ECONOMY-CUBA: Relief in Sight – Venezuelan Oil Imports to Resume

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Jul 24 2002 (IPS) - The upsurge in economic troubles Cuba has suffered over the past few months could be eased as of Aug 1 with the resumption of imports of Venezuelan oil, which were suspended in April due to Havana’s failure to meet its payments.

The bilateral agreement by which Cuba began to purchase 53,000 barrels a day of oil from Venezuela on preferential terms will go back into effect in August, Cuban Ambassador to Venezuela Germán Sánchez Otero said Monday, after the third meeting of the Mixed Commission on Cuba-Venezuela Collaboration, which began last Thursday in Havana.

Sánchez Otero’s announcement was reported by Granma, the official publication of Cuba’s ruling Communist Party.

“At last, some breathing space,” said self-employed taxi driver Tomás González, when he heard that imports of Venezuelan oil would once again begin to arrive.

“It is always said here that without sugar there is no country. But without oil there is no country either,” González, who said his income has dropped since the end of last year, told IPS.

“This country has hung on whether or not the oil tanker has arrived. Venezuelan oil will not resolve our economic problems, but it will bring some relief and tranquillity,” a government official, who preferred not to be identified, told IPS.

The situation had become so complicated in the past few weeks that authorities had to make difficult day-to-day decisions regarding activities that depend on fuel supplies, such as public transport services, said the official.

The service stations that supply government vehicles have suffered gas shortages, and fuel sales in dollars were reportedly maintained by drawing on the fuel reserves held for emergencies.

The government sent specific guidelines to public enterprises, instructing them to substantially cut their electricity consumption, to curb the power outages that affect the entire population.

The blackouts are especially difficult in the stifling summer months, when fans are not a luxury item in this tropical Caribbean island nation.

Some factories shut down production shifts, a number of offices cut short their hours, and air conditioners were turned off in shopping and services centres.

Since the middle of last year, Cuba has seen a resurgence of its more than decade-long economic crisis, which was further aggravated by the knock-on effects of the Sep 11 terrorist attacks against New York and Washington on tourism and remittances sent home by Cubans abroad.

Experts consulted by IPS said the number of tourist arrivals and money orders from overseas, Cuba’s two main sources of foreign exchange along with sugar exports, have not rallied as fast as was predicted at the start of the year.

In May, the Economy and Planning Ministry acknowledged the difficult situation faced by the country’s finances, and announced rises in the prices of a large number of products – including many basic items – that are sold only in dollars.

Tourism Minister Ibrahim Ferradaz reported this week that tourist arrivals from January to March, the high season, were 14 percent down from the same period last year.

The worst economic crisis since Fidel Castro’s 1959 revolution broke out in the early 1990s, when the east European socialist bloc collapsed, and Cuba stopped receiving 13 million tons of oil a year from the Soviet Union.

The economy adjusted itself to receiving just nine million tons a year in imports, one-third of which began to come from Venezuela in late 2000.

According to the Cuba-Venezuela oil agreement that was signed on Oct 30, 2000, 80 percent of Venezuelan oil imports are to be paid by Cuba at market price, within 90 days of delivery.

But the remaining 20 percent is sold by Caracas on soft terms – payable in 15 years, with a two-year grace period and at two percent interest.

However, Venezuela’s oil supplies to Cuba were cut off in April, when a coup d’etat overthrew President Hugo Chávez for two days. Shipments remained suspended until Havana paid more than 100 million dollars that it owed in back payments.

With the state coffers facing serious liquidity problems, Havana had to purchase oil from intermediaries, without financing, and at prices 15 percent higher than those agreed with the Chávez administration.

Cuba expects to produce around 3.3 million tons of oil this year, and hopes to meet with success in exploring for new oil reserves, in order to cut expenditure on oil imports, which totalled one billion dollars last year for the fuel consumed by thermoelectric plants alone.

From December 2000 to April this year, the country received over 25.5 million barrels of oil from Venezuela, worth 675 million dollars, for which it paid 439.7 million dollars, according to an official communique released on May 30.

Venezuela’s Minister of Production and Trade, Ramón Rosales, announced Monday that negotiations last week in Caracas between Cuba’s oil company Cupet and the Petróleos de Venezuela (PDVSA) oil monopoly sorted out all of the difficulties. But he failed to supply details on the agreement reached.

Cuba currently owes Venezuela 142 million dollars, that are to be paid within seven months. The two governments are purportedly seeking a mechanism to keep Cuba from falling into arrears again.

Sources at PDVSA say the suspension of oil shipments was the result of economic factors. But officials in Cuba admitted that the continuation of the agreement would depend on the political stability of the Chávez government.

Cutting off oil exports to Cuba was one of the first measures adopted by those who took over the PDVSA board of directors during the Apr 12-14 coup.

If new problems arise, “we will survive,” though it will be more difficult, said Cuba’s Minister of Foreign Investment Martha Lomas, who confirmed that the negotiations between the two countries had been successful.