Saturday, December 25, 2010

WikiCuba: Cuba derrocha y Venezuela paga.

Una vez mas se corrobora. Cuba depende, como un chulo, del dinero de su nueva prostituta -Venezuela-, para sufragar su existencia plebeya. No hablo de los regalos exuberantes que Venezuela le roba a su pueblo, para ponerlo a los pies  de su jefe,hablo del "Cash-Efectivo". Todos los chulitos en Cuba esperan deseosos las maletas de Chavez. ?Hasta cuando durara el mana venezolano? Bueno, al criterio del diplomatico de Obama en Cuba, esta mermando. Al unico que le pagan a tiempo es a Los Estados Unidos y esto tiene consternado al resto del munsdo: No es justo que Cuba le pague a los "gringos" enseguida y ellos tengan que esperar por Chavez, no en balde estan desesperados por levantar las restricciones y asi sentirse menos envidiosos.Y todo gracias a la sabiduria de nuestros congresistas. Por eso han sido reelegidos.

Juan Cuellar




DE RUEHUB #0322/01 1551354


R 041354Z JUN 09















E.O. 12958: DECL: 06/03/2019




¶B. 06 HAVANA 8017


¶D. 07 HAVANA 761

Classified By: COM Jonathan Farrar for reasons 1.4 (b) and (d)




¶1. (C) The combination of new warnings of potential

blackouts, serious liquidity issues, and potential (if not

already) reduced financial support from Venezuela has sparked

rumors on the street and in the international media that Cuba

may be headed toward another "Special Period". The reality

is that Cuba and Cubans are not as vulnerable as they were in

1989 before the end of Soviet subsidies. However, the Cuban

economy remains remarkably dependent on external markets and

access to credit. While the level of foreign reserves is a

well guarded secret, some analysts and USINT contacts believe

the GOC could run out of cash later this year without a

significant change of course. Energy austerity measures

officially began on June 1, starting with state companies and

then potentially moving to households. We expect a reduction

in non-fuel imports as a next step. End Summary


Are We There Yet? No, But...


¶2. (C) The standard of living for Cubans, while still not as

high as twenty years ago before the end of Soviet subsidies,

remains much better than the darkest days of the 1990 to 1993

period when GDP fell more than 35 percent. While we expect

zero to negative GDP growth in 2009 (Ref A), Cuba's latest

challenges have yet to seriously affect the average Cuban.

The GOC blames its current macroeconomic woes on the world

economic slowdown, the U.S. embargo, a particularly

destructive 2008 hurricane season, and general inefficiency

and waste. The GOC is quick to point out that no Cuban will

be evicted for failure to pay a mortgage and Cuban jobs

remain secure while rich countries are experiencing massive

layoffs. Nevertheless, the GOC has previewed other

difficulties that could soon reach Cuban households.

Liquidity Crunch


¶3. (C) Cuba has been in a perennial state of late-payment

for decades; sometimes due to legitimate cash shortages and

at other times simply as a negotiation tactic. Cuba has long

pointed to the crisis of the day to renegotiate short term

official debt, and we can not rule out that the GOC is simply

using the current world economic crisis to improve its cash

position. However, diplomatic contacts agree that Cuba's

current liquidity crunch is much deeper than in recent years.

Foreign companies are waiting three to six months to receive

payment, and some have already agreed to sell their assets

back to the GOC (Pebercan) or restructure their accounts

receivables (Sherritt) into medium to long term government


¶4. (C) The latest holdup appears to be at the banking level,

as Cuban state companies are reportedly making payments on

time but the payment transfers are delayed by the bank for

months before being released to the foreign enterprise.

Alternatively, the funds are deposited in the foreign

company's account for use within Cuba but they are not

permitted to transfer the funds abroad or into a foreign

currency. Initially, Cuban officials blamed the need to

divert resources to assist in the recovery from last year's

hurricanes, but now the main culprit appears to be the world

economic crisis. A reported collapse in all of Cuba's main

sources of foreign currency (nickel exports, tourism,

remittances) and an increase in the quantity and price of

Cuban imports have magnified an already increasing debt

burden. It is clear that the GOC is hemorrhaging cash.

Whether it has reached the crisis point or not is less clear.

Either way, the Cuban banking sector has lost much of the

credibility it had built in recent years, which has led some

HAVANA 00000322 002 OF 005

to speculate that long time Central Bank President Francisco

Soberon may finally be on his way out.

¶5. (C) CIMEX, Cuba's largest and most diversified holding

company, reported on May 20 that payments for some imports

have suffered delays, but the "will of the country" was to

meet its financial obligations. CIMEX also reported that

remittances were down so far in 2009. CIMEX controls Banco

Financiero International, the most important Cuban bank for

foreign trade related transactions, and the relationship with

remittance providers including Western Union and Canada's

Transcard through Financiera CIMEX. According to Reuters,

the GOC has called government ministries to cut spending by 6

percent and limit imports. European and Canadian diplomats

report reduced exports to Cuba so far this year, especially

for machinery and other non-food items. Ironically, and to

the visible dismay of our diplomatic colleagues, U.S. exports

to Cuba through the first quarter of 2009 were higher than

even last year's historic level. This dismay is heightened

by the fact that U.S. companies are paid on time while others

must wait as reported above. U.S. exports make up much of

the food consumed by Cubans and sold in the income generating

tourist industry, and U.S. law requires payment in cash in

advance. However, there are recent reports that Cuban

purchases of U.S. meat products have been cut through the

rest of 2009.

Threatened Blackouts


¶6. (SBU) In 2005, Fidel Castro announced that his new Energy

Revolution would put a stop to blackouts in Cuba by the end

of 2006. The GOC took several measures over the next few

years to limit future blackouts (Ref B), including increasing

household electricity bills, swapping out refrigerators and

light bulbs, and importing hundreds of small generators.

Despite these steps, the official press announced on May 22

that "exceptional measures to save electricity shall be

applied throughout the country starting 1 June in an effort

to curb overconsumption, bring every center, municipality,

and province in line with their plan, and prevent power

cuts." The GOC identified 1,700 state enterprises as high

electricity users, 3,000 examples of waste in the public

sector, and four provinces with increasing home consumption.

The GOC is taking extreme measures to prevent countrywide

blackouts. A new austerity plan is being implemented by each

municipality and state enterprise to conserve energy. Local

energy councils are monitoring the daily use of electricity

and local authorities are conducting surprise inspections.

In the first few days of the new plan, provinces have been

strict in their stated intention to shut off a company's

electricity if it exceeds its budgeted allowance. There are

reports that the Holguin province shut off the electricity

for the offices and warehouses of the three nickel plants due

to overconsumption, although the plants themselves continue

to operate.

¶7. (SBU) Although households are not included in the formal

austerity program, the official press has highlighted fines

levied on residents caught rigging electricity meters, urged

personal energy savings, and threatened countrywide blackouts

if the situation doesn't improve. The summer 2005 blackouts

were a serious strain on Cuban households and the possibility

of a return to those days despite years of supposed reform in

the sector has clearly disappointed our Cuban contacts.

Frequent but short-lived power outages already take place on

a daily basis, but many Cubans refuse even to speculate on a

return to scheduled blackouts. Blackouts mean spoiled food,

no air conditioning during the brutal summer months, and no

cooking since the GOC recently swapped most gas stoves with

an electric version from China. According to GOC officials,

the root of this summer's energy crisis is not a lack of

generation capacity (as in 2005) but a shortage of fuel.

Cuba uses much of its own heavy crude oil for domestic

electricity production, but also relies on imports, in

particular Venezuelan deliveries of refined products to power

the (diesel) gas guzzling generators.

--------------------------------------------- ------------

Potential Triggers: Venezuela, Hurricanes, or Insolvency

--------------------------------------------- ------------

HAVANA 00000322 003 OF 005

¶8. (SBU) Venezuela: In addition to oil deliveries, Cuba and

Venezuelan oil conglomerate PDVSA have significant joint

ventures in Cuba, Venezuela, and other Petrocaribe countries.

Within Cuba, these ventures are focused on building and

expanding oil refining capacity, oil prospecting, gas

production, maritime transportation (crude oil and

byproducts), housing construction, agricultural production,

access to potable water, fishing, and transportation

services. Potential future operations include increasing

storage capabilities, enlarging cargo docks and navigation

channels, and constructing a network of pipelines, roads, and

services infrastructure. Venezuela has taken over from China

a joint venture to build a new nickel plant within three

years. In addition, Cuba and Venezuela are working on a

fiber optic cable with an ever changing completion date,

currently some time in 2010.

¶9. (C) The GOC started hinting that all was not rosy with

its economic relationship with Venezuela when, in an

unusually public display, the front page of the Communist

Party newspaper Granma reported on May 21 that Venezuela

would experience a 50 percent drop in petroleum revenue in

¶2009. The GOC reference to a lack of fuel rather than

generation capacity to explain energy shortages could

indicate either a reduction (or delay) in fuel supplies from

Venezuela or disappointing refining results through the

Cuba/PDVSA joint venture projects. A French diplomat told us

that a French company inquiring about its overdue accounts

receivable from a Cuban bank was told that the bank had to

wait until funds arrived from Venezuela. Cuba is not yet as

dependent on Venezuela as it was on the Soviet Union.

However, a potential loss of even partial support for the

many activities Venezuelan enterprises are now involved in

would severely impact several facets of the Cuban economy. A

reduction of oil shipments in 2010 (Ref C) could bring the

economy to a halt.

¶10. (SBU) Hurricanes: The 2008 hurricane season devastated

many parts of the island (Ref D), but it mostly missed the

foreign income generating regions of Havana (tourism and most

industry), Matanzas (tourism), and Moa (nickel). It also had

only a modest effect on the sugar and tobacco industries.

The 2009 hurricane season, which began on June 1, is expected

to be less severe than 2008. However, one or two hurricanes

that target these regions would cut Cuba's foreign earnings

even further and raise serious questions around Cuba's


¶11. (C) Insolvency: Cuba effectively ran out of reserves in

1992 at the height of the Special Period. At that time,

Cubans experienced extensive cuts in their rations (food,

clothing, electricity, and fuel), a near end to public

transportation, and strict black market crackdowns. Since

the end of the Special Period, Cuba has built up some foreign

reserves, but, as one European diplomat with good ties in the

Cuban banking sector told us, the exact number remains one of

two key national secrets (along with the details of Cuba's

financial arrangement with Venezuela). The Central Bank of

Cuba has implemented strict new measures limiting foreign

currency transactions by foreign companies and further

controlling transactions by state companies. The French

Commercial Counselor expects Cuba to reach bankruptcy or near

bankruptcy by the end of the year.


Is Cuba Better Prepared This Time?


¶12. (C) Cuba's over-reliance on credit to pay for critical

imports and dependence on Venezuela for more than just oil

remain Cuba's primary vulnerabilities. In contrast to 1989,

however, Cuba has diversified both its trading partners and

sources of foreign currency. Whereas the former Soviet Union

represented 80 percent of Cuba's total trade in 1989, Cuba's

top five trade partners in 2007 represented only 60 percent

of total trade (in goods) with Venezuela on top at 20 percent

(followed by China with 18 percent, Canada with 10 percent,

Spain with 8 percent, and the United States with 4 percent).

Detailed 2008 numbers have not been released yet. All of

these partners, with the exception of the United States,

HAVANA 00000322 004 OF 005

offer Cuba extensive credit. The Spanish Commercial

Counselor told us that Spain is close to concluding a

renegotiation of its short term debt with Cuba. Spain and

Cuba have already agreed on the new structure of the debt

(some cancelled, the rest longer term) and the applicable

interest rate. The only remaining obstacle is how much new

credit Spain will offer Cuba.

¶13. (C) Some of the reforms that helped bring Cuba out of

the Special Period will also provide a cushion for the Cuban

economy today. Even with an expected fall in tourism this

year, Cuba may receive close to 2 million more tourists than

the 340,000 that arrived in 1990. Earlier this year, Cuba

re-started licensing private taxi cabs. Local paladars

(small, private restaurants) frequented by USINT staff remain

profitable self-employment ventures. Although remittances

are reportedly down so far this year, presumably due to the

world economic crisis, money and visits from family members

living abroad remain an important source of income for many

Cuban families. In addition, foreign investors remain

interested in key sectors like hydrocarbons and tourism in

spite of Cuba's liquidity problems, possibly in order to keep

a foot in the door before a hypothetical opening to U.S.

business. Furthermore, the Cuban government is much better

at capturing foreign currency than before 1990 through

customs, fees, taxes, and hard currency stores.

¶14. (SBU) The Special Period is still fresh in the minds of

all Cubans. For most, the problem was not one of income but

rather of a lack of supply. There was simply nothing to buy

and very little provided by the state. As a result, Cubans

have spent the past twenty years learning how to "escapar"

(literally to escape but usually meant to survive) without

relying on GOC assistance. The 2008 hurricanes returned many

families in eastern Cuba, Pinar del Rio, and the Isle of

Youth to desperate conditions with insufficient government

assistance. According to the World Food Program, most

hurricane assistance has now been delivered, so victims will

have to rely on their own efforts for sustenance (see septel

for information on the pending European Community aid package

which includes some humanitarian assistance). The

destruction caused by last year's hurricanes means that some

Cubans don't have as far to fall to reach standards of living

similar to the Special Period.

¶15. (SBU) On May 24, state newspaper Juventude Rebelde

reported on interviews conducted to determine how Cubans see

the effects of the global economic crisis on the country.

Most of the interviewees urged readers to "work harder" and

"soldier on" to help the country through this difficult time.

One retiree said he didn't think this is going to get as bad

as in the worst of the days of the 1990s. Several

respondents said Cubans were better prepared since they have

been trained to live through similar crises. The article

sought to dampen rumors of "catastrophic overtones" including

"no oil, soap, and other staples, (and) that the blackouts

will come back and that they will be long." The GOC and

official press have yet to offer any solutions other than a

call on the patriotic duty of all Cubans to save more and

spend less. Several GOC officials have echoed a 2005 quote

by Central Bank President Francisco Soberon turning the

political motto "Fatherland or Death" into its economic

equivalent of "Savings or Death".




¶16. (C) Daily life for most Cubans remains extremely

difficult primarily due to a backward and mismanaged economy

and the lingering effects of last year's hurricanes. The

summer months promise even more hardship as the world

economic crisis finally makes its way to Cuban households.

Nevertheless, today's Cuban economy is less vulnerable to a

return to the lows of the Special Period thanks to more

diversified sources of income and credits, a more resourceful

Cuban population, and an actual (remittances and travel) and

theoretical (end of the embargo) opening of U.S.-Cuban

relations. By even mentioning the possibility of blackouts,

the GOC is trying to set the expectations of Cubans as low as

they can possibly go without triggering public unrest. If

HAVANA 00000322 005 OF 005

the GOC can show that Cubans working together can

successfully prevent massive blackouts, then it can at least

show level of competence and socialist pride. Further risks

remain, however, as hurricane season approaches and both

Venezuela and Cuba face their own financial crises.


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