Foreign exchange control tightened after oil discovery

Campaign News | Saturday, 1 January 2005

Havana prepares for economic boom

HAVANA, Dec 31 - Cuba yesterday made a surprise move to tighten the government's grip on hard currency, on the heels of an oil find that breathes new life into the economy.

The government said in a statement that from January 1, all revenues from state-run businesses must be channelled through Cuba's central bank.

"Next year, there will be a considerable increase in financial in-flows from abroad," thanks to deals with China, Venezuela and an oil exploration and production deal with Canada's Sherritt, explained the note, signed by bank chief Francisco Soberon.

President Fidel Castro announced on December 25 that oil reserves of at least 100 million barrels had been found off the north coast near Santa Cruz del Norte, east of Havana, which is to be developed by a Cuban state firm in co-operation with Sherritt.

Cuba has been in economic straits since the collapse of the former Soviet bloc.

Havana has been unable to complete a Soviet-technology nuclear reactor that was planned for Juragua. Energy for years has been the Achilles heel of its economy.

And with its oil-burning plants, Cuba has had to rely on Venezuelan imports, while its own crude - which is high in sulfur - has required costly cleaning to be used.

Venezuela, Latin America's only OPEC member, delivers 53,000 barrels of crude a day to Cuba.

Now, the new find - Cuba's first since 1999, and cleaner than other homegrown crude - catapults Havana toward energy self-sufficiency.

Cuba's future capital movements "must be tightly controlled to ensure their optimum use," Soberon's note stressed.

The shift would make the central bank the only Cuban institution authorised to move hard currency; state businesses would have to seek special authorisation to do so.

In November, Cuba took the US dollar out of circulation in Cuba, more than a decade after having made it co-legal tender.

Cubans, having no alternative, exchanged their greenbacks for "convertible pesos" usable only on the island. The government invented the currency - which Cubans call "chavitos" or "Monopoly (board game) money" - to make up for the short supply of dollars.

When he met Chinese President Hu Jintao in November, Castro threw the spotlight on precisely how differently his government has adjusted to the post-Soviet era: He told his key communist ally that Cuba would pursue social goals its own way - that is, he has no plan to embrace international capitalism as China has.

Havana 24 Dec - President Fidel Castro announced the discovery of a crude oil deposit off shore Cuba apparently containing 100 million barrels.

Speaking before the National Assembly in Havana at closed doors but only revealed at Christmas, Mr. Castro said "This is the first discovery since 1999; an exploratory well drilled between December 14/19 produced a thousand tons".

The deposit should be in full production 2006/07 in association with the Canadian oil company Sheritt that has been working with the Cuban oil company and energy producing plants for almost two decades.

The well on the north coast of the island is 55 kilometres east of Havana.

For Cuba with a production of 75,000 bpd, the Xmas announcement is a true gift since the country imports over half of its consumption, mostly from political ally Venezuela.

Oil specialists believe Cuban waters in the Gulf of Mexico could contain large quantities of crude, similar to those exploited by Mexico and United States.

Purchases from Venezuela in the framework of an energy agreement signed in 2000 are partly paid by Cuban doctors and teachers working in Venezuela’s shanty towns.

The news was coincident with Mr. Castro’s public walking reappearance two months after having broken his knee cap and fractured an arm during a speech last October 20.

Wearing his olive green military uniform Mr. Castro was shown walking to the National Assembly aided by a young girl where he was cheered and applauded by hundreds of law drafters.

Mr. Castro stood briefly in public a month ago to receive visiting Chinese president Hu Jintao and when Venezuelan president Hugo Chavez visited him a week ago.

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