US cable: Cuba to be insolvent within 2-3 years

http://news.yahoo.com/s/ap/20101210/ap_on_bi_ge/cb_wikileaks_cuba_2

By PAUL HAVEN, Associated Press Paul Haven, Associated Press – Fri Dec 10, 12:04 pm ET

HAVANA – A newly released confidential U.S. diplomatic cable predicted Cuba's economic situation could become "fatal" within two to three years, and detailed concerns from other countries' diplomats — including China — that the communist-run country has been slow to adopt reforms.

The cable was written in February, months before Cuban President Raul Castro announced a major revamp of the island's economy, laying out plans to fire a half-million state workers and open up the island to expanded forms of private enterprise.

The cable, sent by the U.S. Interests Section in Havana, which Washington maintains instead of an embassy, was released Friday by WikiLeaks. It was apparently written by America's chief diplomat on the island, Jonathan Farrar.

There was no immediate reaction from the Cuban government, but the cable's release is not likely to help improve U.S.-Cuban relations already strained by the long detention of an American contractor on suspicion of spying — not to mention 50 years of Cold War animus.

It details a breakfast meeting held by the Interests Section's chief economic officer with diplomats from some of Cuba's main trading partners, including China, Spain, Canada, Brazil and Italy, as well as France and Japan, both of which are among the island's top creditors.

"All diplomats agreed that Cuba could survive this year without substantial policy changes, but the financial situation could become fatal within 2-3 years," the cable said, adding that Italian diplomats cited sources within the Cuban government as predicting that the island "would become insolvent as early as 2011."

Even the Chinese diplomat expressed what the cable referred to as "visible exasperation." It said the Chinese were particularly annoyed by Cuba's insistence on retaining majority control of any joint venture.

"No matter whether a foreign business invests $10 million or $100 million, the GOC's (Government of Cuba's) investment will always add up to 51%," the cable quoted the unidentified Chinese commercial counselor as saying.

The Chinese also complained about problems getting loans repaid, and in particular a Cuban request to extend from one year to four years the amount of time it has to repay credit.

It is no secret that Cuba's financial situation is increasingly dire. Raul Castro has warned that the state can no longer afford to subsidize nearly all forms of Cuban life. The government provides free health care and education, and nearly free transportation, housing and utilities. All Cubans also receive a ration book that provides them with some basic food, though not enough to live on.

Most islanders work for just $20 a month in a state-dominated economic system riddled with inefficiency.

Yet the country has survived the collapse of the Soviet Union, which caused the near-failure of its economy, as well as a 48-year U.S. trade embargo, the retirement of revolutionary leader Fidel Castro in 2006 and countless other bumps along the way.

And the cable's confidence that the government would not enact economic reforms did not pan out. The reforms announced by Raul Castro in September are considered the most significant in a generation. Still, it is unclear if they will be enough to save the island's perennially weak economy.

The cable said Cuba's attempts at agricultural and other reform up to that point had been ineffective, and said more changes were unlikely. It said the country seemed determined to give the more control over state-run businesses to the military, and particularly Agriculture Minister Ulises Rosales del Toro, whom the cable described as Raul Castro's most trusted general.

The cable said the situation would worsen dramatically should there be economic or political problems involving Cuba's top ally, Venezuela, which the dispatch said was "increasingly unstable." It quoted the French diplomat at the meeting as saying Hugo Chavez's country "is in flames" and "a source of serious concern for Cuba."

Cuba receives billions of dollars worth of oil a year from Venezuela at greatly subsidized prices in exchange for the services of Cuban doctors and other help.

"There is little prospect of economic reform in 2010 despite an economic crisis that is expected to get even worse for Cuba in the next few years," the cable said, citing Cuba experts. It closed with a scathing criticism of the leadership of a government ruled by aging brothers Fidel and Raul Castro since they overthrew dictator Fulgencio Batista in 1959.

The government's "direction and leadership 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," it said.