Chinese Vicepresident in Cuba to meet on economic ties


HAVANA (Reuters) – Chinese Vice President Xi Jinping arrived in Cuba on Saturday for a three-day visit expected to accelerate fast-growing economic relations between the two communist-run countries.

One of Cuba’s six vice presidents, Esteban Lazo, was at Havana’s Jose Marti International Airport to greet Xi, who is tipped to succeed Chinese President Hu Jintao in 2013.

Xi came to Cuba from Italy, where $3.2 billion in business deals were unveiled during his visit, and he was to go on to Uruguay and Chile.

China is in the midst of a massive expansion of economic activity in Latin America, where its trade last year totaled $180 billion, up 50 percent from 2009, official Chinese news agency Xinhua reported.

In a written statement to the press, Xi said he was in Cuba to “increase friendship (and) deepen cooperation” in pursuit of development.

Xi and President Raul Castro were scheduled to hold talks and preside over the signing of so far undisclosed accords on Sunday.

A Chinese official told Xinhua this week the two countries would begin negotiations on a five-year plan for bilateral economic cooperation.

China is Cuba’s second largest trading partner, trailing only Venezuela, with trade between the two increasing to $1.83 billion last year from $440 million in 2001, according to Xinhua. The 2010 figure fell from $2.2 billion in 2008.

China has become the lender of last resort for debt-ridden Cuba, which is carrying out reforms to modernize and strengthen its Soviet-style economy.

Last year, China restructured debt believed to be as high as $4 billion and agreed to extend new credit in what Havana-based diplomats said was a show of support for Cuba’s reforms.

In his statement, Xi praised a recent Cuban Communist Party congress affirming the economic changes, which are timid compared with the market economy China has embraced.

Castro, who succeeded ailing older brother Fidel Castro in 2008 and turned 80 on Friday, is slashing government payrolls, expanding the private sector, putting more agriculture in private hands and giving state companies greater autonomy.

He has said the goal is to make sure Cuban socialism survives once the current generation of aging leaders is gone.

China’s involvement in Cuba’s economy is increasingly evident, with Chinese-made goods filling the stores and Chinese buses and cars a common sight on Cuban roads.

A unit of China National Petroleum Corp is expected to begin work later this year on a $6 billion project to expand and upgrade an oil refinery in Cienfuegos on Cuba’s southern coast, with plans including construction of a liquefied natural gas terminal.

China buys nickel, sugar and other products from Cuba and jointly produces pharmaceuticals in China.

After Sunday’s meeting with Castro, Xi will visit a Havana medical clinic on Monday, then leave for Uruguay from the beach resort of Varadero on Tuesday.

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Don’t Expect Revolution in Cuba


Cuban dissidents and Cuban-American leaders have started to ask why Cubans haven’t followed the lead of oppressed populations in Egypt and Tunisia in overthrowing long-entrenched regimes. Wake Forest University Associate Professor of Political Science Peter Siavelis said he doesn’t expect to see demonstrations for democracy in the streets of Havana anytime soon.

Political and economic conditions in Cuba are more similar to North Korea than Egypt or even Libya, said Siavelis, an expert on Latin American politics. “The level of repression is much more systemic and substantial than in Egypt.”

The Communist government’s security apparatus is pervasive and quick to shut down any opposition or protests before they have a chance to grow, he said. Fidel and Raul Castro still have the support of the military and secret police. And, because the government controls the media and only the Communist Party elite has Internet access, many Cubans might not even know about the popular uprisings in the Middle East and North Africa, he said.

“Cuba is a small, insular place,” Siavelis said. “The government maintains a vice grip over any exchange of information. There is a real sense of isolation among the people, which has limited their ability to build any social capacity for change.”

There are some similarities between Cuba and Egypt, Siavelis said, including a long-standing oppressive regime, high unemployment, an increasingly younger  population, and a lack of opportunities for even the well educated.

Unlike Egypt, Cuba lacks any significant organized opposition, any private enterprise beyond a small number of self-employed people, and a free flow of information, both within the country and in news coming from other countries, he said. Few Cubans — primarily Communist Party leaders and members — even have access to a computer, and there are tight controls on the Internet, Siavelis said.

Cuba is one of the last centrally controlled economies in the world. The government employs about 85 percent of the population. President Raul Castro has made some economic reforms, such as allowing more workers to be self-employed, since he succeeded his brother Fidel in 2008.

Castro announced last year that about 20 percent of government workers — around one million people — would be laid off beginning this month. But on Monday, he announced that the layoffs have been postponed, perhaps with an eye toward avoiding any protests like the ones that sparked the uprisings in the Middle East and North Africa, Siavelis said.

“Even though Raul has instituted some significant reforms — allowing for some private-sector ownership of businesses for instance — the economy is still in the hands of the government, which lessens any chance of political reform,” Siavelis said.

And there’s still the matter of the 50-year-old U.S. embargo, which Siavelis believes hurts the cause of democracy because it limits the flow of people, goods and information into the country. “The government still waves the flag of national sovereignty and plays up U.S. hostilities. The Castro regime has outlasted presidents going back to Eisenhower, so you have to think at some point that it’s not working.”

Siavelis sees more similarities between Egypt and Venezuela than between Egypt and Cuba: an educated, urban, mobile population; unified opposition; access to outside media sources; and oil money being diverted to support other oppressive regimes, including Cuba.

Siavelis and other Cuba watchers will be watching closely when the Cuban Communist Party Congress convenes in Havana for the first time in 14 year next month. Siavelis expects decisions to be made then about the future of the country’s leadership. Fidel Castro is expected to resign as head of the Communist Party and to be succeeded by Raul Castro. Raul Castro has said that the congress will officially adopt reforms to modernize the Soviet-style economy, but how far those reforms will go remains to be seen.

Siavelis expects Cuba to follow the model of Vietnam and China: slowly embracing limited economic reforms, while maintaining tight political control. “But economic reform does unleash a demand for political reform, and then the question becomes, is the government able to repress that,” he said. “In Vietnam and China, because of the tremendous economic success, the government has been able to do that. But I don’t see Cuba being able to replicate that economic success.”

 

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Arrival of Cuba offshore oil rig delayed again


HAVANA, Feb 22 (Reuters) – Delivery of a Chinese-built drilling rig that will open the first full-scale exploration for oil in Cuban waters looks unlikely until at least August in the latest delay to beset the project, sources said this week.

They said an inspection of the newly-built, high-tech rig had been ordered to make sure it was in good shape after taking on water in transit from the Chinese shipyard where it was built to Singapore for completion in October.

The rig — the Scarabeo 9, owned by Italian oil service firm Saipem SPLM.SI — had been expected to arrive in Cuban waters in late June or early July after several earlier delays postponed its original delivery date of September 2009.

If the inspection turns up problems that need repair, the latest delay could stretch beyond August, sources said.

The water problem was not considered a major issue, but an inspection was ordered to assure the rig’s overall quality, they said.

Once the rig gets to Cuba, it will be used by a consortium led by Spanish oil company Repsol YPF (REP.MC: Quote, Profile, Research, Stock Buzz) to drill one or two exploratory wells, then passed on to other oil companies for exploration in drilling leases they hold in Cuba’s part of the Gulf of Mexico.

Repsol drilled the only offshore well in Cuba in 2004 and found oil, but said it was “non-commercial.”

It has long planned to drill another well, but is widely believed to have had difficulty finding a rig that does not violate limits on use of U.S.-developed technology set by the 49-year-old U.S. trade embargo against Cuba.

Cuba, which depends on its socialist ally Venezuela for much of its oil, has said it may have 20 billion barrels or more of oil in its untapped oil fields.

The U.S. Geological Survey has estimated a more modest 4.6 billion barrels and 10 trillion feet of gas.

The Scarabeo 9 is a dynamic positioning, semi-submersible rig, meaning it floats partially submerged in the ocean and is kept in place by thrusters built into the platform.

It will be drilling in more than 5,000 feet (1,524 meters) of water, but is capable of working in depths of 12,000 feet (3,600 meters).

An August arrival would bring Scarabeo 9 to Cuba at the height of hurricane season, but the rig is built to withstand winds up to 115 miles per hour (185 km) and waves up to 88 feet (26.8 meters).

The prospect of offshore oil exploration by Cuba has prompted proposed legislation in the U.S. Congress that could penalize companies operating in the communist-led country or require them to prove they can adequately respond to an accident like last summer’s BP blowout in the U.S. Gulf of Mexico.

Cuba is just 90 miles (145 km) from Florida, but U.S. oil companies cannot operate there because of the U.S. embargo.

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Cuba set for new revolution but US thaw could be a long way off


Irish Times: OPINION: Shedding public sector jobs, bolstering domestic enterprise while seeking foreign investment – does this sound familiar? Welcome to Cuba . . .

CUBANS HAVE entered a period of dramatic change with enormous implications for economic, political and social aspects of their lives, perhaps not seen since the collapse of Cuba’s old sponsor, the USSR.

With that cataclysmic break-up in the early 1990s, some 85 per cent of the Caribbean island’s income vanished, marking the start of a period of extreme hardship remembered bitterly as the Periodo Especial .

Not least among the changes now deemed necessary to deal with the country’s troubled economy by President Raul Castro is the laying off of 500,000 state employees between this month and the end of March. Effectively, this ends Cuba’s official policy of full state employment, with some commentators saying these changes could even mark the beginning of the end of the 50-year socialist economic experiment for the country’s 12 million people.

The demise of communism and the Castro brothers, Raul and Fidel, however, have been predicted many times before – indeed their deaths were once reported in a US newspaper by an Irish-American journalist in 1956 shortly after they had landed in Cuba from Mexico with a small group to begin the final phase of the revolution.

Despite the scale and scope of the proposed changes, however, President Castro is anxious to insist that the essential nature of the last communist state in the western hemisphere will not itself change. A recent 32-page document outlining proposed changes, Draft Guidelines for Economic and Social Policy , emphasised that “as we update our economic model, planning will be paramount, not the market”.

Preparing people for such seismic changes, Castro had said that Cuba would “fall off a cliff” if it did not make savings through efficiencies and “update” the tightly-controlled command economy. He said the economy was the first order of business for all the political leaders.

The measures are intended not only to correct the economy but to deliver improvements in living standards that ordinary Cubans have long and patiently desired. Most prominent of the changes are the dramatic shrinking of state employment; a significant expansion of the private sector; the encouragement of greater foreign investment in designated economic zones (not dissimilar to Vietnam and China, it appears); and a partial opening up of the property market, in which you may buy and sell property, but not accumul-ate.

On a recent visit to China, Cuban parliament speaker Ricardo Alarcon said: “Cuba is prepared to take advantage of China’s experience of development in reform and opening.”

China, now a major trading partner, recently signed a $6 billion (€4.53 billion) deal to upgrade an oil refinery and build a gas refinery in the southeastern city of Cienfuegos. This will process huge finds in the Cuban section of the Gulf of Mexico expected to come online this year.

More than 30,000 Cubans have already received licences to work privately as restaurateurs, mechanics, hairdressers and street vendors, for example, and for the first time such individuals may be allowed to take on employees and must pay taxes. As many as 250,000 licences may be issued eventually. Brazil, Latin America’s emerging economic superpower, has offered to share with Cuba its expertise in private enterprise.

Ordinary Cubans fear that if there is no match between jobs created in the private sector and the lay-offs, there will be a negative impact on the country’s social cohesion that full employment has delivered over the past half century. For example, it is feared that street crime, which is negligible by international standards, will rise.

Furthermore, Cubans express various degrees of anxiety as to whether they might be among the half million selected for efficiencies in the notoriously sluggish and bureaucratic state sector.

Alarm bells will also be ringing in Washington because of the potential for another mass wave of immigrants from Cuba.

Significantly, a long-awaited Communist Party Congress – the party forum which defines major policy issues and announces changes, but has not met since 1997 – has now been called for the end of April. At this meeting the proposals in the draft document and measures already taken will be discussed, and the shape of the new political order in Cuba will become clearer.

Cuba’s change in course is further hard evidence of Raul Castro’s shift away from the doctrinaire communism of his elder brother Fidel towards a more pragmatic, efficiency-socialism model. This approach was also evident recently with the state’s agreement with the Cuban Catholic Church and Spain to release more than 50 political prisoners, and with the opening of a Catholic seminary outside Havana, the first since the revolution.

All of this would suggest that now would be a fruitful time for the US to engage with Cuba, as indeed President Barak Obama promised in the early days of his presidency, which President Castro said he would respond to “measure for measure”.

However, the US economic downturn and mid-term elections have since changed the situation and the Republican Party’s control of the House of Representatives has given it sway over the powerful Foreign Relations Committee. From January, this committee will be chaired by Cuban-born, far-right Florida Congresswoman Ileana Ros-Lehtinen, best known for her visceral hostility towards the Cuban regime and other left-leaning administrations in Latin America.

In a 2006 Channel 4 documentary on the numerous attempts to kill the then Cuban leader, she was happy to announce: “I welcome the opportunity of having anyone assassinate Fidel Castro.”

So despite Cuba signalling an historic change in the state’s relationship with private enterprise, bar unforeseen circumstances it seems any likelihood of the US engaging with the new situation is likely to founder on the jagged rocks of old southern Florida émigré politics.

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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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Cuba deal boosts China’s Latin American oil plans


HAVANA (Reuters) – China is taking another great leap forward in its Latin American energy plans, raising Cuba’s energy importance in the process, with a deal to lead a $6 billion refinery expansion project on the communist island, experts said this week.

The project, to be funded mostly by China’s Eximbank, is the latest of several significant moves in the region for the Asian power as it continues to expand its global influence.

For Cuba, the refurbishing of its antiquated refinery in the coastal city of Cienfuegos will provide an outlet for oil it hopes to tap soon in the Gulf of Mexico, while also laying the groundwork for the island to possibly become a key oil transshipment point for the Caribbean basin.

A unit of state-owned China National Petroleum Corp expects to begin work in early 2011 on the project that will more than double the refinery’s capacity to 150,000 barrels daily and include construction of a liquefied natural gas terminal.

Venezuela, Cuba’s closest ally, will provide financial guarantees in the form of oil, a pattern followed by Beijing in other deals for energy in Latin America.

In the past two years, China has financed projects and formed joint ventures in Venezuela, Brazil and Ecuador which are expected to bring it at least 500,000 barrels of crude oil per day.

It has leased a 5 million barrel storage facility on the Caribbean island of St. Eustatius and reportedly talked with San Antonio, Texas-based refining giant Valero Energy Corp. about buying its refinery on the island of Aruba.

The oil marriage of China with Latin America is one made in energy heaven, said analyst RoseAnne Franco at energy and mining consulting firm Wood Mackenzie in Houston.

“The regions are clearly of complementary interest. China is looking for energy security while Latin America is eager for new consumer capital markets,” she said. “There is a good foundation there for the relationship.”

MODERNIZING CUBAN INFRASTRUCTURE

The Cienfuegos project is part of larger modernization of Cuba’s energy infrastructure. Brazil is financing the refurbishing and expansion of the port at Mariel, which will be the logistical platform for offshore oil operations in the Gulf of Mexico set to begin next year.

Venezuela, Cuba’s principal ally and top trading partner, is refurbishing a tanker port at Matanzas and rehabilitating a cross-country pipeline to the Cienfuegos refinery. It has also committed to constructing a 150,000 barrel per day refinery at Matanzas, which is about 60 miles east of Havana.

The expectation that Cuba will find significant offshore oil reserves is driving much of the work.

Several companies are planning to sink exploratory wells off Cuba’s northern coast starting next year.

The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but Cuba says it could have at least 20 billion barrels of oil.

The other, larger piece of the puzzle is the expansion of the Panama Canal, which is supposed to be finished by 2014 and will allow bigger oil tankers to use the waterway linking the Pacific and Atlantic oceans.

Cuba is well positioned to serve as both a refining center and oil transshipment point for the newly expanded canal, said Jonathan Benjamin-Alvarado, a Cuban oil expert at the University of Nebraska in Omaha.

“Cuba doesn’t solve anybody’s energy issues, but it expands the opportunities of the global markets to have Cuba as another point of transshipment or hub for oil services and activities,” he said.

“There is a need for expansion and diversification of both refining and storage capacity in the region, and Cuba fits perfectly,” he said.

Should normal relations with the United States ever be restored, Cuba, just 90 miles from Florida, would be well positioned to serve the U.S. market, said Jorge Pinon, an oil expert at Florida International University in Miami.

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Hotel opening in Shanghai highlights Cuban expansion


cubastandard:

Putting the spotlight on a recent expansion of Cuban economic activity abroad, tourism Minister Manuel Marrero traveled to China for the opening ceremony of a Chinese-Cuban five-star hotel towering over Shanghai’s booming financial district.

Owned by Chinese state company Suntime International Techno-Economic Cooperation Group and Grupo Cubanacan, the 686-room Gran Meliá Shanghai is operated by Spain’s Grupo Sol Meliá. The $250 million project — considered a key element of Cuban-Chinese cooperation — began in 2003.

No details about the cost or ownership arrangement have been released, nor have the partners explained what exactly Cuban companies have contributed to the project. The construction division of Chinese state company CITIC Group led the design and construction phase; Shanghai Bank, and Eximbank provided and guaranteed the funding.

Cuba’s first large hotel investment abroad is the first of more joint ventures to come between Suntime and Cubanacan, Marrero said during the ceremony. The next project will be construction of a “similar” hotel in Havana, the minister said. The partners reportedly are planning construction of a $150 million hotel at Marina Hemingway, in a western suburb of the capital.

Marrero said the partners had to overcome “great obstacles” to get the project in Shanghai done. He didn’t specify.

Sol Meliá was chosen, among others, because it is the biggest hotel operator in Cuba, with nearly 20 years of track record.

Making the ceremony a trilateral summit, the opening was also attended by Sol Meliá President Gabriel Escarret, Suntime Chairman Yue Shiron, Cubanacan Director Luis Miguel Díaz, as well as Spain’s ambassador in China, the designated Chinese ambassador to Cuba, and the mayor of Pudong, Shanghai’s financial district.

Designed with Feng Shui principles by Sol Meliá house architect Álvaro Sans, the 30-floor hotel is the highest in the Shanghai skyline. It includes a Cuban bar.

Splashed with Cuban art

More the 3,500 sculptures, paintings, and decorative objects by 60 Cuban artists are splashed over nine floors in the hotel. The presidential suite on the 27th floor features four paintings by Roberto Fabelo; a mural by Rigoberto Mena decorates the lobby.

Havana-based art gallery La Acacia held an exhibition opening parallel to the hotel opening ceremony.

Broader tourism agenda

While in China, Marrero met in Beijing with tourism officials to boost marketing of Cuba as a destination in the fast-growing Asian source market. He also talked about additional investment projects, including preparations for the construction of the Suntime-Cubanacan hotel in Havana.

In addition, Marrero met with potential investors, as well as with Chinese travel agency and tour operator executives, and tourism media representatives.

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