Chinese firms helping upgrade transportation

Posted on Fri, Mar. 10, 2006

CUBA
Chinese firms helping upgrade transportation
Cuba has been tapping friendly trade relations with China to modernize
its infrastructure.
BY MARC FRANK
Financial Times

HAVANA - Cuba is turning to Chinese companies rather than western ones
to modernize its crippled transportation system at a cost of more than
$1 billion, continuing a trend of favoring the fellow communist country
that has made Beijing Cuba's No. 2 trading partner after Venezuela.

Buses plying Cuba's highways increasingly come from the Yutong Bus
Company, and railway locomotives arrive from the 7th of February works
in Beijing's outskirts.

Cuba's ports are being revamped with Chinese equipment, in part to
handle the millions of Chinese domestic appliances that began arriving
last year. Oil rigs along Cuba's northwest heavy-oil belt boast Chinese
flags.

And this is only the beginning, says Fidel Castro.

Enabled by friendly ties with a government that is ready to resist U.S.
pressure -- trade cover insuring low-cost credit and what the Cuban
president says are competitive prices and fuel efficiency -- there are
more buses, locomotives, train cars, trucks and cars on the way.

Cuba's ''maximum leader'' announced last month he was negotiating
personally the purchase of 8,000 buses to be partially assembled on the
island. Castro estimated that the cost of the vehicles and old ones
fitted with new motors would exceed $1 billion. In addition, there's a
deal for 500 Chinese railway cars and thousands of trucks and cars.

China reported 2005 bilateral trade between the two countries up to
November was $777 million, up 62.5 percent from a year earlier. The
increase was mainly due to $560 million in Chinese exports to Cuba, up
91 percent.

ELECTRONICS

China has provided Cuba with about $500 million in trade cover to
develop communications and electronics. Direct investment between the
countries is only about $100 million. Plans to jointly produce nickel
and cobalt have yet to materialize.

But the budding commercial relations are still far removed from past
ties with the Soviet Union, says Cuban economist Omar Everleny. ''You
can't say our relations are like those with the Soviets. They are
strictly commercial, though with very low interest, and behind that,
[the] political relations are excellent,'' he said.

The two countries were bitter foes during the Sino-Soviet dispute.

Even today, China and Cuba appear to be heading in different directions,
with the former adopting market economics and the latter clinging to a
command economy that frowns on entrepreneurship and where more than 90
percent of the economy is in state hands.

SLOW RECOVERY

Fifteen years after the demise of the Soviet Union plunged Cuba into
crisis, passenger transport numbers stand at 30 percent of the 1989
level in a country where few own cars.

Internal freight traffic is only now beginning to recover and the truck
and heavy machinery stock consists mainly of old petrol-guzzling
vehicles from the Soviet era.

Western companies such as Volvo, Mercedes-Benz, Alstom, Toyota and Fiat,
entered the Cuban market through representative and subsidiary companies
in the 1990s with an eye to supplying the growing tourist industry and
replacing Soviet equipment if Havana ever had the cash.

Now Castro does have the cash, but it is China that is benefiting,
although Havana still imports large volumes of agricultural goods and
medical equipment from other countries, as well as fuel from Venezuela.

Cuba's foreign exchange earnings increased by more than 30 percent, or
about $2.5 billion, last year, according to senior central bank
officials. And the country had a current account surplus for the second
consecutive year.

Most of the income came from a direct payment from Venezuela for medical
services and indirectly from other Caribbean and Latin America countries
under preferentially financed oil agreements, such as the 13-member
PetroCaribe accord.

Castro was micro-managing the budding trade relationship with the Asian
giant thousands of miles away, in part because it was related to his
campaign to save on subsidized energy and fuel through greater
efficiency, government sources said.

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