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 21 Pesos, as it has since 15 July 1998. CADECA purchased the U.S. Dollar for 19 Pesos from 1 April 1998 to 15 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.
500 AMERICAN ADVANTAGE MILES FOR SOL MELIA HOTELS STAYS, INCLUDING CUBA- Dallas/Fort Worth, Texas-based American Airlines is now permitting the 33 million members of its Advantage Program to earn 500 miles per stay at any one of the more than 200 hotels worldwide managed by Madrid, Spain-based Grupo Sol Melia S.A., including those managed by the company located within the Republic of Cuba. Grupo Sol Melia will manage the soon-to-be-opened 409-room, five-star, Sol Melia Confort Hotel in the City of Havana, the second-largest hotel in the country. [Toronto, Ontario, Canada-based Sherritt International Corporation, the largest foreign investor within the Republic of Cuba, has a 12.5% interest in the Sol Melia Confort Hotel]; Melia Cohiba in Havana; Melia Las Americas in the resort area of Varadero, 140 kilometers east of Havana; Melia Varadero in the resort area of Varadero; Sol Club Las Sirenas in the resort area of Varadero; Sol Club Palmeras, in the resort area of Varadero; Sol Club Cayo Coco, on the northern keys, 508 kilometers east of Havana; Sol Rio de Mares in the resort area of Guardalavaca, 800 kilometers east of Havana; and Sol Club Rio de Luna in the resort area of Guardalavaca.
AMERICAN AIRLINES AND CUBA UPDATE- American Airlines does not currently provide service to/from/through the Republic of Cuba, but members of the American Airlines Advantage Program can accrue mileage for airline partner travel to/from/through the Republic of Cuba. No awards are available for travel to the Republic of Cuba. Members of the Advantage Program can accrue mileage to/from/through the Republic of Cuba when traveling on airlines affiliated with the TACA Airline Group (Taca Airlines, Aviateca Airlines, Lacsa Airlines, Nica Airlines, and Copa Airlines). San Jose, Costa Rica-based Lacsa Airlines, for example, currently services the Republic of Cuba. During the last several years, the globalization strategy by American Airlines has directly and indirectly included the Republic of Cuba: First, American Airlines has a Carrier Service Provider (CSP) license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury in Washington, D.C., which authorizes the company to operate charter flights between the United States and the Republic of Cuba. Second, American Airlines and Hounslow, Middlesex, United Kingdom-based British Airways are seeking approval from the United States Department of Justice and the European Commission to establish a global alliance to coordinate flight schedules and connections, frequent flyer programs, and to sell seats on each other's aircraft. Third, British Airways is expected to begin service between the United Kingdom and the Republic of Cuba within the next twelve months. Fourth, American Airlines and British Airways are jointly purchasing a 10% share in Madrid, Spain-based Iberia Airlines, which has continued to increase its flights between Spain and the Republic of Cuba, and has technical and operational agreements with both Republic of Cuba government-operated Cubana Airlines and with the Institute of Civil Aviation (IACC) of the Republic of Cuba. Fifth, In July 1997, American Airlines agreed to purchase a 10% share in Aerolineas Argentinas S.A., the national air carrier of Argentina, which began service to the Republic of Cuba in June 1998. Aerolineas Argentinas aircraft have been chartered for use in service between the United States and the Republic of Cuba. 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]. Arlington, Virginia-based US Airways already permits the 17 million members of its US Airways Dividend Miles program to accrue mileage for travel to/from/through the Republic of Cuba. While US Airways does not currently provide service to/from/through the Republic of Cuba, and no awards are available for travel to the Republic of Cuba, members of the US Airways Dividend Miles program can accrue mileage to/from/through the Republic of Cuba when traveling on airlines affiliated with LatinPass. LatinPass is a partner of the US Airways Dividend Miles program (other airline partners include ANA, Qantas, Alitalia, Sabena, Swissair, and Northwest). LatinPass, which has 125,000 members, includes ACES, Avianca, Aviateca, COPA, LACSA, Mexicana, Nica, Saeta, Taca, US Airways, KLM, Avis, American Express Membership Rewards, AT&T True Awards, InterAmerican Rent a Car, Diners Club Rewards, Holiday Inn Worldwide, and Radisson Hotels Worldwide. Since 1962, Delta Air Lines, Continental Airlines, and United Air Lines have had route authorities from the following cities: Delta- Havana to Houston, Los Angeles, New Orleans, San Francisco, and San Juan; Continental- Havana to Fort Lauderdale, West Palm Beach, United- Havana to Miami, Key West, Baltimore, Boston, Dallas, Houston, Los Angeles, New Orleans, New York, Newark, Philadelphia, San Francisco, San Juan, St. Croix, St. Thomas, and Washington, D.C.; and Camaguay to Miami, Baltimore, Boston, Dallas, Houston, Los Angeles, New Orleans, New York, Newark, Philadelphia, San Francisco, San Juan, St. Croix, St. Thomas, and Washington, D.C.
PERU PLANS PHARMACEUTICALS PURCHASE- H.E. Dr. Marino Costa Bauer, Minister of Health of Peru, arrived in the Republic of Cuba 31 July 1998 on a five-day visit. Minister Costa said that his visit would focus on concluding negotiations for the purchase of the Republic of Cuba-produced Hepatitis-B vaccine and the Republic of Cuba-produced Yellow Fever vaccine. He explained that his government planned to vaccinate small children nationwide against Hepatitis-B, and those at risk against yellow fever. Minister Costa reported that pilot projects had proved the effectiveness and cost efficiency of the Republic of Cuba-produced pharmaceuticals.
GERMANY'S LTU/LTI PLANS MAJOR EXPANSION- Germany-based LTI tourism corporation, a subsidiary of Germany-based LTU Airlines, reported that the company would begin operating the cruise ship Oliva from the Port of Havana, would increase the number of hotels that the company currently operates from three to five, and would increase the number of direct charter flights from two to four by the end of 1998. LTI reported that the company expected to transport 68,000 tourists from Germany to the Republic of Cuba in 1998, compared to the 80,000 tourists from Germany transported to the Republic of Cuba in 1997 by all Germany-based agencies combined.
SANYO PLANS SERVICE NETWORK AND POSSIBLE ASSEMBLY PLANT- Tokyo, Japan-based Sanyo Corporation announced that the company would establish a network of service centers for its products sold within the Republic of Cuba. The company announced that it would also consider establishing an assembly plant in the Republic of Cuba, but would first have to insure third country markets for any products produced within the Republic of Cuba. Sanyo products are currently marketed within the Republic of Cuba by Republic of Cuba government-operated Cimex S.A., Republic of Cuba government-operated Cubalse S.A., and Revolutionary Armed Forces of the Republic of Cuba-operated U.S. Dollar retail stores.
GRAIN AND CEREAL IMPORTS TO INCREASE- Senior-level sources of the government of the Republic of Cuba reported that the government was seeking to obtain credit and aid to import more cereals, grain, and other food products, due to the continuing drought and due to the continuing decreases in the domestic production of rice (expected to decline more than 25%), potatoes (expected to decline more than 25%), and bananas (expected to decline by more than 15%). According to the World Food Organization (WFO) of the United Nations, Republic of Cuba nationals consume an average of 1,900 calories per day (although many consume 1,500), compared to the recommended minimum of 2,100 calories per day to 2,300 calories per day. According to the government of the Republic of Cuba, food product imports in 1997 were US$692 million (including 300,000 tons of rice, 135,000 tons of beans, and 38,000 tons of powdered milk) in 1997. Some senior-level officials of the government of the Republic of Cuba have reported that food product imports were approximately US$850 million in 1997.
NEW HOTEL CONSTRUCTION BONUS PROGRAM- The Council of Ministers of the Republic of Cuba approved a U.S. Dollar bonus program for Republic of Cuba nationals employed as construction workers building hotels. The goal of the program is to decrease construction delays by providing incentive payments ranging from 4% to 7% of the worker's monthly wage (200 Pesos to 300 Pesos; the average monthly wage of the Republic of Cuba national is 214 Pesos) in the form of bonus coupons redeemable at Republic of Cuba government-operated U.S. Dollar retail stores. The payment of the bonus is to be determined by individual work performance and timely completion of construction.
VARADERO UPDATE- Mr. Fermin Trujillo, the Matanzas Province representative of the Ministry of Tourism of the Republic of Cuba, reported that the resort area of Varadero (located in Matanzas Province), 140 kilometers east of the city of Havana, had 42 hotels with a combined 9,700 rooms which were averaging an occupancy rate of 76%. He said that earnings had increased 16% as the result of new marketing programs, including more competitive all-inclusive packages. Republic of Cuba government-operated Cubatur, has all-inclusive packages US$136.00 per person, double-occupancy, for the first night, with daily rates declining to US$100.00 double-occupancy for a seven-day package. All-inclusive packages available on Cayo Coco off the North-Central coast of the Republic of Cuba are US$635 per person, double occupancy, for a seven-day package; in Cayo Largo off the south-central coast of the Republic of Cuba are US$550 per person, double occupancy, for a seven-day package; and at the Guadalavaca resort in Holguin Province, 750 kilometers east of Havana, are US$650 per person, double occupancy, for a seven-day package. The all-inclusive packages include a 25% discount for children twelve years of age or younger, and air transport to Cayo Coco or Cayo Largo from Havana. However, purchasing a package through a non-Republic of Cuba-based tour operator can, in some cases, reduce the per person, per day, hotel-only, cost to between US$30.00 and US$50.00
FIRST JIBACOA S.A. HOTEL NEARS COMPLETION- Mr. Jose Oscar Rojas, manager of Jibacoa S.A., reported that the first 250 hotel rooms of 2,000 hotel rooms planned for Jibacoa Beach, located between the city of Havana and the tourism resort area of Varadero, 140 kilometers east of Havana, would be operational by December 1998. Jibacoa S.A. is a joint venture between Republic of Cuba government-operated Cubanacan S.A. and Italy-based Mar Kristal. Mr. Rojas said that the 250-room, four-star Jibacoa Hotel, being constructed at a cost of US$15 million, would repay the investors their capital costs in five to six years. The hotel will be managed by Jamaica-based SuperClubs.
CRUISE SHIP UPDATE- H.E. Colonel Alvero Perez, Minister of Transport of the Republic of Cuba, reported that three to five cruise ships would visit the Port of Havana on a weekly basis beginning in November 1998, compared to one cruise ship per week in 1997. Minister Perez, speaking at the constitution of the State Working Group for the Cleaning-up, Conservation, and Development of Havana Bay, said while the group's principle objective was ecological, it would positively impact tourism, shipping, and the economy in general.
PRESIDENT CASTRO CONTINUES CARIBBEAN TOUR- H.E. Dr. Fidel Castro Ruz, President of the Republic of Cuba, arrived in Grenada 2 August 1998, the last stop on a three-nation tour that included Jamaica and Barbados. President Castro met with political and business leaders in all three countries, the heads of state of which all visited the Republic of Cuba during the last twelve months. Republic of Cuba-Caribbean Basin-area country trade was reported as US$1.3 billion in 1997, and Republic of Cuba-Caribbean Sea-area country trade was US$450 million in 1997, an estimated three times the value of the previous four years. "In this increasingly globalized world, our strategy is to integrate first with the Caribbean, then the Caribbean Basin, then all of Latin America," said Mr. Omar Everleny, Deputy Director of the University of Havana's Center for the Study of the Cuban Economy. "We now have full relations with all the independent Caribbean-sea countries," he said. "We were recently granted observer status at the upcoming Lome negotiations, and are invited to the Caribbean Economic Community's upcoming Summit, with which we are negotiating a preferential trade agreement." The Republic of Cuba is also a member of the Association of Caribbean States (ACS). "Full integration won't be easy because our system is socialist and the others capitalist, but we can increase trade, investment, and work together around tourism," concluded Mr. Everleny. Republic of Cuba-based and non-Republic of Cuba-based economists reported that the development of the Republic of Cuba tourism industry was the principal factor in developing closer relations with countries within the Caribbean Basin and Caribbean Sea-area. The Republic of Cuba, the largest of the Caribbean Sea-area countries, is expected to have in 10 years more than the total number of hotel rooms in all of the Caribbean Sea-area countries combined. More than 75% of Caribbean Basin country trade and Caribbean Sea-area country trade was in the form of Republic of Cuba imports, mainly oil and oil-related products from Mexico, Venezuela, Trinidad and Tobago, and other countries. Jamaica-based SuperClubs and Jamaica-based Sandals manage hotels within the Republic of Cuba. Caribbean Basin-area countries have become important importers of non-traditional Republic of Cuba exports such as supplies for the tourism industry, construction materials (such as cement), and steel. The Republic of Cuba has actively promoted improved sea routes and air transport routes within the Caribbean Sea, and currently has four small shipping lines navigating between Caribbean Basin-are country ports; and the Republic of Cuba has worked to develop local air links for multi-destination tourism.
ASIAN CRISIS COULD SERIOUSLY IMPACT ECONOMY- Mr. Osvaldo Martinez, Director of the Republic of Cuba government-operated Cuba Center for the Study of the World Economy, said that the Asian financial crisis could have serious consequences for the economy of the Republic of Cuba. Mr. Martinez, who is also the President of the Economic Committee of the National Assembly of People's Power, said that a deepening crisis "would cause a sharp decline in trade, foreign investment, and tourism. It would become more difficult to sell our products on the international market and purchase what we need."
ECONOMY STAGNATED DURING FIRST SIX MONTHS OF 1998- The Gross Domestic Product (GDP) increased less than 0.5% according to senior-level officials of the government of the Republic of Cuba. According to the sources, an El Nino-related 25% decrease in raw sugar production and a general poor agricultural performance, eliminated expectations for a 2.5% to 4% increase in GDP during the first half of 1998. According to the sources, the 19% increase in tourism saved the GDP from a far worse performance. According to the sources, the Republic of Cuba's GDP does not traditionally register an increase in the second half of the year, and the current drought in the eastern portions of the country made an overall decline in GPD for 1998 likely. However, H.E. Juan Mario Junco, Minister of Construction of the Republic of Cuba, is reported to have said that the construction industry is expected to report an increase in revenues of 9% to 12% for 1998, which, according to the Minister, would provide the Republic of Cuba with an overall 2.5% increase in GDP for 1998.
UNITED NATIONS WORLD FOOD PROGRAM PLANS EMERGENCY RELIEF- The World Food Organization (WFO) of the United Nations announced it was organizing US$7 million in emergency relief for residents in the eastern provinces of Las Tunas, Holguin, Santiago, Granma, and Guantanamo, where the worst drought in more than forty years has continued for more than one month. The WFO reported that food production had decreased 42%, and that water was being delivered by truck to more than 500,000 residents of the affected provinces' 3,500,000 residents. Livestock was being transported out of the affected provinces where possible. Local governments reported damage to important export crops such as sugar, coffee, and honey. The WFO has traditionally provided between US$2 million and US$3 million in assistance annually to the government of the Republic of Cuba.
COFFEE PRODUCTION UPDATE- The 1998-1999 coffee harvest (August-January) is expected to be less than the 1997-1998 coffee harvest as a result of the continuing drought. The Republic of Cuba produced approximately 21,000 tons of coffee during the 1997-1998 harvest, exporting 6,200 tons of partially-processed beans, and earning gross revenues of more than US$50 million. The five eastern provinces of the Republic of Cuba, which are currently experiencing the worst drought in more than forty years, produce more than 80% of the coffee. Local government officials stated that the drought had effected germination and size of coffee beans. Senior-level officials of the government of the Republic of Cuba reported that the situation was also problematic due the investment of tens of millions of U.S. Dollars borrowed from Republic of Cuba government-operated banks. The government of the Republic of Cuba reported coffee production of 60,300 tons in 1961-1962, but averaged to 19,100 tons on annual basis between 1976-1980. Production gradually increased to an average 27,000 tons between 1981-1990. Production decreased to 15,000 tons in 1994-1995. In late 1993, the government of the Republic of Cuba began to divide Republic of Cuba government-operated coffee farms into 250 quasi-cooperatives where workers own everything but the land, but must still sell their entire crop to the government at prices established by the government of the Republic of Cuba. The government also began to give away poorly used or vacant state lands to families in search of a home and work. More than 20,000 acres have been transformed into more than 10,000 privately-managed coffee farms. The 1996-1997 coffee harvest was 17,000 tons to 18,000 tons of partially processed beans, and the 1997-1998 coffee harvest was 21,000 tons. Mr. Isidro Fernandez, President of Republic of Cuba government-operated Cuba-Café, which oversees all coffee production, reported at the end of 1997 that coffee growers were working to produce a record harvest by the year 2002. Mr. Fernandez said that approximately 25% of the 300,000 acres devoted to coffee production were being upgraded. According to Republic of Cuba government-operated CUBAEXPORT, a company which markets Republic of Cuba-produced coffee brands throughout the world, under the auspices of the Ministry of Foreign Trade of the Republic of Cuba, Republic of Cuba-produced coffee is among the world's top ten, in terms of price, and is sold mainly to European Union (EU)-member countries, and to Japan and Canada.
RICE PRODUCTION UPDATE- The National Union of Rice Companies of the Republic of Cuba reported that drought effecting the eastern provinces would seriously impact production, and, by implication, foreign investors as well. Granma Province, which accounts for 45% of domestic rice production, reported that the reservoirs that provide water to the rice plantations at 6% of capacity and that extensive losses had already occurred. Rice plantations located the western province of Pinar del Rio, and in the central province of Camaguey, among other areas, also reported planting and crop losses. Mr. Miguel Rodriguez Mayea, Director of the National Union of Rice Companies of the Republic of Cuba, announced earlier this year plans for the production of 225,000 tons of rice, an increase of 20% from the reported crop in 1996-97. He said that non-Republic of Cuba government-operated production would be a minimum of 150,000 tons. In 1995, when Republic of Cuba government-operated rice production was 80,000 tons (non-Republic of Cuba government-operated production was 50,000 tons and imports were 450,000 tons), the government of the Republic of Cuba began a national program, with financing from non-Republic of Cuba-based financial institutions and non-Republic of Cuba-based companies, to increase overall rice production. Financing agreements included interest payments of two to four points above the international Libor rate, in addition to a percentage of the savings obtained from the cost of increased domestic production compared to the cost of importing similar quantities of rice.
COOPERATION WITH THE UNIVERSITY OF FLORIDA- The Department of Latin American Studies of the University of Florida announced that it would begin regular academic exchanges with the University of Havana. Professor Helen Safer said that the program would begin with the exchange of four doctoral candidates from each university. The program could expand to include other universities from the United States and from the Republic of Cuba.
The annual member luncheon of the U.S.-Cuba Trade and Economic Council is being tentatively-scheduled for September 1998 in New York City. Guest speakers being considered are a grouping of the Chairmen, Presidents, and Chief Executive Officers of non-United States-based healthcare companies which export to, import from, have joint ventures with, or have economic associations with, the Republic of Cuba. If members have suggestions, please contact the U.S.-Cuba Trade and Economic Council.
ANNUAL MEMBER LUNCHEON UPDATE
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