The truth about the economic emergency in Cuba.

The truth about the economic emergency in Cuba.
Jorge Cruz Inclan
May 29, 2009

In a previous post looking for possible causes of the current energy
emergency in Cuba. The cause could be in Venezuela, the world crisis and
the downturn that Venezuela has to maintain a generous assistance to the
government in Havana. Venezuela's economic problem are real and may
affect the future supply of Venezuelan oil in the current, but does not
justify an immediate emergency, Venezuela has fulfilled its commitments,
the Cienfuegos oil refinery produces well, two new tankers have the
operation.

The current energy emergency is the decline in Cuban oil production,
declining steadily since the end of 2003 to date. The deficit in
domestic production is 54% compared to 2003 production. In 2007 the
Cuban petroleum deficit amounts to 10.3 million barrels. In turn we have
an unexplained sustained increase in consumption of oil across the
country in the same period. In 2007, the oil consumption of the Cuban
economy is 41% compared to 2003. This year, the consumption of oil
amounts to 25.5 million barrels.

The bad behavior of these two indicators has been gradually increasing
since 2003 and will affect negatively on the national economy in a clear
way. Throughout the period the government took no steps to correct the
trend and avoid the disruption of oil. This is not a spot on consumption
as reported recently in the Granma newspaper of 40 000 tones of oil
(representing 292 000 barrels of oil). Only a very small deficit
equivalent to almost three days of Venezuelan aid.

The total national oil consumption and decreasing domestic production of
oil in 2007 totaled 35.8 million barrels of oil. Simply put this amount
of oil completely cancels Venezuelan aid is 34 million barrels annually.
Besides a disbelieving spectacle in a country in a state of permanent
economic problems of balance of payments and a huge foreign debt, there
are other problems within which targets could be considered:

Insufficient planning of the company CUPET. Low investment in machinery
and new wells to keep production stable.

Non-payment and late payments to the company Sherritt International
Corp. of Toronto and Pebercan Inc. of Montreal. Both companies delivered
CUPET oil, this company sells it and then paid to Canadian companies.
Pebercan Inc. has withdrawn from Cuba by default and has filed bankruptcy.

The firm Sherritt International has a dispute with CUPET delays in
payments for years. Minister Malmierca recently was denied an entry visa
to Canada, to attend annual meeting of the Canadian company. This is
unprecedented and reveals the level of problems among companies and also
among the two governments.

Finally it is known that consuming industries such as Cuban nickel at a
cost of 135 barrels of oil per ton and the sugar industry with a high
consumption have increased their production.

Cuba's government must now seeks the causes of this energy crisis and
stabilize the oil deficit. Most likely Castro was informed of this
matter and was the cause for the impeachment of Vice President Carlos
Lage and Foreign Minister Perez Roque. But the people will surely turn a
few more years of economic hardship. This time American imperialism is
not the cause of the disaster.

Sources consulted:

Statistical Yearbook for Latin America 2008.OLADE

Will Weissert. Exploration and drilling for oil in Cuba - Is anyone
making money? Feb. 2009. Associated Press.

Oscar Espinosa Chepe. Cuban Economy: expectations and risks. Encuentro.

Fabio Garcia. System of Units and Conversion Factors. OLADE, 2006

Omar Pérez Villanueva. Cuba: an assessment and need some ideas for
change. Nueva Sociedad 216, julio-agosto 2008.

Paolo Spadoni. The Current Situation of Foreign Investment in Cuba. ASCE
2004

American Chronicle | The truth about the economic emergency in Cuba. (29
May 2009)

http://www.americanchronicle.com/articles/view/104251