Trade with China helps Cuba to move up a gear

Trade with China helps Cuba to move up a gear
von Marc Frank
Bilateral deals to restore the island's crippled transport
infrastructure are picking up speed as China profits from high-level
support.

Cuba is turning to Chinese companies rather than western ones to
modernise its crippled transport system at a cost of more than $1bn,
continuing a trend of favouring the fellow Communist country that has
made Beijing Cuba's second trading partner after Venezuela.

Buses plying Cuba's highways increasingly come from the Yutong Bus
Company and railway locomotives from the 7th of February works on
Beijing's outskirts. Cuba's ports are being revamped with Chinese
equipment, in part, to handle 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, Cuba's president. Enabled by friendly ties with a government
that is ready to resist US pressure, trade cover insuring low-cost
credit, and what Mr Castro says are competitive prices and fuel
efficiency, more buses, locomotives, train cars, trucks and cars are on
the way.

China reported 2005 bilateral trade between the two countries up to
November was $777m, up 62.5 per cent year-on-year. The increase was
mainly due to $560m in Chinese exports to Cuba, up 91 per cent.

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

But the 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 political relations are
excellent," he said.

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

Fifteen years after the demise of the Soviet Union plunged Cuba into
crisis, passenger transport numbers stand at 30 per cent 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 in the 1990s, with an eye to supplying the
growing tourist industry and replacing Soviet equipment if Havana ever
had the cash. Now Mr Castro does have it 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 grew by more than 30 per cent, or about
$2.5bn, last year, according to senior central bank officials, and the
country had a current account surplus for the second consecutive year.
Most of the new income came from a direct payment from Venezuela for
medical services and from other Caribbean and Latin American countries
under preferentially financed oil agreements, such as the PetroCaribe
accord.

Government sources said Mr Castro was micro-managing the budding trade
relationship with China, in part because it was related to his campaign
to save on subsidised energy and fuel through greater efficiency.

The first 1,000 buses plus spare parts cost $100m, to be paid over four
years at 5 per cent interest, Mr Castro said at a ceremony where they
were symbolically received. The deal, along with the other transport
projects, was guaranteed by $400m in Chinese government trade cover, the
sources said, overcoming whatever fears Chinese companies might have
about doing business with the Caribbean island.

ftd.de, 08:19 Uhr
2006 Financial Times Deutschland

http://www.ftd.de/karriere_management/business_english/62294.html