The truth about the economic emergency in Cuba.
Jorge Cruz Inclan
May 30, 2009
In a previous post looking for possible causes of the current energy emergency in Cuba. The cause could be in Venezuela, the world crisis and the downturn that Venezuela has to maintain a generous assistance to the government in Havana. Venezuela's economic problem are real and may affect the future supply of Venezuelan oil in the current, but does not justify an immediate emergency, Venezuela has fulfilled its commitments, the Cienfuegos oil refinery produces well, two new tankers have the operation.
The current energy emergency is the decline in Cuban oil production, declining steadily since the end of 2003 to date. The deficit in domestic production is 54% compared to 2003 production. In 2007 the Cuban petroleum deficit amounts to 10.3 million barrels. In turn we have an unexplained sustained increase in consumption of oil across the country in the same period. In 2007, the oil consumption of the Cuban economy is 41% compared to 2003. This year, the consumption of oil amounts to 25.5 million barrels.
The bad behavior of these two indicators has been gradually increasing since 2003 and will affect negatively on the national economy in a clear way. Throughout the period the government took no steps to correct the trend and avoid the disruption of oil. This is not a spot on consumption as reported recently in the Granma newspaper of 40 000 tones of oil (representing 292 000 barrels of oil). Only a very small deficit equivalent to almost three days of Venezuelan aid.
The total national oil consumption and decreasing domestic production of oil in 2007 totaled 35.8 million barrels of oil. Simply put this amount of oil completely cancels Venezuelan aid is 34 million barrels annually. Besides a disbelieving spectacle in a country in a state of permanent economic problems of balance of payments and a huge foreign debt, there are other problems within which targets could be considered:
Insufficient planning of the company CUPET. Low investment in machinery and new wells to keep production stable.
Non-payment and late payments to the company Sherritt International Corp. of Toronto and Pebercan Inc. of Montreal. Both companies delivered CUPET oil, this company sells it and then paid to Canadian companies. Pebercan Inc. has withdrawn from Cuba by default and has filed bankruptcy.
The firm Sherritt International has a dispute with CUPET delays in payments for years. Minister Malmierca recently was denied an entry visa to Canada, to attend annual meeting of the Canadian company. This is unprecedented and reveals the level of problems among companies and also among the two governments.
Finally it is known that consuming industries such as Cuban nickel at a cost of 135 barrels of oil per ton and the sugar industry with a high consumption have increased their production.
Cuba's government must now seeks the causes of this energy crisis and stabilize the oil deficit. Most likely Castro was informed of this matter and was the cause for the impeachment of Vice President Carlos Lage and Foreign Minister Perez Roque. But the people will surely turn a few more years of economic hardship. This time American imperialism is not the cause of the disaster.
Sources consulted:
Statistical Yearbook for Latin America 2008.OLADE
Will Weissert. Exploration and drilling for oil in Cuba - Is anyone making money? Feb. 2009. Associated Press.
Oscar Espinosa Chepe. Cuban Economy: expectations and risks. Encuentro.
Fabio Garcia. System of Units and Conversion Factors. OLADE, 2006
Omar Pérez Villanueva. Cuba: an assessment and need some ideas for change. Nueva Sociedad 216, julio-agosto 2008.
Paolo Spadoni. The Current Situation of Foreign Investment in Cuba. ASCE 2004
The current energy emergency is the decline in Cuban oil production, declining steadily since the end of 2003 to date. The deficit in domestic production is 54% compared to 2003 production. In 2007 the Cuban petroleum deficit amounts to 10.3 million barrels. In turn we have an unexplained sustained increase in consumption of oil across the country in the same period. In 2007, the oil consumption of the Cuban economy is 41% compared to 2003. This year, the consumption of oil amounts to 25.5 million barrels.
The bad behavior of these two indicators has been gradually increasing since 2003 and will affect negatively on the national economy in a clear way. Throughout the period the government took no steps to correct the trend and avoid the disruption of oil. This is not a spot on consumption as reported recently in the Granma newspaper of 40 000 tones of oil (representing 292 000 barrels of oil). Only a very small deficit equivalent to almost three days of Venezuelan aid.
The total national oil consumption and decreasing domestic production of oil in 2007 totaled 35.8 million barrels of oil. Simply put this amount of oil completely cancels Venezuelan aid is 34 million barrels annually. Besides a disbelieving spectacle in a country in a state of permanent economic problems of balance of payments and a huge foreign debt, there are other problems within which targets could be considered:
Insufficient planning of the company CUPET. Low investment in machinery and new wells to keep production stable.
Non-payment and late payments to the company Sherritt International Corp. of Toronto and Pebercan Inc. of Montreal. Both companies delivered CUPET oil, this company sells it and then paid to Canadian companies. Pebercan Inc. has withdrawn from Cuba by default and has filed bankruptcy.
The firm Sherritt International has a dispute with CUPET delays in payments for years. Minister Malmierca recently was denied an entry visa to Canada, to attend annual meeting of the Canadian company. This is unprecedented and reveals the level of problems among companies and also among the two governments.
Finally it is known that consuming industries such as Cuban nickel at a cost of 135 barrels of oil per ton and the sugar industry with a high consumption have increased their production.
Cuba's government must now seeks the causes of this energy crisis and stabilize the oil deficit. Most likely Castro was informed of this matter and was the cause for the impeachment of Vice President Carlos Lage and Foreign Minister Perez Roque. But the people will surely turn a few more years of economic hardship. This time American imperialism is not the cause of the disaster.
Sources consulted:
Statistical Yearbook for Latin America 2008.OLADE
Will Weissert. Exploration and drilling for oil in Cuba - Is anyone making money? Feb. 2009. Associated Press.
Oscar Espinosa Chepe. Cuban Economy: expectations and risks. Encuentro.
Fabio Garcia. System of Units and Conversion Factors. OLADE, 2006
Omar Pérez Villanueva. Cuba: an assessment and need some ideas for change. Nueva Sociedad 216, julio-agosto 2008.
Paolo Spadoni. The Current Situation of Foreign Investment in Cuba. ASCE 2004
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