U.S. DOLLAR GAINS AGAINST THE PESO- Republic of Cuba government-operated Cajas de Cambio S.A. (CADECA) sold the Convertible Peso, equal to US$1.00, for 22 Pesos and purchased the U.S. Dollar for 21 Pesos.  CADECA had sold the Convertible Peso for 21 Pesos and purchased the U.S. Dollar for 21 Pesos from 15 March 1999 to 12 April 1999.  CADECA purchased the U.S. Dollar for 20 Pesos and sold the U.S. Dollar for 21 Pesos from 4 March 1999 to 14 March 1999. CADECA sold the Convertible Peso, equal to US$1.00, for 21 Pesos and purchased the U.S. Dollar for 21 Pesos from 19 February 1999 through 3 March 1999. CADECA had sold the Convertible Peso, equal to US$1.00, for 21 Pesos and purchased the U.S. Dollar for 20 Pesos from 13 January 1999 to 18 February 1999. CADECA purchased the U.S. Dollar for 21 Pesos and sold the Convertible Peso for 22 Pesos from 26 November 1998 to 12 January 1999.  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.  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.

UNITED STATES HOTEL COMPANY PERMITTED TO RETAIN CASA DEL HABANO CIGAR STORE LEASE- A United States-based hotel company has been permitted by the United States Department of State in Washington, D.C., and by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., to own and to manage a US$75 million property located outside of the United States that had a Casa del Habano retail cigar store on the premises (with a multi-year lease) when the United States-based hotel company first evaluated the property for purchase.  The United States-based hotel company controls the non-United States-based company that owns the property and the United States-based company has the management contact for the property.  Republic of Cuba government-operated Habanos S.A., the exclusive distributor of Republic of Cuba-produced cigars, owns the Casa del Habano retail cigar store franchise, of which there are approximately 60 located throughout the world.  Habanos S.A. owns 100% of some of the Casa del Habano retail cigar stores (mainly those located within the Republic of Cuba), has an equity interest in others, and in others has no equity interest, only receiving a franchise fee.  In April 1998, the 798-room Sheraton Hong Kong Hotel & Towers opened a Casa del Habano retail cigar store in the property.  White Plains, New York-based Starwood Hotels & Resorts Worldwide, Inc., owns Sheraton, Westin, Four Points, St. Regis, WHotels, Ciga, and Caesars World.  The Sheraton Hong Kong Hotel & Towers is “partially-owned” ITT Sheraton.  The Nassau Marriott Resort and Crystal Palace Casino located in Nassau, the Bahamas, has featured a nightly one hour and forty-five minute joint performance offering a musical review of Cuban culture and Bahamian culture by 38 Republic of Cuba nationals and 22 Bahamian nationals.  The Nassau Marriott Resort and Crystal Palace Casino is managed by Washington, D.C.-based Marriott International, Inc. (1997 revenues US$13 billion), which operates 1,300 properties in 56 countries. The Nassau Marriott Resort and Crystal Palace Casino is owned by Wichita, Kansas-based Mr. Philip Ruffin.  The performance, taking place in the Rain Forest Theater, which has a capacity for 900 guests, is reportedly being seen by approximately 540 guests each evening.  The performance costs per person US$39.00 with a cocktail or US$59.00 with dinner.  Reportedly, the government of the Republic of Cuba has earned US$577,000.00 between October 1997 and August 1998 from its share of the revenues from the performances.  The performances are expected to continue through October 1999.

FORT LAUDERDALE AIRPORT SEEKS DIRECT CUBA FLIGHTS AUTHORIZATION- The Broward County Aviation Department has written to the United States Department of State in Washington, D.C., requesting that Fort Lauderdale-Hollywood International Airport be authorized to service direct passenger flights and direct cargo flights between the United States and the Republic of Cuba. On 5 January 1999, The Honorable William J. Clinton, President of the United States, announced that the number of airports within the United States authorized to service direct passenger and cargo flights between the United States and the Republic of Cuba would be expanded from the only existing gateway, Miami, Florida’s, Miami International Airport.  The Broward County Board of Commissioners passed a resolution to provide funding for additional officers of the United States Customs Service (a division of the United States Department of the Treasury).  According to Pompano Beach, Florida-based PharmaChem (USA), the United States Customs Service had reported to the company that direct passenger flights and direct cargo flights between Fort Lauderdale-Hollywood International Airport and the Republic of Cuba would not be “acceptable to them” due to a “lack of available staffing.”  Fort Lauderdale, Florida-based Tico Travel recently received a Travel Service Provider license (C-49686) from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury.  [see attached article].

PHARMACHEM (USA) SEEKS CARGO AUTHORIZATION FROM FORT LAUDERDALE AIRPORT- Pompano Beach, Florida-based PharmaChem (USA) reports that the company has a license (D-257-329) from the Bureau of Export Administration (BXA) of the United States Department Commerce in Washington, D.C., and a license (C-36023) from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C, to transport pharmaceutical products from the United States to the Republic of Cuba. PharmaChem (USA) reports that the company has handling agent agreements with Republic of Cuba government-operated Cuba Packs International and with Kingston, Jamaica-based Air Jamaica Limited.  PharmaChem (USA) is seeking authorization to provide direct passenger service and direct cargo service between Fort Lauderdale-Hollywood International Airport and the Republic of Cuba. According to a portion of an 18 March 1999 letter from the President and Chief Executive Officer of PharmaChem (USA) to the Airport Director of the Fort Lauderdale-Hollywood International Airport, “the two existing charter companies that are currently flying from [Miami International Airport] encounter on many flights monumental delays of up to 10 hours and more, as well as, hostile interrogations and searches by anti-Cuba [United States] Customs officials, both departing and arriving.  Even [United States] Interests Section officials in Havana will not use this route because of the total inconvenience and humiliating environment.  They would like to see [Fort Lauderdale-Hollywood International Airport] opened-up and are very supportive of our position.” PharmaChem (USA) also wrote that service charges for aircraft at Miami International Airport are “exorbitant.”

PHARMACHEM (USA) SEEKS CONTRACT FOR MAIL SERVICE- Pompano Beach, Florida-based PharmaChem (USA) reports that the company has contacted the United States Postal Service to become the air carrier for mail and the air carrier for cargo between the United States and the Republic of Cuba.  On 5 January 1999, The Honorable William J. Clinton, President of the United States, announced that direct mail service between the United States and the United States and the Republic of Cuba would be resumed.  The government of the Republic of Cuba is seeking assurances regarding the transportation of dangerous articles and hazardous articles.  Another issue to be reconciled concerns international agreements which traditionally mandate the existence of commercial flight agreements between countries, in this case, authorization for Republic of Cuba government-operated Cubana de Aviacion aircraft to operate regularly-scheduled services to the United States and authorization for United States-based commercial airlines to operate regularly-scheduled services to the Republic of Cuba.  The government of the Republic of Cuba is expected to permit the resumption of direct mail service using United States-based airline charter flights with items limited, at least initially, to letters, commercial documents, and, perhaps, commercial products permitted to be export and permitted to be imported.  The United States Postal Service in Washington, D.C., has an agreement with Redwood City, California-based DHL Worldwide Express, Inc., for the delivery of packages between New York City, New York; Boston, Massachusetts; Philadelphia, Pennsylvania; Charlotte, North Carolina; Phoenix, Arizona; San Francisco, California; Houston, Texas; Miami, Florida; Minneapolis, Minnesota; Chicago, Illinois; Washington, D.C., and eighteen countries in Europe.  Brussels, Belgium-based DHL International Limited owns a minority share in DHL Worldwide Express.  Government of Germany-operated Deutsche Post AG owns 25% of DHL International Limited.  DHL Worldwide Express has authorization from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., to provide delivery services between the United States and the Republic of Cuba.  DHL Worldwide Express, which is controlled by individuals subject to United
States law, receives revenues from DHL International Limited for package delivery services to the Republic of Cuba. The delivery services are limited to 2-pound packages containing documents, brochures, videotapes, compact discs, etc.  DHL Worldwide Express sends packages from the United States to the Republic of Cuba through Mexico City, Mexico, where the packages are transferred from the operational control of DHL Worldwide Express to the operational control of DHL International Limited.  The packages are then sent by commercial aircraft (Aeromexico and Mexicana de Aviacion SA de CV) to the Jose Marti International Airport in the city of Havana for delivery.  The cost of sending a one pound package from the United States to the Republic of Cuba is approximately US$81.00.  The cost of sending a one pound package from the Republic of Cuba to the United States is approximately US$39.00.  The delivery time for packages sent from the United States to Havana, Republic of Cuba, is four days. The delivery time for packages sent from Havana, Republic of Cuba, to the United States is three days.  DHL International Limited commenced operations within the Republic of Cuba in September 1990 through an agreement with Panama City, Panama-based UTISA, which is controlled by the Ministry of Communications of the Republic of Cuba.  In 1998, DHL International Limited delivered from various countries approximately 80,000 packages to the Republic of Cuba. In 1998, DHL International Limited sent approximately 32,000 packages from the Republic of Cuba to various countries.  Republic of Cuba government-operated International Insurance Company (ESICUBA) has an agreement with DHL International Limited to insure packages sent by customers of DHL International Limited from the Republic of Cuba to other countries.  Neither Atlanta, Georgia-based United Parcel Service of America, Inc. (1998 revenues exceeding US$22 billion) nor Memphis, Tennessee-based FDX Corp. (1998 revenues exceeding US$15 billion) currently operate direct delivery services or indirect delivery services between the United States and the Republic of Cuba.  The United States Department of State is considering authorizing individuals subject to United States law be permitted to purchase United States Postal Service money orders for use in transferring remittances from the United States to the Republic of Cuba.  The use of United States Postal Service money orders would require an agreement between the United States Postal Service and at least one Republic of Cuba government-operated company (or financial institution) within the Republic of Cuba serving as a processing agent.  In addition, direct correspondent banking relationships would need be established for the settlement of accounts.  The use of United States Postal Service money orders might lessen the dependence upon those United States-based remittance forwarding providers who are licensed by the OFAC.  The use of United States Postal Service money orders would be a cost-effective method for United States-based companies to make payments to Republic of Cuba-based entities for imports (artwork, books, magazines, photographs, music, motion pictures, television programs) and for services (travel, air charter services, communications, telecommunications, trademark and patent registrations, etc.).

TIME WARNER SUBSIDIARY SIGNS CUBA MUSIC DISTRIBUTION AGREEMENT- New York City, New York-based The Atlantic Group, a subsidiary of New York City, New York-based Time Warner, Inc. (1998 revenues exceeding US$24 billion) and New York City, New York-based Caliente Entertainment have signed a long-term music distribution agreement for the record labels, Havana Caliente and Caliente Records.  Havana Caliente licenses and promotes music produced within the Republic of Cuba.  Time Warner subsidiaries include Time magazine; Cable News Network (which has a news bureau in the city of Havana, Republic of Cuba); Warner Bros.; and Little, Brown & Company among others.

BASKETBALL COACH BOBBY KNIGHT HOLDING CLINICS AND FISHING IN CUBA- Republic of Cuba government-operated Granma, the daily newspaper published by the Communist Party of the Republic of Cuba, reported that Mr. Bobby Knight, head basketball coach at Indiana University located in Bloomington, Indiana, was fishing in Ciego de Avila Province, 426 kilometers east of the city of Havana.  Mr. Knight is also presenting basketball clinics, reportedly under a license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C.

KOREA’S LG GROUP ASSEMBLING AIR CONDITIONERS IN CUBA- Republic of Cuba government-operated Copextel S.A., affiliated with the Ministry of Steel, Mechanical, and Electronic Industry of the Republic of Cuba (SIME), is marketing air conditioners assembled within the Republic of Cuba and designed by Seoul, South Korea-based LG Group.  LG Group also assembles (and supports with a service center network) within the Republic of Cuba televisions, washing machines, audio equipment, and telephones.  LG Group owns Glenview, Illinois-based Zenith Electronics Corporation.

PHARMACEUTICAL INDUSTRY SEEKS RISK CAPITAL- Dr. Agustin Lage, Director of the Republic of Cuba government-operated Centro de Inmunologia Molecular de Cuba (CIM), reported that the CIM and other Republic of Cuba government-operated research centers and healthcare companies are seeking risk capital to develop, register, and market pharmaceutical products.  Dr. Lage is the brother of H.E. Dr. Carlos Lage, a Vice President of the Council of State of the Republic of Cuba.  Dr. Lage is a member of the Board of Directors of Mississauga, Ontario, Canada-based York Medical, Inc., which was established in 1994 to bring together Canada-based experts in pharmaceutical licensing, regulatory and clinical affairs, and marketing, with the Republic of Cuba-based life-sciences establishment.  Dr. Lage discussed an interest in obtaining risk capital, not loans, not selling equity, not establishing joint ventures, and not the selling of patents.  Dr. Lage reported that existing Republic of Cuba-produced products include: Group B meningococcal meningitis vaccine, recombinant streptokinase “clot-buster,” natural and recombinant interferons, and therapeutic monoclonal antibodies.  Products in development within the Republic of Cuba include: cholera vaccine, cancer vaccine, AIDS vaccine, monoclonal antibodies for cancer treatment, hepatitis C vaccine, dengue vaccine, interferons, and diagnostic systems.  The combined annual gross revenues for all of the Republic of Cuba government-operated pharmaceutical manufacturers have averaged approximately US$100 million annually since 1996, below original Republic of Cuba government estimates of US$400 million annually.  The government of the Republic of Cuba has also been using healthcare products as one method of repaying debts owed to other countries, especially to countries located in The Americas.  Non-Republic of Cuba-based healthcare representatives report that one obstacle to obtaining increased revenues for the Republic of Cuba government-operated pharmaceutical manufacturers, and for the Republic of Cuba government-operated healthcare industry overall, has been an unwillingness to sell patent rights and to establish joint ventures.  This obstacle may soon be removed as the government of the Republic of Cuba remains in need of markets to make use of substantial investments in production capabilities that are, at present, far in excess of current requirements.

FRANCE’S SEITA ESTABLISHES CIGAR PRODUCTION JOINT VENTURE- Paris, France-based Seita S.A., Republic of Cuba government-operated Habanos S.A., and the Union of Agricultural Companies of the Republic of Cuba have established a joint venture, MiniCohiba S.A., to produce mini-Cohiba cigars (less than 3 grams).  The joint venture, with an initial capitalization of US$5 million, is expected to be operational by 2000, and is expected to produce 8 million mini-Cohiba cigars during the first year, with production eventually reaching 25 million units annually. The Republic of Cuba is to provide raw materials, labor, and facilities in the city of Havana and Seita S.A. is to provide technology, financing, and export markets.  In December 1998, Cannery Islands CITA, subsidiary of Madrid, Spain-based Tabacalera S.A., Habanos S.A., and the Union of Agricultural Companies of the Republic of Cuba, established Compania de Tobacos Islanos to produce mini-cigars.  CITA will reportedly invest US$2 million in the venture that will begin production by July 1999.  Tabacalera S.A. is the largest importer of Republic of Cuba-produced cigars and provides the majority of the financing for the Republic of Cuba tobacco harvest.  Seita S.A. recently purchased Fort Lauderdale, Florida-based Consolidated Cigar Holdings Inc., a move that positioned the company to become an influential distributor within the United States for three of the most prestigious Republic of Cuba-recognized cigar brands: Montecristo, H. Upmann, and Por Larranaga.  Seita S.A. is expected to have an agreement with Republic of Cuba government-operated Habanos, S.A., the exclusive distributor of Republic of Cuba-produced cigars, for the United States distribution rights to Republic of Cuba-produced brands Montecristo, H. Upmann, and Por Larranaga.  Seita S.A., France’s largest tobacco company, is the Republic of Cuba’s second-largest importer of Republic of Cuba-produced cigars and the second-largest source of financing for the Republic of Cuba’s tobacco harvest.  Sieta S.A. imported 12 million “Habanos” in 1997, in addition to tobacco leaf, and provides an estimated US$10 million in credits annually to finance the tobacco harvest.  Seita S.A. has long held the exclusive rights to Republic of Cuba cigar distribution in France. Consolidated Cigar Holdings Inc., currently controls 24% of the United States cigar market, the largest in the world.  The merged company will be the largest cigar company in the world and in an ideal position, due to its commercial relationships with Republic of Cuba government-operated companies, to gain a significant share of the United States marketing rights for “Made In Cuba” cigars.

CUBA RESTAURANT FRANCHISE TO PARIS- Republic of Cuba government-operated Gran Caribe S.A. has awarded a five-year franchise operating agreement to Paris, France-based Blue Caraibes to operate a 200-seat La Bodeguita del Medio restaurant in the city of Paris, France.  The restaurant will be located near the Cathedral of Notre Dame and the Louvre museum.  The new location expects annual revenue of US$2.5 million.  One of the Republic of Cuba’s most popular restaurants, La Bodeguita del Medio serves traditional Cuban cuisine (roast pork, rice, beans, plantains, shredded beef- known as “old clothes”), and the beverage “Mojito” which contains Republic of Cuba-produced Havana Club brand rum (marketed internationally through a joint venture with Paris, France-based Pernod Ricard S.A.), water, lime, sugar, and mint.  The “Mojito” was made famous by the novelist Mr. Ernest Hemingway, and the restaurant, which opened in 1942, was frequented by the actor Mr. Errol Flynn and the singer Mr. Nat King Cole among others.  Gran Caribe S.A. has also awarded La Bodeguita del Medio franchises to companies located in Mexico, Spain, Russia, and in Saudi Arabia.

COFFEE PRODUCTION DECREASES 40%- The Republic of Cuba’s 1998-1999 harvest was between 12,500 tons and 13,500 tons of semi-processed coffee beans, instead of the planned 22,000 tons of semi-processed coffee beans.  The 1997-1998 harvest was approximately 20,000 tons of semi-processed coffee beans.  The coffee harvest suffered, in part, from drought and from Hurricane Georges.  The 1998-1999 coffee harvest was the lowest reported in more than 50 years.  Republic of Cuba government-operated National Information Agency (NIA) reported that Santiago de Cuba Province, 850 kilometers east of the city of Havana, was concluding the coffee harvest with approximately 2 million latas produced, compared with 3 million latas produced in 1997-1998.  The NAI reported that Santiago de Cuba Province produced 36% of the country’s total coffee harvest, bringing that total to approximately 5.5 million latas.  The Ministry of Agriculture of the Republic of Cuba reported that one lata is equivalent to 4.3 pounds to 5.0 pounds of semi-processed coffee beans.  Reportedly, approximately 60% to 70% of the coffee harvest is exported, most as semi-processed coffee beans, but some as fully-processed coffee, with the 1997-1998 coffee harvest earning a reported approximately US$50 million in gross revenues (combined export and product sold within the Republic of Cuba at U.S. Dollar retail stores and to restaurants and to hotels).  The Republic of Cuba’s primary coffee-producing areas, specifically Santiago de Cuba Province, Guantanamo Province, and Granma Province, are responsible for 80% of the country’s total coffee harvest.  Each of the provinces were effected by drought in 1998 and Hurricane Georges destroyed coffee plantations in Guantanamo Province and damaged others in Santiago de Cuba Province and in Granma Province.  The coffee bean harvest (August to February) has been extended this year into March; and in the case of Santiago de Cuba Province, into April.  The government of the Republic of Cuba has invested millions of U.S. Dollars, primarily in the form of credits issued by Republic of Cuba government-operated financial institutions, toward increasing production.  Due to a failure to sustain an increase in production, joint ventures and economic associations with non-Republic of Cuba-based companies are being considered.  Republic of Cuba-produced coffee beans are amongst the most valued in coffee-consuming countries and is primarily exported to member countries of the European Union (EU), and to Japan and to Canada.  The Ministry of Agriculture of the Republic of Cuba reported that the coffee harvest was 60,300 tons of semi-processed coffee beans in 1961-1962. The coffee harvest averaged 19,100 tons annually between 1981 and 1990.  The collapse of the U.S.S.R. decreased the Republic of Cuba’s supply of subsidized agricultural inputs, resulting in a decrease in production to 15,000 tons of semi-processed coffee beans during the 1994-1995 coffee harvest.  In late 1993, the government of the Republic of Cuba began to divide Republic of Cuba coffee planatations into 250 quasi-cooperatives where the government of the Republic of Cuba continued to own the land, and all production had to be sold to the government of the Republic of Cuba at prices established by the government of the Republic of Cuba.  The government of the Republic of Cuba also began to provide poorly used or vacant land owned by the government of the Republic of Cuba to families seeking a home and an employment opportunity.  More than 20,000 acres have since been transformed into 10,000 coffee plantations where all production must be sold to the government of the Republic of Cuba at prices established by the government of the Republic of Cuba.  The measures were a contributing factor toward increasing the annual coffee harvest to between 18,000 tons and 20,000 tons, until the 1998-1999 coffee harvest.  Republic of Cuba government-operated media has reported in the past that a significant portion of the 1998-1998 coffee harvest has been diverted to the Republic of Cuba-based “black market.”

OIL AND GAS PRODUCTION AND USAGE UPDATE- The Ministry of Basic Industry of the Republic of Cuba reported that the country’s 270 wells were producing 37,000 barrels of oil per day, compared to 35,000 barrels of oil per day reported in December 1998, and 31,000 barrels of oil per day reported twelve months ago.  January 1999 to March 1999 total production reportedly exceeded 500,000 tons of oil and 100 million cubic meters of natural gas.  The 1999 plan is to produce 2 million tons of oil and 400 million cubic meters of natural gas.  1998 total production was 1.678 million tons of oil and 100 million cubic meters of natural gas.  The increased production was from operations along the northwest coast of the Republic of Cuba where Toronto, Ontario, Canada-based Sherritt International Corporation, in partnership with Republic of Cuba government-operated Cuba Petroleo (Cupet), had introduced new oil extraction technology and new natural gas extraction technology.  All of the crude oil extracted from fields in Matanzas Province and in Havana Province, northwest of the city of Havana, where increased production was reported, has an extremely high sulfur content and can be used only in modified power plants and cement plants.  Until 1998, Cupet burned-off all of its natural gas.  Increased natural gas production (also with Sherritt International Corporation) is being used primarily to generate electricity.  Reportedly, more than 40% of the Republic of Cuba’s electricity will be generated in 1999 from Republic of Cuba-produced fuels, compared to 30% in 1998.  In 1997, the Republic of Cuba imported 85% of its fuel, with total consumption reported at 8.23 million tons of oil, compared to consumption of more than 11 million tons of oil in 1989.