Tuesday, March 06, 2018

News From Cuba: Fear of Rising Foreign Debt, Challenges for Development, and Few Short Term Prospects; Resolution 19/2018 Banco de Cuba

(Pix © Larry Catá Backer 2018)

Since the failure of U.S. Cuba normalization, and the return to the reactionary status quo, which older people appear to feel more comfortable  with (like a pair of old and well worn slippers that provide a comforting nostalgia, whatever one's political and ideological allegiance), Cuba has also returned to its perhaps also comfortable state of perpetual penury, especially with respect to its never ending search for financing of its centrally planned economic development. 

Two recent reports from Cuba suggest the contours of both that penury and its consequences for Cuban economic development, at least for the short term.  History has taught us that the one certainty in the consideration of the logic of the actions of leaders in the United States and Cuba is that one always tends to underprice the value of ideological perseverance.  That may serve as a useful window for understanding the rationality of decisions taken on both sides with respect to economic choices.  And more interesting still, perhaps, is the price that Cuba is willing to pay for friendship with Russia and China, the political value of which appears to be much higher than its contribution to the development of the Cuban economy. 

Yet in a sense there is little that is extraordinary in these events: "“They have figured out that the government can renegotiate the foreign debt, but if the state companies do a poor job managing their finances they face the same problem over and over again,” said Vidal, who teaches at Universidad Javeriana Cali in Colombia." (here). Cuba has again become little more than an average player within its region. That turn, however, may turn out to be tremendously and potently threatening to a political system that based its legitimacy (and the sacrifices it asked of its people) precisely on the basis that it and its political project were both special and good. The political consequences, then, might be worth watching as the transformation of Cuba from extra to merely ordinary might affects the legitimacy of the Party-State system.

The first report touches on a slight recovery of sugar harvesting and its contribution to Cuban economic growth.  But note the quite small contribution that such sales make to Cuba's position even in the best of times.  The other ("Cash-Strapped Cuba Imposes New Restrictions on Imports") touches on the difficulty of securing enough funding for the operation of the Cuban public economic sector and the need to impose austerity measures. Also following is the text of the Bank of Cuba's Resolution 19/2018 from the Cuban Gaceta Oficial (28 February 2018) which acknowledges the danger of an increasing foreign debt necessary to sustain Cuban economic activity.

Cuba resumes sugar exports as milling stabilizes
CNBC 5 March 2018
By Marc Frank

HAVANA, March 5 (Reuters) - Cuba began exporting some raw sugar in late February after a disastrous start to the harvest, foreign traders and shippers said this week, but tonnage will fall far short of plans.

Cuba produced 1.8 million tonnes of raw sugar during the 2016-2017 harvest, and hoped to reach 1.6 million tonnes this season despite damage caused by Hurricane Irma, but out-of- season rainfall in December and January all but paralyzed harvesting, forcing cancellation of shipping contracts.

Reuters estimates raw sugar production is more than 300,000 tonnes behind schedule, based on provincial media reports.

For example, eastern Las Tunas reported it had failed to produce 60,000 tonnes of raw sugar through February and central Camaguey 30,000 tonnes.

"The province has failed to produce 49 percent of what was planned to date, while output is at 22 percent of the overall plan," Invasor, central Ciego de Avila's Communist Party weekly reported last week.

The province reported a plan of around 140,000 tonnes when the harvest began.

Due to the hurricane most mills did not open this season until around the New Year on Jan. 1, several weeks later than usual.

* * *

Many mills are now expected to remain open into May, and even June, if the weather permits.

"This is one of the worst harvests I can remember. We are shipping some sugar, but not nearly what we contracted for," one trader said, requesting anonymity.

A local agricultural expert termed the harvest "a disaster" and said he would be surprised if raw sugar production reached 1.3 million tonnes to 1.4 million tonnes.

Cuba consumes between 600,000 and 700,000 tonnes of sugar a year and has an agreement to sell China 400,000 tonnes annually. It sells the rest on the open market.

Sugar was long Cuba's most important industry and export with output reaching 8 million tonnes in 1991, but today it ranks eighth in exports behind sectors such as tourism, tobacco, nickel and pharmaceuticals.


HAVANA (Reuters) - Cuba has imposed new restrictions on imports by state-run companies, ordering them to obtain a letter of credit from the central bank for purchases above the equivalent of $100,000, as the Communist-run island struggles with a shortage of cash and mounting commercial debt.

Central bank resolution 19/2018, which took effect this month, states that the measure is aimed at ensuring companies have the resources to meet their foreign obligations and to prevent that “the foreign debt continues growing.”

Cuba’s government frequently regulates demand for imports using access to credit and foreign currency, and other mechanisms.

A western banker with extensive experience of working with Cuba said the measure would lead to a short-term plunge in imports and to slower contracting of supplies.

The banker, who requested anonymity, said it might also shut down non-essential and insolvent companies.

“Other Latin American countries have adopted similar measures in the past, for example Argentina, but those were market economies not state dominated ones,” the banker said by telephone.

U.S. embargoed-Cuba has suffered from the implosion of ally Venezuela’s economy and oil industry, as well as lower commodity prices and dwindling domestic production following cuts in electricity, fuel allocation and other inputs to state companies beginning in 2016.

Cuban exports of goods and services fell from $17.8 billion in 2014 to $13.6 billion in 2016 while imports slipped from $13.9 billion to $10.3 billion, according to the government.

Cuba last reported its debt at $18.9 billion in 2014.

Since then President Raul Castro’s government has restructured much of its official debt, but according to diplomats and foreign businessmen state companies are overdue in paying more than $1 billion to suppliers.

The central bank resolution says authorities need to “exercise adequate control” over debt. To obtain a letter of credit, companies must prove they “have adopted measures to insure they can meet their obligations at the time of payment,” it said.

Pavel Vidal, a former Cuban central bank monetary specialist, said state-run banks would now function as an additional filter to ensure companies were solvent and could pay for imports.

He said Cuba had experienced similar payments problems every decade since the 1980s.

“They have figured out that the government can renegotiate the foreign debt, but if the state companies do a poor job managing their finances they face the same problem over and over again,” said Vidal, who teaches at Universidad Javeriana Cali in Colombia.

Reporting by Marc Frank; Editing by Daniel Flynn and Tom Brown
Our Standards:The Thomson Reuters Trust Principles.


A partir del análisis efectuado y en correspondencia con el acuerdo del Consejo de Ministros de 30 de noviembre de 2017, resulta necesario adoptar determinadas medidas para que el endeudamiento externo no continúe creciendo sin que se garanticen los ingresos su cientes para honrar los compromisos adquiridos por las entidades nacionales, así como que las autoridades puedan ejercer un control adecuado de dicho endeudamiento.

POR CUANTO: El artículo 17, inciso a), numeral 13 del Decreto Ley No. 172 “Del Banco Central de Cuba” de 28 de mayo de 1997, faculta al Banco Central de Cuba a es- tablecer la política de crédito y dictar los reglamentos y las normas pertinentes en cada coyuntura económica.

POR TANTO: En el ejercicio de las facultades conferidas en el citado Decreto Ley No. 172 de 1997,


PRIMERO: El pago de las operaciones de comercio exterior por importación de bie- nes, en monedas extranjeras por importes superiores a cien mil (100 000) dólares esta- dounidenses (USD) o su equivalente en cualquier otra moneda libremente convertible, se ejecuta mediante cartas de crédito.

SEGUNDO: En las operaciones cuyos montos sean inferiores a cien mil (100 000) dólares estadounidenses (USD) o su equivalente en otra moneda libremente convertible, se podrá utilizar cualquier otro instrumento de pago reconocido en las normativas vigentes y en la práctica bancaria internacional.

TERCERO: Queda prohibido fraccionar la ejecución de una operación comercial en varios contratos, con el objetivo de que el monto total no alcance el límite de cien mil (100 000) dóla- res estadounidenses (USD) o su equivalente en cualquier otra moneda libremente convertible, y pueda pagarse con otros instrumentos distintos a la carta de crédito.

CUARTO: Los sujetos obligados por la presente Resolución, para asumir compromi- sos de pago a partir de la apertura de una carta de crédito, deben adoptar previamente las medidas que garanticen el cumplimiento de la obligación en la fecha de su vencimiento.

QUINTO: El Sistema Informativo Bancario del Banco Central de Cuba a efectos de procesar los contratos sin instrumentos bancarios, esta información incluirá una columna en el modelo 1006, que permita conocer la fecha en que se contraen las nuevas obligaciones de pago a partir de la entrada en vigor de la presente Resolución y de ellas las que vencen en el año 2018, para lo cual se actualizarán las metodologías actualmente vigentes y se noti cará directamente a los tributantes de la información.

SEXTO: Los sujetos obligados continúan con el envío de la información mensual que se capta a través del Sistema Informativo Bancario, fecha de entrega trimestral hasta el día 15 del mes que corresponda con información del mes vencido, además de la certi ca- ción impresa por el directivo de la institución sobre la veracidad de los datos gestionados por este sistema.

SÉPTIMO: Los jefes y presidentes de los órganos, organismos de la Administración Central del Estado, organizaciones superiores de dirección empresarial, entidades nacio- nales, grupos empresariales, empresas estatales, unidades presupuestadas, y de socieda- des mercantiles de capital ciento por ciento (100 %) cubano, quedan responsabilizados con el cumplimiento de lo dispuesto en la presente Resolución.

OCTAVO: La presente Resolución entrará en vigor el 1ro. de marzo del año 2018 y estará vigente hasta el 31 de diciembre de 2018, fecha en que será actualizada teniendo en cuenta la experiencia en su aplicación y la coyuntura económica.

PUBLÍQUESE en la Gaceta O cial de la República de Cuba.
ARCHÍVESE el original en la Secretaría del Banco Central de Cuba.
DADA en La Habana, a los nueve días del mes de febrero de dos mil dieciocho.

Irma Margarita Martínez Castrillón
Ministra Presidente Banco Central de Cuba 
Garceta Official pp. 116-117 (28 Feb. 2018)

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