Joint Ventures: New developments
in Cuban mining and oil exploration
by Eloise Linger, Ph.D

The paper is entitled “Joint Ventures: New developments in Cuban mining and oil exploration.”   My handout of 11 pages of data includes information about joint ventures for exploration, drilling, development, refining and marketing of oil and petroleum by-products.  However, since we have a Cuba Petroleum (or CUPET) speaker participating via teleconferencing, I will limit my talk to the sections of this paper about joint ventures in mining, industrial development and Cuba’s strategies for meeting energy needs, both today’s necessities and some new developments with the potential to solve the most severe problems Cuba has faced for a decade and a half.

On energy and infrastructural needs. Anyone who has spent any time in Cuba has seen Cuba’s serious needs for the rapid modernization of its infrastructure that provides electricity and water to supply the energy needs of both the population and the island’s facilities for food processing, manufacturing, and services.  Power outages often were and are so long they may lead to spoilage of precious food, even with lots of advance notice to the population.  For example, some entire areas or grids have to be shut down in order to make repairs on others.  Last September, it was announced that power output had plunged to about 50 percent of demand.  In October 2004, 118 factories had to close and schools and workplaces closed one-half hour early for several months. 

Again this May, after a major breakdown at Cuba's main oil-fueled power plant, Antonio Guiteras in Matanzas province, the long blackouts have grown longer.  Amid breakdowns at other plants, power output has [again] plunged to about 50 percent of demand, officials say.  This is partly explained by the fact that nine oil- or gas-fired power plants produce more than 90 percent of the electricity used by Cuba's 11 [11.3] million people.   Additionally, Basic Industry Minister Yadira Garcia said there are no spare parts readily available.  She explained that most of the power plants that produce electricity use vintage 1960s and 1970s Soviet- and Czech-technology.  Cuba has to special-order the spare parts, which also contributes to costs and durations of blackouts.

Besides the Minister’s considering the entire electrical system to be obsolete, in a TV appearance by Head of State Fidel Castro, Cubans learned from state power company officials that the country needs to replace 17,000 kilometers (10,563 miles) of power lines and 44,000 power line poles to modernize the country's distribution system (source: “Cooking with Fidel: As blackouts multiply, Castro pleads for power thrift,” Granma, May 27, 2005; www.Granma.cu, load-date May 28, 2005).

Continuing on infrastructural needs related to energy, we can see that  transportation also continues to suffer.  Twelve badly needed trains are being imported from China, but they are all freight trains to meet the new production needs of the Cuban economy.   Presumably the old, unreliable cross-island passenger lines will have to wait a bit longer.  Bus schedules remain less frequent than in 1990, and the urban buses, several of them newer and more energy efficient, nevertheless have been jammed with people since 1992.  Gasoline for personal usage is and has been extremely limited from the early 1990s to the present.  Other parts of Cuba’s economic infrastructure needing updating and repairs, include water conservation and distribution, roads, transportation for agricultural goods, railroads, urban systems for sewage and water, upgrading of schools and school equipment, and the renovation of thousands of older housing units while also building new housing for the needs of a larger population (now 11.3 million). 

As one of the first crucial steps, VIVIAN BUSTAMANTE MOLINA reported in the Cuban workers’ newspaper, Trabajadorres on May 27 [2005] that 400 new trucks are being purchased for the electrical workers to provide for the most rapid and least problematic repair schedules possible.

HOW has Cuba responded to these profound levels of needs? In addition to the fiscal measures related to U.S. dollars presented by the EIU specialist [Emily Morris speaking on trends and prospects for Cuba’s economy], Cuba’s main response to its economic needs for food and infrastructure, has been to also develop its potential along three other lines. 

First, it has opened to large-scale oil exploration several large blocks of coastal and offshore deep water drilling regions, in virtually virgin territories within the Gulf of Mexico that have produced a grade something like West Texas Crude, certainly not the best quality but much better than  previous oil being pumped from Cuban wells.  Since 1999, two new discoveries were announced in December 2004.  A few months later, in March 2005, joint agreements were announced with several countries and corporations that not only would increase the exploration and drilling but also would build of related oil and petroleum by-products processing industries. 

To work toward meeting its own domestic oil needs, Cuban oil development has more than tripled in the twelve years since the loss of Soviet oil shipments in 1990 and 1991. However, quadrupling the domestic barrels per day extracted in 1990 to 75,000 domestic barrels per day (27 million barrels per year) in 2004 is no small achievement for the island and its international partners.  Yet, the 2004 figure seems like drops in the proverbial barrel compared to the potential that might possibly arise, based on a fairly recent off-shore oil discovery, one oilfield that might cover Cuba’s domestic needs for more than three years, perhaps up to four with more efficient machinery.

Montreal-based Pebercan and Toronto-based Sherritt International have found that one field with 100 million barrels of oil reserves, as announced  in December 2004 (source: Energy Intelligence Group, Inc. Oil Daily January 13, 2005).

Brazil's state oil giant Petrobras has also begun this year to increase its energy co-operation in Cuba, and is expected to team up with Sherritt International Corporation or Spain's Repsol in exploration of two new prospecting zones off Cuba.  After passing on two zones earlier selected for it to explore in 2002, Brazil’s Petrobras is planning to carry out deep-water offshore prospecting (source: National Post's Financial Post & FP Investing [Canada], January 29, 2005, Toronto Edition).

Venezuela’s PDVSA will not only help search for oil in prospecting and production (on new wells located in Cuban territorial waters), it will also help Cuba in refining and marketing, will build with the Cuban firm CUPET a lubricants plant, and build a facility for storing residual petrochemicals -- 600,000 barrels a day -- in Matanzas,  AND PDVSA will take part in the reopening of the oil refinery and terminal in Cienfuegos, on Cuba's southern-central coast, a facility built with Soviet technology in 1990 but which ground to a halt almost immediately due to its high energy consumption (source: Agence France Presse, “Castro gets best possible economic news: Venezuela's PDVSA to search for oil off Cuba,“ English, April 28, 2005).

Furthermore, China is seeking oil everywhere and Cuba is no exception.  Three large Chinese companies, SINOPEC, Petro China and CINOOC - China National Offshore Corporation, are involved in a large agreement, perhaps already underway, for coastal and deep-water explorations. Most significant to this topic, especially in light of other Chinese investment in Cuba, is the fact that Sinopec,  China's second largest oil company, has stated a goal of helping boost Cuba's domestic oil production and producing 60% of its oil needs by 2006.  (As best we can gather by extrapolating from various sources, the island is producing roughly 43-45% of its minimal needs today, thus 60% self-sufficiency by next year would be a tremendous aid for Cuba‘s desperate needs for energy, particularly electricity and gasoline.)  Although Cuba's oil production is relatively tiny, it has managed to quadruple its production levels of 1990 to 71,000 in 2003 and increase that to 75.000 b/d in 2004, but the country needs 160,000b/d to function just minimally (source: Energy Intelligence Group, Inc. International Oil Daily, February 1, 2005).

Additional plans for exploration and development of other blocs of potential reserves were announced by two other Chinese oil companies, China National Petroleum Corp. and China National Offshore Oil Corp., after talks with CUPET, Cuba Petroleum,  Some exploration will be in coastal regions but much, based on the better quality of the oil, will take place in off-shore deep waters (source: National Post's Financial Post & FP Investing [Canada], February 1, 2005, all but Toronto Edition).

Alongside increases in past and expected future production of oil, natural gas extraction has been steadily rising.  Natural gas produces about 5% of Cuban electricity, and natural gas also supplies cooking energy to much of urban Havana and other parts of the island.  However, like oil, gas supplies are not sufficient to meet consumers’ needs.

Gas production, which accounts for nearly 20% of oil and gas output, is reported to have grown by 10% (source: Economist Intelligence Unit [EIU], April 2005).

So, it would appear that Cuba’s strategy of opening its virgin territories for oil exploration may greatly help the island‘s economy and improve the levels of energy available for personal consumption. 

Is an increase in Cuban oil production, per se, of much interest to the U.S.?

As an aside, Sen. Mel Martinez, R-Fla  recalled a New York Times story last summer on oil exploration by a Spanish company, saying "If 100 million barrels is only the tip of the iceberg, there will be calls on Capitol Hill for normalization of relations with the Cuban government."

Another official reported, “Halliburton officials said it would certainly change the posture of the petroleum industry.…[and] "For the Bush administration, it might be cause to make a change in policy."  Maybe Vice President Cheney and Commerce Secretary Gutierrez could return to their former political positions of being in favor of ending the embargo against Cuba (Cheney in 1988), and exploring the real possibilities for trade with Cuba (as Gutierrez did when he served as CEO of Kellogg). At the moment,  they publicly support the position of their boss.

In another aside, there have been some signs of cooperation in other areas and I found an interesting item from December 10, 2004, regarding a clinical trial of a Cuban vaccine against lung cancer, It was set to begin in the United States this year, 2005. If the Cuban therapeutic vaccine against lung cancer works in the clinical trials stage, it would be subsequently officially registered, according to José Miyar Barruecos, Secretary of the Cuban Council of State.  

My own opinion is that the U.S. will not need Cuban oil, but we could benefit greatly from biotechnical cooperation and reduced costs for pharmaceuticals that Cuba has developed.  And Cuba’s biotechnical innovation for good causes leads to the second major strategy Cuba has used to climb out of a deep hole and strengthen its economic and political place in the world. 

Cuba has called on and is using its rich human capital, the highly skilled and resourceful Cuban population to come up with new schemes and new inventions, and new mobilizations to try to conserve energy.  In efforts to develop alternate sources for electrical and mechanical power, some  experimental initiatives show the creating of new energy sources from oil by-products: “Energas,” for example, was developed from capturing the gas from the plume that usually is lost into the atmosphere during the process of drilling for oil, and also during the stage of refining the oil. 

Then, there has been the use of “biogas” that was developed in Cuba from sugar by-products. About 1,500 people will benefit from the new, semi-experimental production and distribution of biogas—a combustible obtained from the degradation of organic matter—in the eastern Cuban province of Las Tunas.  The ecological initiative is already underway in a  residential area near the Antonio Guiteras sugar mill (source: Granma, Las Tunas, March 7, 2005, p. 26).  Thus human capital and necessity have led to creative problem solving.

Human capital is immense in Cuba.  Some 400 Cuban doctors are participating in one Venezuelan neighborhood medical mission called "Barrio Adentro" in the municipality of Sucre.  The island's professionals also provide assistance to the poor who live in Venezuela’s remote communities.  This is believed to be just one part of the exchange from Cuba for the 80,000 to 90,000 or more barrels of oil that Venezuela is supplying to Cuba each day (source: PDVSA chief Rafael Ramirez, April 28), an amount that is far more than matching the island’s oil production at this time.  But its talents and training are not restricted to medicine or innovative biotechnology. 

Human capital?  More than 100 agreements have been signed with Brazilian universities in the context of advancing integration in the region and in the  project of the Latin American universities.

Appendix 1 lists some of Cuba’s health statistics in tables 4-7 for 1962-2002 and shows comparative figures for Cuba and comparative figures with three other Latin American countries.  The numbers are clear, but we should state that Cubans’ level of difficulties seems quite different when placed in a global perspective. Of the 190 countries in the United Nations, the statisticians who prepared the results for the 2004 HUMAN DEVELOPMENT REPORT ranked Cuba at number 52, thus placing it within the category of “highest” human development.  In other words, Cuba ranks higher than 85 countries with mid-level human development, and higher, of course, than 35 countries with the lowest levels of human development.  Furthermore, Cuba is even ahead of three other countries in the top-ranking 55 (source: UNDP, Human Development Report 2004). 

Using its comparatively healthy and well-educated population, Cuba will again call on its talented artists and well-trained professionals to explore new possibilities to participate in the Spain’s market, namely in the fields of culture, information technology, and the bio-pharmaceutical industry.  Both parties also agreed on encouraging strategic alliances in the entrepreneurial  sector aimed at third countries, particularly in respect to the subcontracting of Cuban professional services (source: “Businesspeople from Cuba and Spain Agree to Strengthen Bilateral Ties,” Ahora.cu / 30-05-2005, posting date May 30, 2005).

Besides teachers, doctors and other professional resources Cuba sends abroad, other sectors of the population also are mobilized. High school students have been recognized for helping recycle 45 tons of raw materials during the first four months of 2005, as reported in Cuba’s daily paper Granma from the Isla de la Juventud, Isle of Youth (source: Dtcuba, posted by “adel” on 2005/6/4 13:47:29). 

To help conserve energy and avoid the power outages occurring last year, the ACINOX stainless steel company in the eastern province of Las Tunas was able to reduce its consumption by 600 megawatts per hour, compared to the January-April period in 2004 (source: Granma.cu, May 23, 2005).  The Las Tunas ACINOX steel plant is decisive for turning out the red-hot ingots used in making of stainless steel.

With a new emphasis on sugar by-products, so far this year, over 8.2 million liters of alcohol have been distilled by the workers two sugar mills located in Cuba's eastern province of Las Tunas.  Unlike previous years, when the raw material was only molasses, alcohol is being obtained now from sugarcane juice. In addition, two new systems for the production of extra-fine alcohol have been installed, and these innovations will permit an increase in the quality of the export rums made in these plants. That good news has been tempered by the rainfall levels for 2004, which were the lowest registered since 1901, in a long drought that began in the spring of 2003 in the country’s eastern region (source: Periodico 26 from Las Tunas,  posting date April 29, 2005.)

A talented farmer is the innovator of new experimental tool made from recycled materials.  His invention combines several types of cultivation tools in one machine to triple the results obtained by traditional cultivation methods.  So far, the new tool has increased productivity and made the cultivation process easier and less costly (source: Granma, Las Tunas, Apr 2, 2005, p. 26).

More than 37,000 acres from the Toa and Guantanamo-Guaso basins have been saved from erosion by Cuban experts, starting from techniques to correct big gorges provoked by water in the zone.  To achieve this, other correcting methods were applied, including the use of organic fertilizers and live and dead barriers, leveling, and construction of reservoirs and terraces.

The creativity strongly emphasizes the great contrast between those who do and make so much out of so little and certain other societies that do so little despite having so much.  One difference is due to the large number of highly trained Cuban professionals, problem-solvers who together form one of Cuba’s very richest resources for its socio-economic recovery and growth strategy.  But, of course, even the best-educated human beings can do little without economic investment for large-scale development, and that is the third economic strategy.

Moving from human capital to foreign investment capital

Cuba’s third strategy for coping with its severe needs has been to grasp every opportunity open to it.   Cuba gained a lot by taking advantage of the great windfall in prices for nickel in 2004, seeking increased production with its long-term joint venture Canadian partner, Sherritt International.  Despite some reduced capacity, they managed to raise production to gain 2004  revenue that exceeded $1 billion for the first time in a combination of export sales, but primarily due to exceptionally high commodity prices for nickel.  Canadian coal, used to help produce Cuban nickel, cobalt and electricity was also enhanced for Sherritt by its new discovery of oil in Cuba.

Table 1 shows changes in refined nickel production over the last decade, with projections from planned expansion of Sherritt mining operations into 2008. 

Table 1. Nickel Production 1993-2004 with projections through 2008

Something about Sherritt and how it benefits from its long-standing relations with Cuba appear in Table. 2, below.  There is a striking comparison of the bottom line in terms of net income for 2002, 2003 and 2004, and even for the first 3 months of 2005, stated below those figures. Not evident in Table 2, but certainly noteworthy beside nickel, is the interesting breadth of Sherritt’s diversification of investments inside Cuba, including tourist hotel complexes in Havana and Veradero, energy (electricity) and cobalt production, organic farming and soybean processing plants.  While a lot of political noise was made at the time when Sherritt decided to sell its share in the cellular telephone business, there is no evidence in these figures of any major losses or hard feelings.

Table 2. Sherrit International Corporation is reaping rewards

FISCAL YEAR DATE: 12/2004

Sherrit’s current financial position:  For the three months ended Mar. 31, 2005, net income was $35,500,000 or $0.25 per share compared with restated net income of $46,100,000 or $0.35 per share for the corresponding year-earlier period. Operating revenue slipped to $255,300,000 from a restated $258,500,000. (Source: AUDITOR  Deloitte & Touche LLP, C.A., Toronto, Ontario, Canada, posting date: June 2, 2005.)

However, let‘s look again at the lower 1^st quarter 2005 net income of 35 and a half million U.S. dollars:  If that lower rate of net income were to continue through 2005, it would still add up to an annual leap from $133M to $142 million in net income.  Of course, this may be unlikely, since nickel prices will probably come down from the peak, but, then again, tourism is increasing dramatically again, organic foods are in demand, and oil prices may continue to rise, so Sherritt has all three bases and home-plate covered.

In February [2005], the trade publication STEEL & FERROALLOYS reported that Sherritt was moving cautiously on the Cuban nickel project and placed a bid circular to raise the financing for a $450-million investment to upgrade productive capacity for an additional 16,000 metric tons.  They also were assessing the possibility of increasing output by another 32,000 m. tons/year of nickel (Vol. 76 [2005] No. 7, p. 13).  By March or April the caution seemed to have disappeared and Sherritt was forging ahead with a new contract, possibly in fear of losing its share of nickel to the far larger Chinese corporations that have been entering Cuba’s economy.

In contrast to nickel, there is also Ferro-nickel, an iron-nickel combination mostly used in steel-making.  Cuba has a joint venture to produce nickel with Toronto-based Sherritt.  Business sources in Havana said Cuba also planned to produce 90,000 tons of ferro-nickel a year with

Sherritt and estimated the needed investment at $475 to $710 million. 

Nickel plus cobalt reserves in the north east of the island are among the world’s largest, and Cuba is the world’s sixth-largest producer of nickel.  

So we should expect, logically, that Sherritt International is not the only force seeking to develop Cuban nickel mining and production. 

China’s rapid industrialization is hungry for resources and this new industrial giant has signed an agreement which calls for China’s state-owned Minmetals to invest in a new unit to mine and extract 22.5 million tons/year of ferronickel at the mothballed Las Camariocas plant, also located near Moa Bay.  If the figure was correctly stated, China will extract 250 times the amount of ferro-nickel that Sherritt is planning -- and one Chinese company may spend up to US$600 million to allow reactivation of plant that had been mothballed for years. (One source listed the projected extraction at 22.5 billion tons, but it seems to be a typing error insofar as it would be virtually impossible to produce 250,000 times as much as Sherritt now can mine.)

An executive of Minmetals' nonferrous unit said China was also interested in other projects in Cuba's nickel industry in Holguin province, where Sherritt

International Corporation also has operations (source: National Post, Financial Post & FP Investing [Canada] November 23, 2004, all but Toronto Edition, posting date November 23, 2004).  According to the same issue of the Financial Post and FP Investing, Cuba has the third-largest nickel reserves in the world and currently is the fourth most important producer at around 70,000 tons a year of unrefined nickel plus cobalt.

In November 2004, China signed contracts to buy 4,000 tons of Cuban nickel per year.  There were fifteen additional contracts signed, 3 others related to Cuban nickel, and twelve other deals including the sale of Chinese freight trains, and massive loans at far more favorable rates than Cuba has had for a long, long time.

Since that time, China’s Yutong  Bus Company began exporting 400 buses worth US $29 million to Cuba, including 200 units to be made at the Cuban vehicle maker Tranbus's domestic plant.  Plans are in the works to build a joint venture with an annual production capacity of 1,500 buses in Cuba for both domestic use and export to other countries in the region (source: China Daily, May 2, 2005).  China has made loans on a favorable basis for this joint venture vehicle factory.

One must imagine that increased investment will continue to open more markets for sale of Chinese goods to Cuba.  The major 2004 import partners with Cuba are listed in Table 3, below. 

Table 3 (with chart). Cuba’s export partners and volume 2003 (values in table following chart).

The “other” represents the rest of Asia (including Japan), Africa, other European countries like the Netherlands, plus the developing trade with Russia and old trading partners of the former Soviet countries. 

Thus, joint ventures have led to other sales by all countries doing business with Cuba, except for the United States, many of whose states have sought and established sales to a good segment of the Cuban agricultural market, thus far, from chicken to wheat to rice and more. However, other agricultural producers from other countries are waiting in that export line and Cuba may lose its patience with the increasing restrictions being imposed by the current administration’s self-defeating and long-ago-outdated ideological policies.

Besides the relations between established joint ventures and Cuban markets, there are other important infrastructural joint ventures in the works, most bilateral but some interesting trilateral ventures with long-term implications. 

Venezuela and Cuba will work together for the progress of Petrocaribe, the Venezuelan initiative for the regional business and oil-diplomacy initiative (source: Agence France Presse, “Castro gets best possible economic news: Venezuela's PDVSA to search for oil off Cuba,” English, April 28, 2005).

Additionally, the Cubans are working on a shipyard or naval repair plant about 315 miles northwest of Caracas in the oil-producing state of Zulia. Venezuela’s vast oil company PDVSA also will prospect for, pump and refine oil from Cuba's Gulf of Mexico economic zones (source: Venezuelan Wire service, Caracas, “Venezuela y Cuba construirán astillero de reparación naval” April, 2005)

“Joint ventures,” Appendix 2, lists the names of some of the best-known joint venture partners, lists potential new large-scale joint ventures, and discloses some numbers showing Cuba’s recent policies toward certain small business joint venture partners, several of whom now are leaving Cuba.

While there is a lengthier quote about joint ventures from the EIU Country Report of February 2005, included as Appendix 3, I would like to emphasize some very interesting potential trilateral agreements, involving large-funds investments by Cuba, Venezuela and China. Quoting from the EIU on trilateral negotiations in process:

·       Possible contract for the supply of around 590,000 tonnes a year of Venezuelan coal to fuel Cuban-Chinese ferro-nickel plant.

·       Possible construction of a coal-fired thermo-electric plant in Cuba, in a joint venture with Chinese partners, that will use 500,000 tonnes of Venezualan coal a year.

·       Possible Chinese financing for the construction of a stainless steel plant in Venezuela that will use Cuban nickel and Venezuelan coal.

How might these new initiatives have a business impact in the United States?  First, on a positive note, the Cubans will be able to buy more food -- and if the Bush administration tries to prevent this vitally needed marketing, the Cubans do have other alternatives, although more costly for reasons of transportation.  So, at this point in the game, any market restrictions by any U.S. administration will be politically costly, in my opinion.  Second, Cuba’s buying ability seems headed for a long-awaited rise, and even if the U.S. agricultural producers increase their overall sales, the U.S. exports may still have a shrinking piece of the Cuban imports pie shown in Table 3, above, for 3004.  This seems to depend more on internal U.S. politics than it does on the market, since Cubans have shown themselves, thus far, eager to buy U.S. agricultural and pharmaceutical products.

Brief Conclusions

I will conclude that the newer energy sources and larger-scale economic development of them are likely to a) affect Cuba’s long-overdue investment in social needs such as upgraded educational facilities, replenished pharmacy shelves, stable electricity for both home and industrial needs, better transportation and more housing for the people; and b) alter Cuba’s  trade relationships in terms of who may increase their portion of Cuba’s Cuba’s import markets, a topic that is increasingly important to U.S. agricultural exporters and possibly in the long-run to other U.S. manufacturers and other economic interests. 

The social indicator tables and notes in Appendix 1 show vast improvement for the period 1962-2002, especially when the mortality rates are placed in a comparative perspective with other Latin American countries. It is my opinion, having spent a great deal of time in Cuba in the 1990s, that there must be pressure on the health statistics because I am almost sure the loss of milk and other protein and food in general for pregnant women led to a greater incidence of miscarriages (by anecdotal information, I am almost sure of this).  Then, too, a lack of antibiotics in many local pharmacies, sometimes for months at a time, must have led or be leading to lower life expectancies, a statistic that will show up only after cumulative calculations over a few decades.  Indeed, during those hardest of years, the most frail sadly perished from often-simple infections that got out of hand because there were no antibiotics. 

Thus, the excellent progress Cuba made over four decades probably would take some statistical dips very soon, if Cuba’s economy had not been able to find, immediately, a way up from the pits of empty shelves, unstable prices, economic underdevelopment (including out-of-date industrial facilities), and the severe lack of infrastructure.  It seems their three lines I have discussed, 1) opening to oil exploration vast stretches of Cuban waters, 2) the continued development and global use of Cuban resources, 3) the most rapid expansion possible of mining to take advantage of higher prices and global demand for Cuban natural resources.  These measures, in addition to fiscal measures discussed by others, will permit the Cuban economy to recover to at least its former ability to feed, clothe and medically care for its population.  Appendix 1 also lists some of the new expenditures for health, education and housing that support this conclusion.  Other data suggest a great expansion of the potential to deal with Cuba’s serious social needs.  

We have to conclude that with new mining and oil resources, and new international cooperation in joint ventures, the island and its people are finally coming out of a crisis of more than a decade and a half.  The new expenditures promised -- and some already delivered -- are a great ray of hope for the future.  Cuba is clearly developing its resources, human and material to find a safer, more secure place in the global economy that will presumably do a great deal to improve the quality of life on the island.

-------------------------------------- Appendices --------------------------------------

Appendix 1 - Health results of developing human capital

Table 4. Infant and under-five mortality/1000 live births

Table 5. Maternal mortality per 100,000 births in Cuba, 1962-2002

Table 6. Infant & under-five mortality/1000 live births in four countries

Table 7. Maternal mortality per 100,000 births in four countries

Significant increase in education and health budgets for 2005
December 24, 2004:  FOR 2005, 68% of the state budget spending is to be directed to raising the levels of education, public health, social security, culture, sports and science and technology. Finally, Cuban teachers and healthcare professionals were awarded a significant and long-awaited pay increase.

Housing - In a long-awaited need Cuba has begun producing materials for the national effort to build some 100,000 houses—a project announced by Cuban President Fidel Castro in a speech he gave on International Women’s Day (March 8, 2005).

Cuba leads Latin America in education
In a population of 11.3 million, there are presently 20,000 full-time professors and lecturers and an additional 60,000 serving on a part-time basis throughout the country’s higher education system. In addition to that huge teaching force, Cuba has a reserve of 740,000 professionals and 380,000 university students who could also work as teachers if necessary. 

New possibilities and more places available at the university
FROM September 2005, more students will have access to university studies as a result of new measures announced by René Sánchez Díaz, director of Admissions and Placement of the Ministry of Higher Education.  The nationwide university enrollment for the academic year beginning September could well exceed half a million students, Cuba´s Higher Education Minister, Fernando Vecino Alegret, announced on May 30 [2005]. 

Vaccines against diphtheria, whooping cough, tetanus and hepatitis B
BEGINNING March 1, 2005, Cuba’s Immunization Program is now using a Cuban-produced vaccine that protects children from four diseases (diphtheria, whooping cough, tetanus and hepatitis B). 
Appendix 2 - Joint Ventures  Sources for Appendix 2 include the EIU (Economist Intelligence Unit), Steel and Ferroalloys, Agence France Press, The Miami Herald, China Daily, National Post?s Financial Post & FP Investing (Canada), The Mining Journal, Ltd,  Plalts Metals Week, Liquid Africa, International Herald Tribune, New York Times the Financial Post, the Associated Press (AP), the BBC, and Cuban online sources).

Joint ventures accounted for more than half of Cuba's exports last year (2004) and a third of all hard-currency earnings, or $1.3 billion and $2.3 billion respectively.  This appendix is divided into A – best known joint ventures, B – potential joint ventures, C – changes in the direction of joint ventures and cooperatives.

A. Best-known Joint ventures - better-known companies in larger joint ventures

Sherritt International (Canada) has had 49.9% interest in several joint ventures, as shown on sheet  2, but mostly known for nickel, oil, gas and power.

Sherritt - oil.  Through 2004, 40% of Cuba’s oil was extracted by Sherritt.  AND:

December 2004, Sherritt confirmed that initial results for exploration well at Santa Cruz were promising. 2005 - Appraisal wells will be drilled.  If feasible, in 2006 or in 2005, commercialization of the Santa Cruz field will begin.

Sherrit - nickel

March 3, 2005, the Corporation and its Cuban partner executed a base agreement providing for an expansion of annual production by 16,000 tons of nickel plus cobalt in mixed sulphides, to a total of 49,000 tonnes (total non-sulfide nickel was about 76,000 metruic tons in 2004 so the expansion is significant).

Pebercan -oil (Canada)

With Sherritt helped find the 100 million barrel reserves in December 2004. Santa Cruz del norte oil field, 53 km (33 miles) east of Havana and 145 km (90.6 miles) south of Key West, Fla., will go into production in 2006.

Repsol-YPF (Spain) - oil

2004 - July, Repsol-YPF said that its first well drilled near Cuba was not worth exploiting commercially  HOWEVER, Repsol earlier had suggested a possible find of reserves that could produce 400,000 barrels a day, almost six times the mid-2004 level of 73,000 b/d. (for current demand of 169,000 b/d.).  "We believe there is oil. We have reached an agreement with two other oil companies (Waterloo North Hydro and Sinopec) and we are going to do an additional seismic study and certainly drill one or two more wells. But not 100 percent at the expense of Repsol, but rather sharing the risk with two other companies. Evidently they like others have done all the studies and reached the conclusion that it's worth the effort to invest."  Repsol had been spending about US$195,000 a day to rent a Norwegian platform for exploratory drilling about 30 kilometers (18 miles) north of the island's coast in Cuban waters.  Repsol YPF of Spain is drilling in a separate, 4,132-square-mile tract. The American Association of Petroleum Geologists listed the Repsol find as among the most "significant discoveries" worldwide in 2004. 

In July, 2004, Matthew Pickles, a senior manager at the Barbados office of Ernst & Young, speaking at a Conference in Port of Spain, Trinidad, suggested that “an oil discovery in Cuba could also lead to the building of new refineries or the expansion of existing ones, potentially making Cuba a refining center for the eastern Caribbean, Mexico and Venezuela” (source NY Times Business edition, July 6, 2004).

PDVSA (Venezuela) -oil
PDVSA will search for oil "in prospecting and production (on new wells located in territorial waters) as well as in refining and marketing," PDVSA said in a statement.

PDVSA - refining

PDVSA also will take part in the reopening of the oil refinery and terminal in Cienfuegos, on Cuba's southern-central coast, a facility built with Soviet technology in 1990 but which long since ground to a halt due to its high energy consumption.

PDVSA - lubricants production and storage construction

PDVSA and CUPET will build a lubricants plant, and build a facility for storing residual petrochemicals -- 600,000 barrels a day -- in Matanzas, east of Havana, and an oil port, the company said.

 

Petrobas - oil (Brazil)

After passing on two zones earlier selected for it to explore in 2002, "Petrobras is waiting to find out its (new) designated zones to carry out deep-water offshore prospecting," the Brazilian ambassador said at the time. In early 2005, Petrobras is both boosting energy cooperation in Cuba, and trying to team up with Canada's Sherritt or Spain’s Repsol as it moves to explore two new prospecting zones off Cuba.

Industrias Básicas y Minería (Mining and Basic Industries of Venezuela)

Seeking production with Cuba iof a metallurgical industry to produce stainless steel, which neither country now has the capacity to produce, and therefore would reduce vulnerability of price fluctuations and reliance on foreign steel.  The plan includes integrating use of Venezuelan coal, Cuban nickel and ferro-nickel in the production of iron and steel, both of which are in large demand by China’s huge and growing economy.

CINOOC China National Offshore Corporation (China)

Deep-water exploration for oil.

SINOPEC (China)

THE national Cubapetróleo (CUPET) company and SINOPEC of China have signed a joint production contract for one of the island’s potential oil regions, announced the

ministry of basic industry in a press release dated January 30.  SINOPEC is also cooperating with other companies for oil explorations.

Shengli Oilfield Administration (China)

A subsidiary of China's Sinopec now working with Sherritt and other companies for oil exploration.

Minmetals Corp (China)

Up to US$600-million: Investment will allow reactivation of mothballed plant for ferro-nickel, which is expected to produce enormous exports to China.

 

Sol Melia (Spain)

Global tourist resorts and hotels

Pernod Ricard (France)

(recently bought Allied Domecq, the British firm Allied Domecq at a public auction, according to an official report released here.

Pernod Ricard´s society with Cuba brought immediate benefits to the extent that two million 12-bottle boxes of Havana Club rum are sold every year, especially in the European markets.  Pernod Ricard produces a wide variety of Cuban rums, including aged Silver, Especial, Reserva, 3 Years Old, 7 Years Old, Cuban Barrel Proof and 15 Years Old.

Bouyues (France) - Construction

Altaldis (French and Spanish) - Tobacco - cigars

Bitish-American Tobacco (England?) - Cigarettes

Telecom Italia (Italy) - Telecommunications

NV Interbrew (Belgium) - Beer

Nestle (UK) - Bottled water and other consumer goods.

AWS Technologies Company (Switzerland) has opened a website for sending money to Cuba which, among its competitive advantages offers greater rapidity and efficiency in the service.

 

B.  Potential Joint Ventures (some may now be in operation)

Brazilian Ministry of Science and Technology with Cuba’s several high officials from the Brazilian Science and Technology Ministry covering areas such as biotechnology, microelectronics, and health.  During their stay in the island, they will visit the Cuban Enterprise for Technology Information and Telematic Services (CITMATEL), The Center for Molecular Immunology, and the Finlay Institute, a recognized vaccine creator and producer. (Cuba has sold vaccines to Brazil in the past.)

Zhengzhou Yutong Bus Co Ltd (China)

Building of plants in several countries for the Manufacture of buses (source: CHINA DAILY, April 30, 2005).   The Shanghai-listed firm on Friday began exporting 400 buses worth 240 million yuan (US $29 million) to Cuba, including 200 units to be made at Cuban vehicle maker Tranbuss' domestic plant with components shipped from China.  

Yutong's exports to Cuba will total 1,000 buses this year, Xu said.  They will be sold in the country under the Yutong brand. "We are negotiating with Tranbuss to build a joint venture with an annual production capacity of 1,500 buses in Cuba," Xu said. The expected joint venture will target the whole Latin American market, he said. Pedro Cruza, Cuba's commercial counsellor to China, said on Friday: "We will need more buses as well as trucks and cars from China. Vehicle businesses will be an important part of growing trade between the two countries."

During the visit of the Chinese President, Hu Jintao, in November (see The political scene), 16 bilateral co-operation agreements were signed. Although some of the projects remain at the exploratory stage, the contracts already signed are sufficient to make an important contribution to prospects for the mining sector and a significant difference to Cuba’s external accounts. By the end of 2004 there were a total of 13 Chinese companies operating in Cuba, with total investments of US$50m, and seven Cuban companies operating in China, with investments of US$15m. It seems that the level of bilateral economic co-operation is set to expand rapidly in the next few years, particularly considering the easy terms of credit that China has offered Cuba.

METUNAS (Cuba - Dominican Republic may or may not be joint venture) is a factory that produces metal structures, with negotiations underway with the Dominican Republic to supply materials to build three storehouses at an industrial park in Puerto Plata.

C.  Joint Ventures and cooperatives - clear changes in direction

Joint ventures

2002 - 412 joint ventures.

2004 - end-of-year 313.

2005 - projected to have under 250 by end of year.

Cooperative production ventures

2003 -313.

2004 end-of-year 133.

2005 - all projected to be closed by end of year.

Cuba has scrapped its free-trade zones that boasted more than 400 companies a few years ago. Some traders outside the zones report their licenses have not been renewed as the state has sought to do business directly with foreign suppliers. Cuban officials insist that joint-venture exports and sales increased last year, despite the drop in their numbers, evidence that the "house cleaning" is working, they tell diplomats.

Foreign Investment and Economic Cooperation Ministry (MINVEC) recently said it was still interested in investment by major foreign investors in priority sectors such as energy, mining, biotechnology and tourism but made clear that small and medium-sized businesses need not apply. (Marc Frank in Financial Times February 7, 2005 and in Reuters dispatch, May 31, 2005.)