Cuba report about Resolution 63/7 at the General Assembly of the United Nations (Section 3.2) for the year 2009

This is the third part (3.2 Repercussions of The Embargo on Other Sectors of the Cuban Economy) of the new report presented by Cuba this year at the General Assembly of the United Nations. It is expected that this resolution will be voted upon on October 28th, 2009.

It is very likely that the United Nations General Assembly will condemn the continuation of the blockade/embargo against Cuba by U.S. President Barack Obama.

3.2 Repercussions of The Embargo on Other Sectors of the Cuban Economy

Construction Industry Sector. From April 2008 until March 2009, this sector has suffered losses on account of the embargo to the total of 47.2 million dollars; these, without a doubt, have had negative repercussions on the country being able to fulfill its projected plans and the recovery after the disasters caused by the passage of three hurricanes in 2008.

* Cuba has had to face up to a complicated situation in the area of the construction of and repairs to the more than 600,000 homes affected by the hurricanes. Of these homes, 90,958 were completely destroyed. However, the embargo prevents us to carry out our plans for construction, conservation and rehabilitation of these homes since it puts up obstacles for the importing of materials, products, tools and construction equipment coming from abroad, as well as raw materials for the national production of materials. Repercussions on the home construction programmes were calculated at 7.3 million dollars.

* In the period between March 2008 and April 2009, the IMECO Construction Company which imports materials and products for home construction suffered losses of 2.3 million dollars because of the difference in prices after having to purchase products in distant markets; risk costs are also added to the price.

* MATCO, a company that imports construction materials, is forced to carry out more than 80% of its business in Europe and Asia because of the embargo; this generates delays in operations and affects all its internal economic activities that depend on this. The time period from the beginning of import procedures until the purchased products enter the country has grown considerably longer. These days, the average time for this is 11 months; it could be reduced to 5 months if only Cuba had access to US markets.

* Faced with the impossibility of importing electrical parts made in the US, Westinghouse and Cuttler Hammer brands, IMECO had to carry out this operation using CONYAL S.A. as intermediary, thus significantly increasing the cost of said products.

* The Cuban companies we have mentioned above have presented offer requests to American companies such as the Ring Power Corporation and Spears Co., including their subsidiaries in third countries, in order to purchase tubes, interior and exterior PVC accessories, construction and parts and components for construction equipment; no reply was ever received in the fear that sanctions would be applied as a consequence of the embargo policy.

An example of the extra-territorial application of the embargo in the construction sector:

* The Siemens Company (Cement Division) – based in Denmark – refused to supply Cuba with equipment for the new Santiago de Cuba cement factory as a result of the embargo. This negative answer forced Cuba to choose a less reliable supplier and lose the standardization of the equipment in all the plants in the country, increasing the financial costs by inventories.

The Cuban sugar industry was affected to a total of 127.5 million dollars during the period under analysis. Just for relocating markets in order to import agricultural consumables, the country had to pay 76.0 million dollars.

* During 2008, production of sugar cane was affected by the embargo for 162.799 tons, equivalent to 44.7 million dollars, according to the market price at that moment. This US policy prevented us from purchasing special roller bearings, packaging, metals, spare industrial parts, lubricants and grease for repairs on production equipment. Added to this are the obstacles for buying trucks, tractor trailers, tires, combines, parts and accessories for locomotives. All these products are essential to the sugar industry.

The Cuban Civil Aeronautical Company has not escaped the effects of the embargo. Some examples from this period:

* The Cuban civil aviation system continues facing serious obstacles in the matter of charging for its aeronautical services provided to US airlines that operate to and from the US, for the use of Cuban air space. An example of this is the penalty of 100,000 dollars imposed on Spirit Airlines of the US for the payment of its instalments to Cuba after its planes used Cuban air space.

* Cubana de Aviación S.A. is not authorized to fly over US territory because of the embargo. Just in the 800 flights this airline makes from Canada to the east-central area of Cuba, the company has accumulated losses of at least 2.4 million dollars.

* Likewise, while the prohibition for US citizens to travel to Cuba remains in place, Cuban and US airlines continue to be forbidden from serving this kind of traffic. In the period we are dealing with here, the income lost because of this prohibition and not being able to provide other airport services totals 193 million 832,538 dollars.

Activities in Science, Technology and the Environment are also affected because of the US embargo.

* The Cuban Office Industrial Property Office (OCPI) faces obstacles when it comes to paying the OMPI Office in Geneva for requests for international patents. The Swiss banks Credit Suisse and UBS refused to make the operations requested of them as a result of the extra-territorial application of the embargo.

The Informatics and Communications sector have also been heavily affected by application of the embargo, including the restrictions imposed by the US on Cuban Internet access.

* Cuba is not able to connect to the Internet at a suitable speed. The current Cuban connection to the so-called network of networks does not permit the adequate band width to satisfy the country’s demand. The embargo forces Cuba to use a band width and connection services via satellite, something that is very expensive and has a limited capacity. The problem could be solved if Cuba would be permitted to connect without conditions or discriminatory requirements to the undersea fibre-optic cables that pass a few kilometres off the coast of Cuba. US authorities have not allowed this.

* Cuba does not have the right to accede to the services offered by a large number of Websites. This denial of access occurs when the connection is established from an Internet address (IP) authorized for the Cuban domain .cu. As a result, one only has an idea of the effect when one accedes from Cuba. A case has been detected where the negation of all relations with Cuba was produced without consideration of the origin of the connection. This is the case of the travel site AMADEUS (http://www.amadeus.com).

* In May, the American company Microsoft decided to block Windows Live service to Cuba. At the moment of connecting to this tool, this message comes up: “Microsoft has cancelled Windows Live Messenger IM for users in countries embargoed by the United States, therefore Microsoft will not provide Windows Live service to your country”.

Some examples of other web pages that are denied access from the .cu domain follow:

* Cisco Systems http://tools.cisco.com/RPF/register.do technologies for connection, routers for Internet access servers, including equipment in the digital video field.

* SolidWorks http://www.solidworks.com/sw/termsofuse.html automated design systems.

* Symantec http://www.symantec.com/about/profile/policies/legal Virus protection software.

* The Empresa de Telecomunicaciones de Cuba S.A. (ETECSA) has lost 53. 7 million dollars in the period being studied. These damages are basically due to the fact that there is no access to the American market to buy specialized equipment, spare parts and other necessary consumables needed for the good functioning of the company’s activities. This forces them to seek out intermediaries, thus making the product more expensive. During this period ETECSA has been forced to pay 96,100 dollars over the forecast amount in order to have the greatest number of spare parts available and to thus guarantee their service.

The Cuban tourism industry has not escaped the adverse effects of the embargo. It is estimated that income lost totalled 1214.5 million dollars.

* OFAC has continued to prevent commercial transactions to Cuba that are related to the Cuban tourist trade, including services offered on the Internet such as reservations, purchases of tickets, accommodations, plane leasing, and operations relating to cruises and boating activities. Last year, OFAC forbade GDS SABRE from continuing to provide global distribution services for Cuban hotel room reservations administered by foreign chains.

* According to projections of ASTA (Association of American Travel Agents) –that coincide with other sources linked to international tourism and in the Caribbean area in particular – the number of US tourists and cruise ship passengers that could have taken vacations in Cuba in 2008 if the prohibition maintained by the US government did not exist is calculated at 1.75 million visitors. For this reason during this period, the Cuban tourism industry lost at least 1,120 million dollars, even considering the variable of a decrease in daily spending of these visitors as a result of the crisis affecting the US economy since last year.

* Canadian airlines must hand over information to the United States on passengers on flights crossing US territory towards Cuba, 72 hours in advance. This new control is being used by OFAC to control US citizens traveling to Cuba without a permit.

* As a result of the US persecution, Cuban tourism companies cannot advertise on the best systems on the net such as Google, Yahoo and MSN, since these are all US owned. During the period covered by this report, the US government has continued to limit and slow up as much as it can Cuba’s access to electronic trade and to transactions via credit cards as a way of paying for Cuban sales.

* The embargo makes it impossible to buy equipment, parts and aggregates on the US market and from their subsidiaries and branches in other countries, as well as technology and services bearing US brands that are well-known to tourists. This makes supplies to the Cuban tourism industry much more expensive through higher prices, greater inventories, increases in freight rates and higher interest rates for credit.

Basic Industry, an important backbone for the national economy, is constantly under siege by the embargo policy. In this sector, the nickel industry continues to be one of the most attacked and persecuted branches. During the stage that we are analyzing, the industry has suffered losses of 62.9 million dollars. Of these, 45.8 million dollars are a result of the effects on exports since the US forbids imports of products manufactured totally or partly with Cuban raw materials even though they may have been made in third countries.

A Cuban body belonging to Basic Industry requested the American company ARMSTRONG EQUIPMENT to supply a micronizer mill or a milling module, something very useful for mining. In fear of application of the embargo, the request never reached them.

Examples of the extra-territorial dimension of the applications of the embargo to this industry:

* Minxia Non-Ferrous Metal Inc., a subsidiary of the China Minmetals Company, was fined by OFAC for 1 million 198 dollars for purchasing Cuban metals (nickel) without a permit between 2003 and 2006.

* The current US government fined the Varel Holdings company 110,000 dollars for exporting technology to Cuba. This company manufactures drills for oil rigs and, according to an OFAC report, between June 2005 and June 2006 “a foreign branch of Varel Holdings made eleven exports of goods in which Cuba or a Cuban citizen had interests”. This company’s fine is the largest of the penalties applied during the present fiscal year.

* On April 30, OFAC informed that the American company EFEX Trade LLC was fined 2,000 dollars for providing services to the sending of remittances without a permit, in which Cuba had an interest.

* In July 2008, Platte River Associates of Boulder, Colorado, was accused of “trading with the enemy” for allegedly having transferred technology to Cuba. It was accused of providing specialized technical computer software and of computer training that was later used to create a model on exploration and the development potential of oil and gas in Cuban territorial waters, without having first obtained a permit from the Treasury Department. The company executives were facing sanctions of up to 10 years in prison.

* The Brazilian branch of Purolite was not able to sell selective cationic resins for nickel and cobalt to the Cuban institute of science and technology (IMRE) so that they could test their use in the processing of laterites. Successful application of these resins could result in important increases in the recovery of nickel and cobalt, along with a decrease in production costs. The regional director for Latin America of Purolite expressed “that since this is an American company it was not possible to establish trade relations with Cuba”.

Effects on the iron and steel industry have reached 38 million 164 thousand dollars. If these losses had not been incurred, it would have been possible to buy 139,284 refrigerators or 1,773,423 galvanized steel roofs that could have roofed 49,261 homes of 70 square metres each.

* The embargo causes the raw materials for the manufacture of some medical equipment to rise in price. For example in the acquisition of steel, losses totalled 96.5 thousand dollars die to the necessity of using markets that were further away. With this amount we could have produced 17 pedal-operated or femoral sinks that are needed by the Neonatal Unit in the Dr. Eusebio Hernández Maternity Hospital which attends a large population; or we could have looked after the Emergency Department needs at the Juan Manuel Márquez Pediatric Hospital. These products are essential for the surgical wards of those hospitals.

* The extra-territorial dimension of the application of the embargo affected ACINOX, a Cuban company, when it needed to buy a 125 MVA transformer for the 220 KV electrical sub-station of Antillana de Acero de Cuba. When they attempted to effectuate the purchase in a Latin American country, Siemens pointed out: “We cannot sell to Cuba since, in spite of the fact that we are a German company, we follow some US rules.”

* Something similar occurred in January 2009. ALCOA- España refused a request from the Cuban commercializing company Alcuba to buy aluminium profiles. ALCOA- España’s answer was: “In response to your request for information about the supplying of aluminium, we must inform you that, as a company with its main office in the USA, we are not allowed to look after your request due to current existing restrictions that affect trade with Cuba”.

Light Industry has also been affected as a direct consequence of the negative impact of the embargo. Between April 2008 and April 2009, losses for this concept were calculated at 18.7 million dollars.

* CETRO, Unión Suchel and TEXORO of the Textile Union have been affected to a total of 1.9 million dollars for delays in the arrival of consumables for the production of bath and laundry soaps, just to mention two of their products. This delay was caused by the embargo restrictions that force us to make purchases in markets that are farther away.