ECONOMY: Hot Summer Saps Cuba’s Energy

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jun 26 2003 (IPS) - The high temperatures and scorching sun beating down on Cuba these days are jeopardising the government’s energy savings plans, aimed at reducing fuel imports at a time of continued economic difficulties aggravated by a poor sugar harvest.

”The hotter it is, the more is spent on electricity, because fans and air conditioning units run constantly. That is normal at this time of year,” the start of summer, a researcher familiar with the energy sector told IPS.

Shelling out scarce foreign exchange for fuel imports continues to be one of Cuba’s biggest financial challenges, despite the fact that most of the electricity used on this Caribbean island nation is generated by locally produced oil.

That problem has been compounded by the small sugar harvest, which ended this week.

Diplomats speculate that the fact that the government has not yet announced the size of this year’s yield confirms the projections of experts who believe the harvest stands at between 2.1 million and 2.2 million tons, far from the already low 2.7 million tons predicted by the government.

If that is true, the country could lose around 180 million dollars in revenues due to the shortfall in sugar exports, the analyst, who preferred not to be named, told IPS.

The country’s main sources of foreign exchange are tourism, the sugar industry and expatriate remittances from Cubans living abroad.

Cuba continues to feel the effect of financial troubles caused by the drop in tourism triggered by the Sep. 11, 2001 terrorist attacks on New York and Washington, which had a heavy impact on global air travel flows and tourism.

In addition, three hurricanes in the past two years caused over two billion dollars in losses.

The socialist government of Fidel Castro was forced by high oil prices and the country’s weak financial situation to implement a series of measures since the second half of 2002 aimed at reducing energy consumption and imports.

The programme, which according to official estimates could lead to nearly 400 million dollars in savings in a single fiscal year, includes restrictions on electricity use by companies not directly involved in production or trade.

In addition, the surface area planted in crops using irrigation systems that run on locally-produced electricity rather than imported diesel fuel, which is needed to keep the mass transit systems running, was increased.

Crops are irrigated in the early hours of the morning, in order to avoid competing with electricity use in residential areas, which consume around half of all energy on the island.

Fuel shortages have contributed to reducing collective transport in urban areas to half of the normal capacity.

As part of a longer-term strategy, the government set up the Renewable Energy Front (FRE) in October 2002, to promote the use of alternative sources like wind, solar and photovoltaic energy.

Under that project, all central administration entities must include an allotment of resources for the development of renewable energy sources in their 2004 budget plans.

Experts say the renewable energy plan will not only help the country deal with the burden of high oil prices, but will also increase the use of alternative energy sources, in line with the commitment assumed by Latin America at the World Summit on Sustainable Development, held last year in Johannesburg, South Africa.

According to official statistics, this Caribbean island nation of 11.2 million consumes around eight million tons of oil a year, five million less than what it received from the Soviet Union until it fell apart in 1991.

In 2002, Cuba produced 4.1 million tons of oil and natural gas, which generated around 90 percent of the electricity consumed on the island, and covered all of the country’s cement production and nearly 20 percent of demand for refined crude.

The remaining 50 percent of national consumption is covered by imports from Venezuela and other markets.

But since last year, Venezuela’s political crisis has had a strong impact on the agreement through which that country sells Cuba 53,000 barrels a day of crude and derivatives, including diesel and airplane fuel and gasoline.

Under the bilateral agreement, Cuba pays for 80 percent of the fuel shipments from Venezuela at market price within 90 days of delivery, while the remaining 20 percent are payable within 15 years, with a two-year grace period, at two percent annual interest.

However, the oil shipments were cut off twice in the past 14 months.

The first time was due to the frustrated coup d’etat in which Venezuelan President Hugo Chávez was overthrown for two days in April 2002.

The second was caused by the December-January general strike called by Venezuela’s main business association and trade union, as well as managers of the state-owned oil industry, in another unsuccessful attempt to topple Chávez.

The interruptions of deliveries by PDVSA, the Venezuelan oil company, ”caused us hundreds of millions of dollars in economic damages from April 2002 to date,” a Cuban Foreign Ministry spokesman complained on Jun. 9.

The suspensions of deliveries led to an accumulation of Cuba’s debt to Venezuela, which the two countries have had to renegotiate in order to renew the agreement in effect since 2000, which was criticised from the start by anti-Chávez sectors.