Cash-short Cuba reports big jump in trade deficit

Cash-short Cuba reports big jump in trade deficit
Fri Dec 26, 2008 6:19pm GMT
By Marc Frank

HAVANA, Dec 26 (Reuters) - Cuba's trade deficit soared by nearly 70
percent, or an estimated $5 billion, in 2008 due mainly to rising prices
for imports such as food and oil and falling prices for nickel, its main
export, official media said on Friday.

Foreign Trade Minister Raul de la Nuez said in a speech to parliament
deputies on Thursday that imports surged 43.8 percent while exports grew
just 2.1 percent, said the Communist party daily, Granma.

The news follows reports that Cuba, battered by three hurricanes and the
global financial crisis, is facing a cash crunch that is forcing it to
seek debt restructuring with various countries and companies and delay
cash transfers for payments abroad.

"Dealing with the trade balance is a strategic issue for the country's
economic survival," Ricardo Cabrisas, vice president of the Council of
Ministers in charge of international economic relations, told the meeting.

Granma gave no figures for 2008, but estimates based on the numbers from
de la Nuez and data for 2007 would place imports at $16.1 billion and
exports at $4.4 billion, leaving a deficit of $11.7 billion.

That would be an increase of $4.8 billion, or 69.5 percent, over
official figures for 2007, that showed a deficit of $6.9 billion, with
exports totaling $4.3 billion and imports $11.2 billon.

The government reports foreign exchange data in the convertible peso
which it pegs at $1.08.

President Raul Castro, who formally replaced older brother Fidel Castro
as president in February, has been warning for several months Cuba would
have to tighten its belt due to rising international prices for food and
fuel that had pushed up the cost of imports.

The global financial crisis has made it difficult for Cuba to get credit
to purchase imports, which include 60 percent of its food.

Over the last few years Cuba has helped pay for its trade deficit, which
is a measure of goods bought and sold, through revenue from tourism and
service exports, mainly for health and education to oil-rich ally Venezuela.

Three hurricanes struck the island starting in late August, causing an
estimated $10 billion in damages.

Nickel prices have plummeted worldwide amid rising production and
falling demand to between $10,000 and $15,000 per tonne from a high of
around $50,000 in 2007.

Cuba reported a debt of $17.8 billion and current account balance of
payments surplus of $527 million in 2007, based on $9 billion in service
exports.

But tourism revenues were expected to increase by just a few hundred
million dollars this year and there was no mention by the media on
Friday of a significant increase in other service exports, all but
ensuring a big deficit in this year's current account balance of
payments. (Editing by Jeff Franks and Mohammad Zargham)

http://uk.reuters.com/article/oilRpt/idUKN2629982020081226?sp=true