Friday, December 10, 2010

Diplomats spoke of "fatal" Cuban economy in cable

Reuters, via Yahoo!

Diplomats from several countries said Cuba's economic situation could become "fatal" within two to three years while a Chinese diplomat groused that discussing reforms with the Cuban government was "a real headache," according to a purported U.S. cable obtained by WikiLeaks and published on Thursday by the Spanish newspaper El Pais.

The cable was written in February, before the communist-led government announced significant economic reforms in September.

It chronicled a breakfast meeting hosted by a U.S. diplomat for economic and commercial counsellors from China, Spain, Canada, Brazil, Italy, France and Japan.

The cable talked generally abut Cuba's economic problems, which forced the government led by President Raul Castro to slash imports, stop payments to many creditors and freeze foreign business accounts in Cuban banks.

"All diplomats agreed that Cuba could survive this year without substantial policy changes but the financial situation could become fatal within two to three years," said the cable, classified confidential and apparently authored by Jonathan Farrar, chief of the U.S. Interests Section in Havana.

The interests section substitutes for an embassy because the United States and Cuba, at ideological loggerheads for five decades, have no official diplomatic relations.

"Italy said (Cuban government) contacts had suggested Cuba would become insolvent as early as 2011," the cable said.

"Even China admitted to having problems getting paid on time and complained about Cuban requests to extend credit terms from one to four years," the cable said. "France and Canada responded with 'welcome to the club.'"

It said China's representative complained "in visible exasperation" that Cuba insists on keeping majority control of all joint ventures.

The group was described as pessimistic about the possibility of "meaningful" economic reform, with the Brazilian saying it had the potential of being politically "destabilizing."

"Any discussions around Chinese-style reforms, particularly regarding foreign investment, have been difficult and 'a real headache,' according to the Chinese," the cable said.

REFORMS UNDER WAY

The Cuban government has since undertaken reforms to boost the island's troubled economy by expanding the private sector and reducing the state's role, while maintaining the socialist system installed after Fidel Castro took power in a 1959 revolution.

Its cash crunch also appears to have eased as more creditors are getting paid and more bank accounts unfrozen.

The diplomats complained about the lack of access to government officials and said the military was increasingly in control of the economy.

"The French argued that the military is seizing all core economic activities of the state," the cable said.

It said military engineers were capable of running day-to-day operations but "do not have the vision to enact reforms or lead the country out of the economic mess of centralized state planning."

Cuba was concerned about its reliance on Venezuela, its top trading partner and oil provider, because the South American oil giant, led by socialist President Hugo Chavez, "is in flames," the French representative was quoted as saying.

The cable said many Cuban government officials had "reconciled themselves to the inevitability of better relations with the United States."

But it said Cuba's direction "remains muddled and unclear, in great measure because its leaders are paralyzed by fear that reforms will loosen the tight grip on power that they have held for over 50 years."

The cable said the Cuban people were "accustomed to tough times and will respond to future belt-tightening with similar endurance."

(Reporting by Jeff Franks; Editing by Bill Trott)

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JG: Cuba's economy is in a state of disaster at the present time. A centrally planned economy does not work very well. Nevertheless, a market-based economy must be restrained with a strong bridle to combat the excesses of savage U.S. capitalism.

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