Key political risks to watch in Cuba - 09-2011

Key political risks to watch in Cuba
Mon Sep 5, 2011 1:01pm GMT
By Jeff Franks

HAVANA, Sept 5 (Reuters) - Cuba is moving slowly on its economic
reforms, at least publicly, while keeping a wary eye on the health of
its top ally, Venezuelan President Hugo Chavez, and waiting anxiously
for a Chinese-built drilling rig on its way to explore for oil in Cuban
waters.

ECONOMIC REFORM

There has been little word of late about the progress of reforms that
President Raul Castro hopes will assure the survival of Cuban communism,
but he complained to the National Assembly about bureaucratic resistance
holding back the changes. [ID:nN1E77M0XX]

The reforms are aimed at improving productivity and prosperity by
modestly liberalizing the island's Soviet-style economy. Castro wants to
reduce the role and cost of government and has vowed to slash over the
next few years a million jobs from state payrolls in a process that has
already begun.

The government has opened up self-employment opportunities so that more
Cubans can earn their living in the private sector. It says a third of
Cuba's work force of 5.2 million will be "non-state" by 2015, up from 15
percent in 2010.

As of July, officials said 325,000 people were working in the
self-employed sector, up from 150,000 in 2009. [ID:nN1E76TO2K]

Cuban media has reported that in October many small service businesses
run by the state will be leased to employees to run essentially as
private businesses, in an extension of an experiment that began last
year with barber shops and beauty salons.

President Castro has said details of key reforms such as plans to
liberalize the sale of homes and cars will be unveiled later in the
year. Changes to give state-owned companies more autonomy have not yet
been disclosed. [ID:nN09221946]

He told the National Assembly plans were afoot to loosen up Cuba's
restrictive travel and immigration rules, also to be revealed toward the
end of the year. [ID:nN1E7701VN]

Castro is trying to raise sagging agricultural output by handing out
idle plots for planting and other measures. Nearly 150,000 people are
cultivating previously unused land, with mixed results so far.
[ID:nN1E7710FM]

State media said the coffee harvest has begun in eastern Cuba, where 85
percent of its coffee is produced. It is expected to be only slightly
better than the 6,000 tonnes last year, one of the worst in the area's
history. [ID:nN1E7810LS]

What to watch:

-- The final version of reforms.

-- The progress and impact of government layoffs.

-- The numbers and performance of the newly self employed.

-- Agricultural production.

FINANCIAL HEALTH

Cuba's finances have slowly improved from a liquidity crisis that led to
a default on payments and freezing of foreign business bank accounts.
[ID:nN24211495]

President Castro told the National Assembly the bank accounts issue
would be resolved by year's end.

The government has said tax payments from the self-employed have boosted
revenues and that its top hard currency earners -- tourism and nickel
exports -- have improved this year.

The island's deposits in international banks also have increased.

Castro said Cuba's economy was expected to grow 2.9 percent this year,
up from 2.1 percent in 2010, but warned that global economic problems
could darken the picture.

Long-awaited golf course developments, aimed at attracting wealthier
tourists, remain on hold. [ID:nN04118234]

The first Americans to visit Cuba under more flexible travel rules put
in place by U.S. President Barack Obama have begun arriving. [ID:nN1E77F13C]

What to watch:

-- Progress on liquidity crisis.

-- Effects of global economic problems.

-- The growth of American travel to Cuba

OIL PLANS

A Chinese-built rig owned by Italian offshore company Saipem and
contracted by Spanish oil company Repsol YPF has set sail from
Singapore, with arrival in Cuba expected by Nov. 1. Soon after it
reaches Cuban waters, it will begin the first full-scale oil exploration
in Cuba's part of the Gulf of Mexico. [ID:nN1E77P03U]

Malaysia's Petronas, in partnership with Russia's Gazprom Neft, will use
the rig after Repsol to drill in their offshore Cuban leases

Federal lawmakers from Florida have introduced legislation trying to
stop the drilling, saying exploration there poses environmental dangers.
[ID:nN24203352] U.S. oil companies are forbidden by the long-standing
U.S. trade embargo against Cuba from operating in the communist nation.

Cuba depends on imports from its oil-rich ally Venezuela, but says it
may have 20 billion barrels of oil offshore. The U.S. Geological Survey
has estimated 5 billion barrels.

China has signed an agreement to play a major role in increasing Cuban
oil production both onshore and offshore, although details were not
disclosed. [ID:nN08140650] State-owned China National Petroleum Corp is
said to be considering leasing exploration blocks in Cuban waters.
[ID:nN1E76C1S6] China also committed to negotiations of contracts for a
$6 billion expansion of Cuba's Cienfuegos refinery and a liquefied
natural gas project. [ID:nN22266891]

What to watch:

-- Arrival of drilling rig.

-- Results of Repsol's exploratory well.

-- Fate of U.S. legislation on Cuba drilling.

-- China's growing involvement in Cuban oil development.

FOREIGN RELATIONS

Cuba's biggest concern at the moment is the health of Chavez, who
provides 114,000 barrels of oil a day and investment to Cuba but now is
battling an undisclosed type of cancer. He has said he expects a full
recovery, but if his illness were to damage his chances for re-election
in 2012 or take a turn for the worse, Cuba would have to hope he is
replaced by someone as devoted to the island.

Chavez is very close to former leader Fidel Castro, who is 85 and
increasingly frail. Unconfirmed rumors emanating from Venezuela have
portrayed him as gravely ill. Cuban officials have said nothing, but a
pro-government blogger sometimes used to get out the government's first
reactions, has said he is fine.

U.S.-Cuba relations, which thawed briefly under Obama, have been frozen
by the imprisonment in Cuba of U.S. aid contractor Alan Gross.
[ID:nN24221723] He was sentenced to 15 years for providing Internet to
Cuban groups under a U.S. program promoting political change in Cuba
[ID:nN12265306] and Cuba's highest court affirmed the sentence in
August. [ID:nN1E77411A] (Additional reporting by Marc Frank; Editing by
Kieran Murray)

http://af.reuters.com/article/energyOilNews/idAFRISKCU20110905?sp=true