Friday, December 10, 2010

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

Posted on Friday, 12.10.10
US cable: Cuba to be insolvent within 2-3 years
Associated Press

HAVANA -- 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

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

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

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