19 July 1999 to 25 July 1999
U.S. Dollar Unchanged Against The Peso- 1
National Bank Of Cuba Exchange Rates- 1
SmithKline Beacham Receives OFAC License For Cuban Meningitis B
Vaccine- 2
Canadian And Spanish Banks In Financial Services Joint Venture-
3
Direct Foreign Investment Update- 3
Cuba’s Free Trade Zones Export US$153.2 Million In Products And
Services To Cuba- 4
Conflicting Trade Values Reported Again- 4
Wheat Import Update- 4
Rice Import Update- 4
Number Of Russian Tourists Reportedly Increases- 5
Nickel Production Update- 5
Oil, Gas And Energy Update- 5
Oil Exploration Update- 6
Attachment: Article From The Sun-Sentinel Newspaper
U.S. DOLLAR UNCHANGED 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 22 Pesos as it has since
16 June 1999. CADECA had sold the Convertible Peso for 22 Pesos and
purchased the U.S. Dollar for 21 Pesos since 13 April 1999. The official
international exchange rate of one Peso to one U.S. Dollar, in effect for
more than thirty years, remained unchanged. The government of the
Republic of Cuba maintains a fixed exchange rate for its international
dealings and a more flexible exchange rate for domestic use. The
government of the Republic of Cuba does not fluctuate the value of the
Peso for commercial transactions regardless of any fluctuation with the
value of the U.S. Dollar or other currencies on the international market.
The Peso and the U.S. Dollar circulate freely in the Republic of Cuba.
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NATIONAL BANK OF CUBA EXCHANGE RATES- 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 23
July 1999. These rates do not necessarily reflect the exchange rates
at all Republic of Cuba government-operated banks:
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SMITHLKINE BEACHAM RECEIVES OFAC LICENSE FOR CUBAN MENINGITIS B VACCINE- Brentford, United Kingdom-based SmithKline Beacham plc (1998 revenues exceeding US$10 billion) and its United States-based subsidiary, Philadelphia, Pennsylvania-based SmithKline Beacham, have received a license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C. The OFAC license, which was approved after eighteen months of inter-agency review by the Clinton Administration, authorizes SmithKline Beacham to enter into an agreement with Republic of Cuba government-operated Carlos Finlay Institute for testing, clinical trials, and marketing of a Meningitis B vaccine developed by the Carlos Finlay Institute in 1985. Since SmithKline Beacham owns the Brussels, Belgium-based facility where the testing and clinical trials will be held, an OFAC license was required. SmithKline Beacham currently markets vaccines to prevent Meningitis A and to prevent Meningitis C. The Finlay Institute could eventually receive US$10 million to US$20 million from SmithKline Beecham plc for a five-year exclusive right to market the vaccine. Under the terms of the OFAC license, during the testing and clinical trial stages, SmithKline Beacham will compensate Carlos Finlay Institute in the form of products (perhaps healthcare products and food products) equal to the U.S. Dollar value of the compensation. If the Meningitis B vaccine is marketed, SmithKline Beacham will then make royalty payments to Carlos Finlay Institute in U.S. Dollars or their equivalent. Approximately 1,000 United States citizens contract Meningitis B each year, of which 120 die. The Honorable Arlen Specter (R-Pennsylvania) visited the Republic of Cuba from 2 June 1999 to 3 June 1999, where he met with representatives of the Ministry of Public Health of the Republic of Cuba and visited the Carlos Finlay Institute. Senator Specter said that “Cuba can benefit from the research of the National Institutes of Health [NIH] and we can benefit from the research [the Cubans] are doing in meningitis B, for example.” He said that a meeting would be requested with The Honorable Donna Shalala, United States Secretary of Health and Human Services, to discuss opportunities for bilateral cooperation in public health matters. Senator Specter is the Chairman of the Subcommittee on Labor, Health and Human Services, Education, and Related Agencies of the Committee on Appropriations of the United States Senate. Also supporting the OFAC license application request by SmithKline Beacham were from the United States Senate: The Honorable Christopher Dodd (D-Connecticut) and The Honorable Richard Lugar (R-Indiana), among others; and from the United States House of Representatives: The Honorable Tom DeLay (R-Texas), The Honorable Sonny Callahan (R-Alabama), The Honorable Joseph McDade (R-Pennsylvania), The Honorable James Greenwood (R-Pennsylvania), The Honorable Nancy Pelosi (D-California), The Honorable Henry Waxman (D-California), and The Honorable Howard Berman (D-California) among others.
CANADIAN AND SPANISH BANKS IN FINANCIAL SERVICES JOINT VENTURE- The Central Bank of the Republic of Cuba has licensed Financiera Iberoamericana S.A., a financial services joint venture between the Republic of Cuba government-operated Grupo Nueva Banca S.A., Madrid, Spain-based Banco Sabadell S.A, and Nassau, Bahamas-based Natcan Holdings International Ltd. (a subsidiary of Montreal, Canada-based National Bank of Canada). This is the fourth financial services joint venture licensed to operate within the Republic of Cuba. Financiera Iberoamericana S.A. is expected to have an initial capital of US$6 million and a US$15 million line of credit, with equal portions of the initial capital and the line of credit being provided by each of the three partners, thus having Financiera Iberoamericana S.A. as the first financial joint venture within the Republic of Cuba in which a Republic of Cuba government-operated entity does not have shareholder control or at least a 50% share. The joint venture is licensed to provide credits, leasing, and factoring, as well as, limited financial services, although the joint venture is prohibited, at this time, from accepting deposits and engaging in other “direct banking activities.” Republic of Cuba law currently prohibits non-Republic of Cuba government-operated financial institutions from engaging in “normal banking operations.” Sixteen non-Republic of Cuba-based banks have thus far been licensed, including Banco Sabadell S.A., to maintain offices within the Republic of Cuba. The three joint venture financial service companies currently operating within the Republic of Cuba are 1) Havana Asset Management Limited, a joint venture between the London, United Kingdom-based Beta Fund and the Ministry for Foreign Investment and Economic Cooperation of the Republic of Cuba 2) Carifin, a joint venture between London, United Kingdom-based Commonwealth Development Corporation and Republic of Cuba government-operated Grupo Nueva Banca and 3) Corporation Financiera Habana S.A., a joint venture between Madrid, Spain-based Cajas de Madrid and the Republic of Cuba government-operated Banco Popular de Ahorro.
DIRECT FOREIGN INVESTMENT UPDATE- The Central Bank of the Republic
of Cuba reported the following values for direct foreign investment in
the Republic of Cuba since 1993.
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The U.S.-Cuba Trade and Economic Council estimates that the total cumulative value of announced, committed, and delivered investments since 1990 by private sector companies and government-controlled companies from various countries to enterprises within the Republic of Cuba is approximately US$6.119 billion, of which approximately US$1.7672 billion is estimated to have been committed and/or delivered to the Republic of Cuba. On 15 March 1999, the United States Department of State in Washington, D.C., reported that an estimated total of US$1.7 billion had been invested in the Republic of Cuba since 1990, with the largest sectors being 1) Telecommunications with approximately US$650 million 2) Mining with approximately US$350 million and 3) Tourism with approximately US$200 million.
CUBA’S FREE TRADE ZONES EXPORT US$153.2 MILLION IN PRODUCTS AND SERVICES TO CUBA- The Central Bank of the Republic of Cuba reported that the 200 primarily product import companies located in the country’s three Free Trade Zones exported a reported US$153.2 million worth of products and services to the Republic of Cuba in 1998. Companies operating in the Free Trade Zones are authorized to export 25% of their production to the Republic of Cuba without losing their tax-free status.
CONFLICTING TRADE VALUES REPORTED AGAIN- The Central Bank of
the Republic of Cuba reported the following trade information which showed
that 1998 imports decreased 20.8% from imports in 1997 and that 1998 imports
increased 3.5% from imports in 1997.
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However, there are discrepancies in the trade figures provided by the government of the Republic of Cuba. Earlier this year, the Republic of Cuba government-operated official daily newspaper, Granma, reported that the Republic of Cuba’s foreign trade decreased 10% in 1998 from 1997. Granma, Reported that 1998 foreign trade was US$5.143 billion, compared to $5.57 billion reported by the Central Bank of the Republic of Cuba for 1997. At the end of December 1998, H.E. Jose Luis Rodriguez, Minister of the Economy and Planning of the Republic of Cuba, reported that exports decreased 11% in 1998 and imports increased 6% in 1998. The Central Bank of the Republic of Cuba reported that 1997 foreign trade was US$5.5725 billion (exports- US$1.8115 billion and imports- US$3.761 billion), compared to US$5.4345 billion (exports- US$1.8655 billion and imports- US$3.569 billion) in 1996. Using the percentages reported by Minister Rodriguez, 1998 foreign trade would have been US$5.6991 billion (exports- US$1.6125 billion and imports- US$3.9866 billion), not the US$5.143 billion reported by Granma.
WHEAT IMPORT UPDATE- The Republic of Cuba imported 26,500 tons
of wheat from 1 July 1999 to 14 July 1999 from the port of Rouen, France.
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RICE IMPORT UPDATE- The government of the People’s Republic of
China reported that 13,125 tons of rice was exported to the Republic of
Cuba in June 1999 and a total of 93,807 tons of rice was exported to the
Republic of Cuba from January 1999 through June 1999.
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NUMBER OF RUSSIAN TOURISTS REPORTEDLY INCREASES- The government of the Republic of Cuba reported that 13,000 nationals of the Russian Federation visited the Republic of Cuba in 1998 and 11,000 nationals of the Russian Federation visited the Republic of Cuba in 1997.
NICKEL PRODUCTION UPDATE- The Ministry of Basic Industry of the Republic of Cuba reported that 1999 nickel plus cobalt production was expected to be 73,000 tons, compared to a record nickel plus cobalt production of 68,000 tons in 1998. The nickel plus cobalt industry, concentrated in Holguin Province, 850 kilometers east of city of Havana, has three plants in operation: 1) Moa Nickel S.A., a 50%-50% joint venture with Toronto, Canada-based Sherritt International Corporation 2) Republic of Cuba government-operated Che Guevara (Punta Gorda) works and 3) Rene Ramos Latour (Nicaro) nickel works. The three plants have a combined refining capacity of approximately 75,000 tons to 80,000 tons of nickel plus cobalt sulfides and other compounds. A reported US$200 million has been invested in the three plants during the last five years to improve efficiency and to increase capacity. Nickel prices have recently been increasing, from approximately US$4,000.00 per ton in January 1999 to approximately US$6,000.00 per ton last week. Nickel plus cobalt is the Republic of Cuba’s second-largest (sugar being the largest) export earner of U.S. Dollars, reportedly approximately US$$300 million to US$350 million in 1998. Nickel plus cobalt production is also used to guarantee trade credits and financial credits. Republic of Cuba nickel is considered to be Class II with an average 90% nickel content. The Republic of Cuba government-operated National Minerals Resource Center reported that Holguin Province has 34% of the world's known reserves of nickel plus cobalt, or approximately 800 million tons of nickel plus cobalt reserves, and another 2.2 billion tons of probable nickel plus cobalt reserves, with lesser reserves of nickel plus cobalt in other areas of the Republic of Cuba. The Republic of Cuba reportedly has the world's second largest reserves of cobalt and the world’s third largest reserves of nickel.
OIL, GAS, AND ENERGY UPDATE- The Ministry of Basic Industry of the Republic of Cuba reported that 1) oil production increased 24% from January 1999 through June 1999, compared to the 768,000 tons reported for the same period in 1998 and 2) natural gas production, used primarily for generating electricity, quintupled from less than 50 million cubic meters for the same period in 1998. The Republic of Cuba plans to produce a record quantity of two million tons of oil and 500 million cubic meters of gas in 1999, compared to production of 1.68 million tons of oil and production of 100 million cubic meters of gas in 1998. All of the crude oil extracted from the fields in Matanzas Province and Havana Province have an extremely high sulfur content and can be used only in modified power, cement, and other industrial plants. The Ministry of Basic Industry of the Republic of Cuba reported that 42% of the country’s electricity from January 1999 through June 1999 was generated with domestically produced fuels, compared to less than 30% in 1998, and 20% in 1997. The government of the Republic of Cuba imported a reported 85% of its fuels in 1997, with total consumption reported at 8.23 million tons.
OIL EXPLORATION UPDATE- Rio de Janeiro, Brazil-based Braspetro
Oil Services Company, a subsidiary of government of Brazil-operated, Rio
de Janeiro, Brazil-based Petroleo Brasileiro SA (known as Petrobas), will
begin drilling for oil in 2000 off the northern coast (approximately 300
kilometers east of the city of Havana) of the Republic of Cuba. Reportedly,
a deep water drilling rig is unable to be transported from the coast of
Africa due to weather considerations (hurricane season which ends in November).
Petrobas conducted extensive studies of offshore block 50 prior to signing
an exploration contract with Republic of Cuba government-operated Cuba
Petroleo (CUPET) earlier in 1999. Montreal, Canada-based Pebercan
Limited reported a horizontal well drilled earlier this year, CANASI 2,
was producing 2,500 barrels of heavy oil per day, compared to the previously
discovered CANASI 1, which is producing 1,500 barrels of heavy oil per
day. Pebercan reported that a third well would be drilled in the
CANASI field, located along the northern coast of the Republic of Cuba
in block 7, 70 kilometers east of the city of Havana. CUPET reported
that 10 non-Republic of Cuba-based companies had exploration/production
contracts for 22 of 45 available blocks.
ECONOMIC EYE ON CUBA© is published each Monday for members of the U.S.-Cuba Trade and Economic Council, the largest nonpartisan business organization within the United States focusing upon the Republic of Cuba. The organization is a private, not-for-profit corporation which does not take positions with respect to United States-Republic of Cuba political relations. All rights reserved. Material may not be reproduced without written permission.