'normal' column of U.S.-Cuba commercial relations."
CONTINENTAL AIRLINES, DELTA AIR LINES, AND AIR FRANCE HAVE CUBA IN COMMON- The previously-announced code-sharing agreements, marketing agreements, and scheduling agreements between Houston, Texas-based Continental Airlines and Paris, France-based Air France and between Atlanta, Georgia-based Delta Air Lines and Paris, France-based Air France, were implemented on 19 June 1998. Air France began Paris/Havana flights on 21 June 1998 using Boeing 747-200 aircraft. Since 1962, Continental Airlines has had route authorities from the city of Havana to following cities: Fort Lauderdale and West Palm Beach. Since 1962, Delta Air Lines has had route authorities from Havana to the following cities: Houston, Los Angeles, New Orleans, San Francisco, and San Juan.
FRENCH MINISTER TO SIGN AGREEMENT FOR THE SALE OF 150 RENAULT BUSES- The Honorable Jean Claude Gayssot, Minister for Equipment, Transportation, and Housing of France, arrived in the Republic of Cuba on 21 June 1998 for a five-day visit. Minister Gayssot is expected to 1) sign an agreement for the sale of 150 buses produced by Boulogne-Billancourt Cedex-France, based Renault S.A. 2) negotiate agreements for the sale of transportation equipment, particularly for use in the freight and passenger railroad sector and 3) discuss a contract to repair the Havana Bay Tunnel, constructed by a France-based company in the 1950's.
BRASCUBA PRODUCING HOLLYWOOD BRAND CIGARETTES- Brascuba, a joint venture between Souza Cruz, the Brazil-based subsidiary of United Kingdom-based B.A.T. Industries p.l.c., and Republic of Cuba government-operated National Union of Tobacco Companies, has announced that it would begin producing Hollywood brand cigarettes, currently Souza Cruz's most popular brand, for the Republic of Cuba U.S. Dollar market and for export. Brascuba, located in the city of Havana, produces Popular brand and Continental brand cigarettes. The company produced more than 200 billion cigarettes in 1997. The Ministry of Public Health of the Republic of Cuba has become more vocal with respect to seeking ways to reduce smoking (cigarette and cigar) by Republic of Cuba nationals.
DOUBLE TAXATION TREATIES READIED- H.E. Marta Lomas, Vice Minister for Foreign Investment and Economic Cooperation of the Republic of Cuba, reported that double taxation agreements with Spain and Italy were near completion. Spain and Italy are the countries with the most joint ventures operating within the Republic of Cuba.
MEXICAN FOREIGN MINISTER VISITS- H.E. Rosario Green, Minister of Foreign Affairs of Mexico, arrived in the Republic of Cuba on 21 June 1998. Minister Green will preside at a series of economic cooperation meetings, along with a bilateral meeting on international drug trafficking. The Mexican government reported bilateral trade was approximately US$65 million from January 1998 through March 1998, with 92% exports to the Republic of Cuba. Republic of Cuba government-operated companies have joint ventures (agricultural tools and pharmaceuticals) operating in Mexico with Mexico-based companies. Mexico-based companies have joint ventures in light industry (sneaker production, etc.), telecommunications (cellular service), and tourism operating in the Republic of Cuba. Mexico is the Republic of Cuba's most important Latin American tourism provider.
MEXICANA AIRLINES TO BEGIN SERVICE TO VARADERO- Mexico City, Mexico-based Mexicana Airlines will begin weekly service between Mexico City and the resort area of Varadero, 140 kilometers east of the city of Havana, on 11 July 1998. Mexicana Airlines currently services Mexico City and Havana. With the implementation of the Mexicana Airlines service to Varadero, there will be a total of 30 flights between Mexico and the Republic of Cuba each week. Some of these flights are operated by AeroCaribbean, an affiliate of Mexicana Airlines, which has service between Cancun, Mexico, and Havana. Republic of Cuba government-operated Cubana Airlines provides services between Havana and Cancun and Havana and Mexico City.
FINANCING PROBLEMS CONTINUE- H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that obtaining financing remained extremely problematic. Republic of Cuba-based and non-Republic of Cuba-based financial services sources report that the Republic of Cuba requires between US$2 billion and US$3 billion in low interest rate medium term credits to low interest rate long term credits to "implement and to sustain a recovery strategy based upon prosperity rather than survival." Currently, the Republic of Cuba has access to approximately US$500 million in medium term credits and long term credits, borrowing approximately US$2 billion at annual short term rates of 14% to 22%. The credits are often guaranteed by export receivables from nickel plus cobalt, sugar, tobacco, citrus, shellfish, and tourism, etc. Republic of Cuba government sources report that financing has become increasingly difficult due to low sugar production and to low sugar and low nickel plus cobalt prices. The sources said the situation meant purchases were being made on a day-by-day and week-by-week basis, limiting the ability to take full advantage of volume discounts and lower international commodity prices. Non-Republic of Cuba-based companies continue to report increases in delays of payments for products and services sold to Republic of Cuba government-operated companies.
EXPORT REVENUES MAY DECREASE AS MUCH AS US$500 MILLION- H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that the 1997-1998 sugar harvest (November-June) would be more than 3.2 million tones, the lowest figure since before 1945, and about one million tons below the 1996-1997 harvest's 4.25 million tons. He said that raw sugar production accounted for 48% of export revenues in 1997, or approximately US$1 billion. Republic of Cuba-based and non-Republic of Cuba-based sugar industry experts have estimated that 1997-1998 raw sugar production would be 3.0 million tons to 3.2 million tons; and have reported that the raw sugar production decline, combined with lower international sugar prices, meant that gross raw sugar production revenues for 1998 would decrease a minimum US$300 million. Minister Rodriguez said that gross revenues from nickel plus cobalt, the country's second most significant export in terms of gross revenues after sugar, had also decreased due to decreasing international prices. He said prices were approximately US$4,500.00 per ton, compared to more than US$7,000.00 per ton one year ago. The Republic of Cuba plans to export 70,000 tons of nickel plus cobalt in 1998, which would, at current international prices, produce gross revenues of US$315 million, compared to US$490 million at 1997 prices. Minister Rodriguez said that the gross revenues from the export of shellfish, cigars, pharmaceuticals, coffee, steel, construction materials, and other commodities and products were somewhat meeting expectations. Shellfish and cigars, for example, accounted for between 25% and 30% of total export earnings in 1997, or approximately US$500 million. The government of the Republic of Cuba reported exports of US$2.194 billion in 1997, compared to exports of US$2.070 billion in 1996.
DROUGHT MAY REACH CRISIS LEVEL- The Republic of Cuba began its seventh week of near record dry and hot weather. The months of May and June, traditionally the start of the rainy season, are important planting months. Sugar farmers reported they were weeding plantations as they awaited rain needed to plant. Produce farmers said they were planting where irrigation permitted, and leaving non-irrigated lands plowed and unplanted. Provincial and local government officials located in various eastern parts of the Republic of Cuba reported that they already were, or might soon begin, restricting water use to the population and to industry.
IMPORT COSTS DECREASE- H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that decreasing international oil prices had helped to compensate for decreasing export revenues thus far in 1998. International oil prices have averaged approximately 60% to 75% of their 1997 levels. The Government of the Republic of Cuba reported it had spent approximately US$1.2 billion to import oil and oil byproducts in 1997. If current international oil pricing trends continue, oil import savings for the Republic of Cuba would be between US$250 million and US$350 million in 1998. The Republic of Cuba imports approximately US$800 million in food products (cooking oil, rice, wheat, corn, soy, powered milk, poultry, etc.) annually. Prices for some of these commodities have decreased thus far in 1998, thus some savings should result. The Republic of Cuba imports (mostly from Asia) products for sale at Republic of Cuba government-operated U.S. Dollar retail stores, import prices of which, sources report, have decreased thus far in 1998. The Republic of Cuba imports (mostly from Asia) heavy machinery and transportation equipment, import prices of which, sources report, have decreased thus far in 1998. The Republic of Cuba reported the value of 1997 imports at US$4.5 billion, compared to US$3.880 billion in 1996.
CONSUMPTION DEEMED "VERY MODEST"- H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that consumption remained "very modest." Republic of Cuba residents receive an extremely limited government subsidized ration, then must purchase the remainder of what they need to survive and any extras that they can afford, at Republic of Cuba government-operated produce markets and retail stores or private produce markets (where prices are based on supply and demand). Republic of Cuba-produced studies indicate that an adult Republic of Cuba national requires 700 pesos per month to meet basic requirements, while the average wage thus far in 1998 is 214 pesos per month. All Cuban nationals receive a limited subsidized monthly food ration, free health care and education, and pay no more than 10% of their wage for housing. Workers, with the exception of the self-employed all receive various forms of social security coverage. Minister Rodriguez said the government's monthly food ration, estimated at no more than two weeks minimum consumption, would not increase this year. He said that more than 900,000 Republic of Cuba national workers, out of a total labor force of approximately 4,500,000 (out of a total population of approximately 11,000,000) received U.S. Dollar or U.S. Dollar-based bonuses. Previously, various officials of the government of the Republic of Cuba reported that 1,200,000 Republic of Cuba national workers were receiving U.S. Dollar and U.S. Dollar-based bonuses. Minister Rodriguez reported that 49% of Republic of Cuba nationals have some access to U.S. Dollars, although this percentage has also been reported as 35%.
FOREIGN INVESTMENT UPDATE- H.E. Marta Lomas, Vice Minister for Foreign Investment and Economic Cooperation of the Republic of Cuba, reported that Republic of Cuba government-operated companies were currently operating a total of 340 joint ventures and economic associations, compared to approximately 300 at the beginning of 1998. Minister Lomas reported another sixty projects were near signing, and that an additional 100 were in their initial stages of negotiation. Minister Lomas reported that most foreign investment was concentrated in basic industry, tourism, light industry, food processing, agriculture, and construction. Minister Lomas reported that companies from Italy, France, Spain, and United Kingdom accounted for 50% of existing foreign investment, companies from Canada accounted for 20% of existing foreign investment, and companies from Mexico, Argentina, Venezuela, and Chile accounted for 18% of existing foreign investment. Companies from Canada, however, account for nearly 25% of all foreign capital invested within the Republic of Cuba.
ACCOUNTING PROBLEMS CONTINUE- The National Auditing Office (NAO) of the Republic of Cuba reported that it conducted sixty-four audits from January 1998 through April 1998, thirty-seven of which focused upon joint ventures and Republic of Cuba government-operated companies conducting commerce with U.S. Dollars. Fifty of the sixty-four audits uncovered "serious accounting problems," seven of which were deemed criminal. The NAO reports that it would need to double its current staff of 150 to adequately audit the 12,000 companies registered within the Republic of Cuba.
TOURISM UPDATE- H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that tourism continued to become the principal fuel for the overall economy. He said the number of tourists visiting the Republic of Cuba had increased more than 18% through June 1998 from the same period in 1997. Minister Rodriguez reported that the percentage of Republic of Cuba-produced inputs used within the tourism industry had increased from the 44% share in 1997. In 1997, the Ministry of Tourism of the Republic of Cuba reported that 1,170,000 tourists visited the country producing gross revenues of US$1.5 billion. In 1998, the Ministry of Tourism of the Republic of Cuba has estimated that 1.4 million tourists will visit the country producing revenues of US$1.8 billion to US$2.0 billion.
IBEROAMERICAN TELEMEDICINA CONFERENCE- H.E. Dr. Carlos Dotres, Minister of Public Health of the Republic of Cuba, presided at the second annual Iberoamerican Telemedicina Conference held 16 June 1998 to 18 June 1998 in the City of Havana, with live video links to other parts of the country. During the event, joint operations and diagnosis were performed via a satellite link with doctors in Norway, Spain, and Bosnia. Minister Dotres said the nation's hospitals were linked by a data network, and work had begun on a more sophisticated visual information network.
WORLD'S LONGEST CIGAR- Veteran cigar roller William Collejo rolled the world's longest cigar - 435 centimeters in length by 3.6 centimeters in diameter. Mr. Collejo also holds the world record for the largest cigar (length and width).
UNITED STATES CITIZENS WIN HEMINGWAY FISHING TOURNAMENT- Three teams including individuals subject to United States law aboard the vessels Sound Waves II, Mr 2, and Suncatcher, won first place (Mr. Nelson Fenimor with a 67.5 pound Marlin), second place, and third place at the Hemingway International Blue Marlin Fishing Tournament. Thirty-nine boats and 152 contestants participated.
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