US cable: Cuba to be insolvent within 2-3 years

HAVANA(AP) – A newly released confidential U.S. diplomatic cable predicts Cuba’s economic situation could become “fatal” within two to three years, and details concerns voiced by diplomats from other countries — including China — that the communist-run country has been slow to adopt reforms.

The cable was written in February, months before Cuban President Raul Castro announced a major revamp of the island’s economy, laying out plans to fire a half million state-workers and open up the island to expanded forms of private enterprise.

The cable, sent by the U.S. Interests Section in Havana, which Washington maintains instead of an embassy, was released Friday by WikiLeaks. It was apparently written by America’s chief diplomat on the island, Jonathan Farrar.

It details a breakfast meeting held by the Interests Section’s chief economic officer with diplomats from some of Cuba’s main trading partners, including China, Spain, Canada, Brazil and Italy, as well as France and Japan, both of which are among the island’s top creditors.

“All diplomats agreed that Cuba could survive this year without substantial policy changes, but the financial situation could become fatal within 2-3 years,” the cable said, adding that Italian diplomats cited sources within the Cuban government as predicting that the island “would become insolvent as early as 2011.”

Even the Chinese diplomat expressed what the cable referred to as “visible exasperation.” It said the Chinese were particularly annoyed by Cuba’s insistence on retaining majority control of any joint venture.

“No matter whether a foreign business invests $10 million or $100 million, the GOC’s (Government of Cuba’s) investment will always add up to 51%,” the cable quoted the unnamed Chinese commercial counselor as saying.

The Chinese also complained about problems getting loans repaid, and in particular a Cuban request to extend from one year to four years the amount of time it has to repay credit.

The cable said Cuba’s attempts at agricultural and other reform up to that point had been ineffective, and said more changes were unlikely.

“There is little prospect of economic reform in 2010 despite an economic crisis that is expected to get even worse for Cuba in the next few years,” it said, citing Cuba experts.

It is no secret that Cuba’s economic situation is increasingly dire. Castro has warned that the state can no longer afford to subsidize nearly all forms of Cuban life. The government provides free health care and education, and nearly free transportation, housing and utilities. All Cubans also receive a ration book that provides them with some basic food, though not enough to live on.

Most islanders work for just $20 a month in a state-dominated economic system riddled with inefficiency.

Yet the island has survived the collapse of the Soviet Union, which caused the near-failure of its economy, as well as a 48-year U.S. trade embargo, the retirement of revolutionary leader Fidel Castro in 2006 and countless other bumps along the way.

And the cable’s confidence that the government would not enact economic reforms did not pan out. The reforms announced by Raul Castro in September are considered the most significant in a generation. Still, it is unclear if they will be enough to save the island’s perennially weak economy.

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