U.S. DOLLAR UNCHANGED AGAINST 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 22 Pesos, as it has since 26 November 1998.  CADECA purchased the U.S. Dollar for 21 Pesos and sold the U.S. Dollar for 21 Pesos from 15 July 1998 through 25 November 1998.  CADECA purchased the U.S. Dollar for 19 Pesos and sold the U.S. Dollar for 21 Pesos from 1 April 1998 to 14 July 1998.  CADECA 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 purchased the U.S. Dollar for 24 Pesos and sold the U.S. Dollar for 24 Pesos in August 1996.  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.

NATIONAL BANK OF CUBA EXCHANGE RATES NOW INCLUDE THE EURO- The following are the biweekly official exchange rates between the Republic of Cuba Convertible Peso, equal to one U.S. Dollar, and selected international currencies as of 9 January 1999, now including the Euro.  The National Bank of the Republic of Cuba cautions that these rates do not necessarily reflect the exchange rates at all Republic of Cuba government-operated banks as each bank is authorized to establish its own exchange rates:
 

ARCHER DANIELS MIDLAND COMPANY ANNOUNCES 100 TON DONATION AND PLANS FOR SALES- On 5 January 1999, Decatur, Illinois-based Archer Daniels Midland Company (ADM), a member of the U.S.-Cuba Trade and Economic Council, announced that the company had donated 100 metric tons of powered soy beverage for distribution to children within the Republic of Cuba.  According to the United States Department of Commerce, this is one of the largest-ever single donations of food product to the Republic of Cuba by a United States-based company.  ADM received a license promptly from the Bureau of Export Administration (BXA) of the United States Department of Commerce in Washington, D.C., to authorize the shipment by sea of five, 40-foot containers to Republic of Cuba.  Mr. Dwayne O. Andreas, Chairman of ADM, said “This donation is a gift to the children of Cuba from the 23,000 employees of ADM.  Our company believes that every effort should be made to assist those who do not have the extraordinary bounty that we have in this country.  This is especially true when speaking about children.”  Mr. Andreas continued, “With yesterday’s announcement by Secretary of State Madeleine Albright that United States companies will now be able to sell food products to the Republic of Cuba, ADM expects to quickly seek a license to sell United States-produced food products to the Republic of Cuba.  Last month, ADM received an inquiry on behalf of an entity in the Republic of Cuba for a substantial quantity of products.”  The donation by ADM will be distributed within the Republic of Cuba through Caritas Cubana, a non-governmental organization operated by the Roman Catholic Church.  Assisting with the coordination of the donation were His Excellency John Cardinal O’Connor, Archbishop of New York; The Honorable Charles B. Rangel (D-New York), a member of the United States House of Representatives; and the U.S.-Cuba Trade and Economic Council.  The products donated by ADM to the Republic of Cuba are: 1) WMR1, an alternative to whole or filled milk powder for utilization in nutritional beverages formulated to provide equivalent protein, carbohydrate, fat, mineral, and vitamin levels as whole milk powder.  The nutrients and protein composition contained in WMR1 exceeds the FAO/WHO/UNU requirement of amino acids for preschool children.  2) WMR4 is a lactose-free, all vegetable nutritional powder product designed to be used as an extender for whole milk powder.  Nutritionally, WMR4 contains protein, fat, carbohydrates, calories, minerals, and vitamins in levels similar to those found in whole milk powder.  ADM is engaged in the business of procuring, transporting, storing, processing, and merchandising agricultural commodities and products.  ADM is one of the world’s largest processors of oilseeds, corn, and wheat.  Other operations include grain storage, peanut shelling, cocoa processing, and the production of consumer food products.  Annual global revenues exceed US$16 billion.

PRESIDENT CLINTON ANNOUNCES COMMERCIAL POLICY CHANGES TOWARD CUBA- On 5 January 1999, The Honorable William J. Clinton, President of the United States of America, announced  substantial changes in United States commercial policy toward the Republic of Cuba.  Some of the initiatives were authorized by the Cuban Democracy Act when signed into law by then President George H.W. Bush in October 1992.

1) Authorization for the issuance of licenses from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and from the Bureau of Export Administration (BXA) of the United States Department of Commerce for United States-based companies to sell food products to certain entities within the Republic of Cuba.  The entities include private home-based restaurants (known as “paladares”) and non-governmental organizations (NGO’s).  The export (sale) of food products from the United States to the Republic of Cuba were suspended in 1963.  United States-based companies are already permitted to donate food products to NGO’s within the Republic of Cuba.

2) Authorization for the issuance of licenses from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and from the Bureau of Export Administration (BXA) of the United States Department of Commerce for United States-based companies to sell farm equipment (tractors, plows, silos, etc.) to certain entities within the Republic of Cuba.  The entities include small private farmers, non-governmental organizations (NGO’s), and, reportedly, Basic Units of Cooperative Production (Unidades Basicas de Produccion Cooperativa), known as the UBPC.

3) Authorization for the issuance of licenses from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and from the Bureau of Export Administration (BXA) of the United States Department of Commerce for United States-based companies to sell agricultural products (fertilizer, pesticides, seeds, etc.) to certain entities within the Republic of Cuba.  The entities include small private farmers, non-governmental organizations (NGO’s), and, reportedly, Basic Units of Cooperative Production (Unidades Basicas de Produccion Cooperativa), known as the UBPC.

4) Authorization for the issuance of licenses from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and from the Bureau of Export Administration (BXA) of the United States Department of Commerce for United States-based companies to sell farm supplies (such as fencing, clothing, etc.) to certain entities within the Republic of Cuba.  The entities include small private farmers, non-governmental organizations (NGO’s), and, reportedly, Basic Units of Cooperative Production (Unidades Basicas de Produccion Cooperativa), known as the UBPC.

5) Authorize the re-establishment of direct mail service between the United States and the Republic of Cuba.  Currently, letters sent from the United States to the Republic of Cuba and letters sent from the Republic of Cuba to the United States are routed through Canada and through Mexico, resulting in delivery times ranging from ten days to sixty days.  Direct mail service between the United States and the Republic of Cuba was suspended in 1963.  Currently, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury licenses United States-based companies (mainly in Florida and New Jersey) to provide humanitarian (clothing, food, medicine, etc.) package delivery services to individuals residing within the Republic of Cuba.  These packages are sent from the United States to the Republic of Cuba using the regularly-scheduled charter airline flights at costs of up to US$2.00 per pound plus a service fee.  In addition, packages may be sent from the United States to the Republic of Cuba using the services of Redwood City, California-based DHL Worldwide Express under the following conditions: a) only documents may be sent, including video tapes, music tapes, books, magazines, etc. b) there are no quantity limitations per package and c) that the shipments may be addressed to residences and to offices.  DHL Worldwide Express delivers packages between the United States and the Republic of Cuba through Mexico.  DHL Worldwide Express has an operational agreement with the Ministry of Communications of the Republic of Cuba for the delivery and pick-up of packages within the Republic of Cuba.  DHL Worldwide Express delivered to the Republic of Cuba and sent from the Republic of Cuba a total (to all countries serviced) of more than 100,000 packages in 1998.  Atlanta, Georgia-based United Parcel Service of America (1998 revenues exceeding US$22 billion) and Memphis, Tennessee-based FDX Corporation (1998 revenues exceeding US$15 billion) do not yet offer package delivery services between the United States and the Republic of Cuba.  Currently, United States-based companies seeking to export (sales and donations) products (healthcare products, informational materials, brochures, catalogs, books, magazines, newspapers, music products, motion picture products, television products, artwork, etc.) to the Republic of Cuba must use the regularly-scheduled airline charter flights which charge up to US$2.00 per pound for cargo.  In addition, United States-based companies must pay for the transportation of any product to Miami, Florida, and for the services of a freight forwarder.  Often, the costs associated with shipping a product from the United States to the Republic of Cuba are greater than the value of the product being shipped.  The same excessive costs are associated with products being imported to the United States from the Republic of Cuba including informational materials, brochures, catalogs, books, magazines, newspapers, music products, motion picture products, television products, artwork, etc.

6) Expand existing regularly-scheduled airline charter flights between the United States and the Republic of Cuba.  Currently, the flights operate only between Miami, Florida’s Miami International Airport and Havana, Republic of Cuba’s Jose Marti International Airport.  The flights are operated by Fort Lauderdale, Florida-based Gulfstream International Airlines (using Dash-7 turboprop aircraft and Beechcraft 1990-R turboprop aircraft) and Miami, Florida-based Airline Brokers Company (which charters aircraft from Elk Grove Township, Illinois-based United Airlines, including Boeing 777 aircraft).  Additional flights will be permitted from cities within the United States (to include Newark, New Jersey; New Orleans, Louisiana; and Los Angeles, California among others) to cities within the Republic of Cuba (to include Holguin, Santiago de Cuba, and Camaguey among others).  The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury has issued Carrier Service Provider (CSP) licenses to 12 United States-based companies, eleven of which are located in the State of Florida and one is located in the State of Texas (Dallas, Fort Worth Airport-based American Airlines, Inc.).  The OFAC has come under criticism (and threatened legal action) from United States-based companies for delays of almost twelve months in the processing of license applications for CSP’s and Travel Service Provider’s (TSP).  The criticism is primarily a result of the OFAC not issuing complete uniform application guidelines and continually requesting information that, in some cases, had already been provided to the OFAC earlier in the application process.  New York City-based American Express Travel Related Services, Inc., a subsidiary of New York City-based American Express Company (1998 assets exceeding US$100 billion), has a TSP license from the OFAC.
 
7) Authorize any individual subject to United States law to remit up to US$1,200.00 annually (US$300.00 per quarter) to any Republic of Cuba national, small private farmer, private cooperative, owner of a private home-based restaurant (known as a “paladare”), non-governmental organizations (NGO’s), and, reportedly, Basic Units of Cooperative Production (Unidades Basicas de Produccion Cooperativa), known as the UBPC.  Previously, only individuals subject to United States law who had relatives who were Republic of Cuba nationals residing within the Republic of Cuba were authorized to send up to US$1,200.00 annually to relatives residing in the Republic of Cuba.  In 1998, an estimated US$300 million in cash was sent from the United States to the Republic of Cuba mainly using individuals subject to United States law as couriers (many of whom departed the United States with far in excess of US$10,000.00 without having completed the required declaration from the United States Customs Service) or through financial institutions located outside of the United States, including in the Bahamas and in Canada.  A subsidiary of Paramus, New Jersey-based Western Union Financial Services International, itself a subsidiary of Hackensack, New Jersey-based First Data Corporation (1998 revenues exceeding US$5 billion), has been awaiting authorization for quite some time from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury to implement remittance forwarding services between the United States and the Republic of Cuba for which the company already has a license from the OFAC. Western Union Financial Services is seeking to establish remittance receiving service centers in cities throughout the Republic of Cuba, which would be operated through a representation agreement with a Republic of Cuba government-operated company that would receive a small payment for processing the transaction.  United States-based companies are supporting the OFAC license request by Western Union Financial Services as direct wire transfers would be a time-efficient, cost-efficient, and secure method of making payments to the Republic of Cuba for products and services.  There are currently 63 United States-based small companies which have Family Remittance Forwarder (FRF) licenses from the OFAC.  The companies are located in Florida (45), California (6), New York (1), Texas (2), New Jersey (5), Louisiana (1), Illinois (1), Puerto Rico (4), and Colorado (1- Western Union Financial Services).

8) Increased people-to-people contact: a) cultural exchanges such as the reported two-game series in the city of Baltimore and in the city of Havana between the Baltimore Orioles baseball team and the National Team of the Republic of Cuba b) academic exchanges c) athletic exchanges and d) scientist exchanges.  President Clinton said that the licensing and visa process to facilitate the people-to-people contact would be “streamlined.”  The existing process has received increasing criticism,  specifically for a continuing lack of timely responses from the Office of Cuban Affairs of the United States Department of State for the issuing of travel visas for Republic of Cuba nationals and from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury for the issuing of licenses to engage in related financial transactions.  The OFAC authorizes Republic of Cuba nationals to perform in the United States provided that they only receive a per diem and travel expenses.  Republic of Cuba nationals are not authorized by the OFAC to receive fees from ticket sales, endorsements, etc.  Republic of Cuba nationals are authorized by the OFAC to receive revenues from the sales of recordings sold within the United States.  United States-based music promoters have criticized the OFAC and the United States Department of State (which determines the policy guiding the regulations administered by the OFAC) for restraining the ability of Republic of Cuba nationals to perform in larger venues within the United States and to retain some of the ticket revenues, which many of the performers confirm that they would use to purchase equipment.  The Republic of Cuba has a national income tax which does include specific income tax rates for Republic of Cuba nationals earning all or a portion of their income in U.S. Dollars.  Some promoters are increasingly confident that with Cuban music becoming more popular- especially in the states of Florida, New Jersey, Texas, and California, performers such as Manolin- “El Medico de la Salsa” and groups such as “Los Van Van” could tour venues with 10,000 seats to 20,000 seats.  The Milwaukee, Wisconsin-based Milwaukee Symphony Orchestra is reportedly seeking an OFAC license to perform two concerts in the Republic of Cuba at the end of 1999.

CUBA FARM STRUCTURE UPDATE- Farms within the Republic of Cuba are divided into four categories: 1) Republic of Cuba government-operated farms 2) small private farms 3) private cooperatives and 4) Basic Units of Cooperative Production (Unidades Basicas de Produccion Cooperativa), known as the UBPC.  The small private farms and the private cooperatives own their land, while the UBPC, which were established by the government of the Republic of Cuba in 1993 and in 1994 from some Republic of Cuba government-operated farms, own everything but the land, which is granted to them by the government of the Republic of Cuba on an indefinite basis solely for farming.  All four categories of farms must purchase all of their supplies from Republic of Cuba government-operated entities and are required to sell 75% or more of their total production to the government of the Republic of Cuba at prices established by the government of the Republic of Cuba.  The remainder of their production may be used for their own consumption and/or for sale at Republic of Cuba government-operated agricultural markets, where prices are relatively established by supply and demand within guidelines established by the government of the Republic of Cuba.  The government of the Republic of Cuba requires all private home-based restaurant (known as “paladares”) owners and Republic of Cuba national landlords who provide meals for their renters to purchase all food products from Republic of Cuba government-operated retail stores or from Republic of Cuba government-operated agricultural markets.  The 125,000 small private farmers that till 10% of the Republic of Cuba’s arable land are organized into credit and service cooperatives for the purpose of contracting credits and services from the government of the Republic of Cuba and to sell their products within the Republic of Cuba government-operated agricultural markets.  The small private farmers, along with the private cooperatives, are members of the Republic of Cuba government-operated National Small Farmers Association.  The 1,164 private cooperatives tilling 12% of the Republic of Cuba’s arable land have 63,000 members.  The approximately 3,000 UBPC’s tilling 43% of the Republic of Cuba’s arable land have 220,000 members.  Republic of Cuba government-operated farms till 35% of the Republic of Cuba’s arable land and produce sugar, milk, and vegetables, potato, banana, pork, eggs, and rice, among other products.   The 3,000 UBPC’s are evenly divided between sugar and non-sugar agriculture, while the  small private farms and private cooperatives produce products for both domestic consumption and for export.

BULK FOOD COMMODITY IMPORT UPDATE- The most recent information regarding bulk food commodity imports by the government of the Republic of Cuba was published in 1996.  According to senor-level sources within the government of the Republic of Cuba, the quantities of bulk food commodity imports in 1997 and the quantities of bulk food commodities in 1998 did not change significantly from the quantities of bulk food commodities imported in 1996.  The government of the Republic of Cuba continues to import quantities of bulk food commodities below the minimal Republic of Cuba government nationally-recognized requirements.  Some bulk food commodity product switching occurred to take advantage of international price fluctuations in 1997 and in 1998.  The government of the Republic of Cuba reported that bulk food commodity imports were valued at US$610.89 million in 1995 and at US$689.108 million in 1996.  Vegetable oil and animal fat imports were valued at US$24 million in 1995 and at US$25.57 million in 1996.  The quantities of bulk food commodities imported by the Republic of Cuba in 1996 were as follows in millions of metric tons:
 
 

*Media reports have indicated that the Republic of Cuba imports approximately 900,000 tons of wheat annually. **Media reports have indicated that the Republic of Cuba imports approximately 100,000 tons of wheat flour annually.

CUBAN GOVERNMENT RESPONDS (INITIALLY) TO UNITED STATES COMMERCIAL POLICY CHANGES- H.E. Ricardo Alarcon, President of the National Assembly of People’s Power of the Republic of Cuba, gave a live two-hour televised address at 9:30 p.m. on 8 January 1999 during which he responded (initially) officially on behalf of the government of the Republic of Cuba to the 5 January 1999 initiatives toward the Republic of Cuba announced by The Honorable William J. Clinton, President of the United States.  In order not to interfere with the most popular television program (a soap opera from Colombia) aired throughout the Republic of Cuba from 9:15 p.m. to 10:00 p.m., the government of the Republic of Cuba broadcast the soap opera from 8:45 p.m. to 9:30 p.m.  President Alarcon said that the government of the Republic of Cuba would 1) accept the resumption of direct mail service with a guarantee from the government of the United States that security could be maintained to prevent explosives from being sent.  2) accept increased “people to people” contact.  3) consider an increase in Republic of Cuba destinations for airline charter flights.  4) rejects the change in the policy regarding remittances.  5) rejects the change in policy to sell food products, sell farm equipment, sell agricultural products, and sell farm supplies.  Republic of Cuba-based diplomats believe that compromises will be reached between the government of the Republic of Cuba and the government of the United States to implement some of the initiatives consistent with existing legal structures within the Republic of Cuba.
 
CUBAN GOVERNMENT QUESTIONS REASON FOR DELAY OF U.S. HEALTHCARE/MEDICAL EXPOSITION- H.E. Ricardo Alarcon, President of the National Assembly of People’s Power of the Republic of Cuba, during his live two-hour televised address at 9:30 p.m. on 8 January 1999 during which he responded (initially) officially on behalf of the government of the Republic of Cuba to the 5 January 1999 initiatives toward the Republic of Cuba announced by The Honorable William J. Clinton, President of the United States, specifically mentioned the U.S. Healthcare/Medical Exposition for which Westport, Connecticut-based PWN Exhibicon International L.L.C., received the first license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., to organize in the city of Havana.  PWN Exhibicon International L.L.C., actually received three planning licenses from the OFAC.  President Alarcon questioned the logic of the United States government in granting licenses to plan for the event but not yet permitting the event to take place within the Republic of Cuba, even after approximately 200 United States-based healthcare companies had expressed their interest in having representatives participate in the event.  Individuals qualified to participate in the event remain expected to include executives and representatives from United States companies that manufacture, distribute, market, and retail, health care sector informational materials, medical equipment, medical instruments, medical supplies, medicated products, medicines, and pharmaceuticals.  In March 1998, after receiving the third OFAC license necessary to organize the event, Mr. Peter W. Nathan, President of PWN Exhibicon International L.L.C., with forty-two years of experience in the exhibition industry, and who previously organized the first trade shows for United States companies which were held within the People’s Republic of China and within the former U.S.S.R., said that “the Clinton Administration has responded to the increasing desire of the United States business community to identify opportunities within the health care sector in Cuba.  There is no better cost-effective method to achieve tangible results than through a trade fair where thousands of people can interact with one another in one place at one time.  The Clinton Administration spent more than one year evaluating the proposal, after denying our first request for an OFAC license to organize a trade show in 1997.  Their change in attitude is welcomed.”  PWN Exhibicon International L.L.C. is also identifying trade show opportunities within Cuba for United States companies in entertainment, telecommunications, publishing, and other sectors.  For information regarding trade show participation, sponsorship, and costs, please contact telephone (203) 222-8660 or facsimile  (203) 222-8335.

USCTEC INTERNET “HITS” INCREASE 200% LAST WEEK- Due to the announcement by The Honorable William J. Clinton, President of the United States, with respect to the Republic of Cuba, the Internet address of the U.S.-Cuba Trade and Economic Council, http://www.cubatrade.org, had a daily usage increase exceeding 200% for the period 5 January 1999 through 8 January 1999.