20th May 2024

The US government has removed Cuba from its latest list of countries that it says do not fully co-operate with its anti-terrorist efforts. Despite this, Cuba remains on Washington’s separate list of nations that it alleges are state sponsors of terrorism: a designation that has made it difficult to undertake international financial or other business transactions with the island.

In an email, a US State Department spokesperson confirmed that Cuba was not on its list of non-fully cooperating nations for calendar year 2023 under Section 40A of the Arms Export Control Act. It reflected, a spokesperson said, the fact that on the order of Colombia’s President, the country’s Attorney General had suspended the arrest warrants for 17 ELN commanders, including those whose extradition Colombia had previously requested from Cuba. It also noted that “The United States and Cuba resumed police cooperation in 2023, including in the fight against terrorism. Therefore, the Department determined that continuing to certify Cuba as a ‘not fully cooperating country’ was no longer appropriate.”

The official added however, that the designation was “not the same list as that of State Sponsors of Terrorism”, which “under US law establishes specific legal criteria for rescinding a designation of that nature.” “Any future review of Cuba’s status would be based on the law and the criteria established by Congress,” the official said.

Responding to the change in designation, Cuba’s Government said that the US decision was insufficient. President Díaz-Canel wrote on X: “By confirming what is widely known, that Cuba cooperates in the battle against terrorism, the US should do what is correct and consistent with that position: remove #Cuba from the State Department’s arbitrary list and end the coercive economic measures that accompany it.”

In another post, Bruno Rodríguez, Cuba’s Foreign Minister, wrote that the US “has just admitted what is known to everyone: that Cuba collaborates fully with efforts against terrorism.” Rodríguez demanded that the US Government remove Cuba from “the arbitrary list with which it designates countries that supposedly sponsor terrorism.” “All political manipulation of the issue should cease and our arbitrary and unjust inclusion on the list of countries sponsoring terrorism should end,” he added.

Other similar posts on X were made by MINREX Ministers who have actively participated in recent meetings with US officials in Washington and Havana on security matters. Such exchanges aim to deepen existing cooperation on counter-terrorism, narcotics interdiction, and human trafficking, matters on which the two capitals, their coastguards and related entities co-operate.

Responding to the Biden Administration’s decision, the US Senator, Rick Scott, (R-Florida)  said that the removal of Cuba as a non-cooperating state was “a first step to reverse the designation of Cuba as a State Sponsor of Terrorism.” He described it as an act of appeasement, as destabilising to the Western Hemisphere, supportive of terrorism, and delivering “a huge favour for America’s enemies in Russia, Iran, and communist China.”

The nations listed by Washington in its 2023 report as non-cooperating countries are North Korea, Iran, Syria, and Venezuela. The inclusion of Cuba in the US list of countries alleged to be sponsoring terrorism was taken in January 2021, one of the last decisions made by the Trump Administration. It did so on the basis that Cuba refused to extradite to Colombia, guerilla leaders involved in peace negotiations in Havana, a process in which Norway and Cuba were guarantors on terms that included safe passage for all participants out of the country.

29 April 2024

Cuba is making steady progress towards achieving its objective of receiving 3.2mn tourists this year, but still has far to go to achieve the 4.5mn visitors it received in 2019 before the pandemic.

Figures released recently by the island’s Office of National Statistics and Information (ONEI) show that in the first three months of 2024 total international arrivals numbers grew by 7.5% from 752,431 in 2023 to 809,238 this year.

The figures show numbers from Canada, Cuba’s largest market, increasing by 3.2% to 399,272 in the first three months of 2024 from 387,069 in the same three months of 2023, accounting for some 49.3% of all visitors so far this year.

Notably, visitor numbers from Russia continue to increase significantly as new airlift is added, promotional activity enhanced, and the Russian government actively encourages tour operators, airlines, and investors to take a greater interest in Cuba as a destination. ONEI’s first quarter figures show that Russian arrivals more than doubled, from 32,222 stopovers in the first three months of 2023 to 66,887 in the same three months of 2024.

In contrast, Cubans living abroad, a category Cuba counts separately, accounted for 75,386 of all international visitors arriving in the first quarter of 2024, a figure down from 83,663 recorded in the same three months of 2023.

For the month of March, international visitor numbers arriving were up 6.7% at 281,139 compared to the 263,465 received in March 2023. The arrivals numbers for March this year show, in addition to significant growth from Canada and Russia, the island’s other leading visitor markets were the United States with 46,717 arrivals, and Germany with 22,097. Visitor numbers from other European source markets remained low, however, with Cuba’s principal European markets, France at 19,377, the UK 16,719, and Spain 14,036, all likely affected by US travel regulations. These now require anyone eligible to enter the US under its ESTA visa waiver scheme to apply for a US visa if they entered Cuba after 12 January 2021.

As the year progresses, Cuba is hoping to increase visitor arrival numbers particularly from Latin America. Announcing details of this year’s International Tourism Fair (FitCuba 2024), Cuba’s Minister of Tourism,  Juan Carlos García, recently highlighted the promotional emphasis now being placed on increasing the number of travellers from Mexico, Colombia, Argentina, Brazil, and the rest of the Caribbean. This year’s fair takes place on Cuba’s from 1-5 May in Jardines del Rey located on the north coast of the provinces of Ciego de Ávila and Camagüey.

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

15 April 2024

 Cuba’s Central Bank (BCC) has said that it hopes this year to reduce further the amount of cash in circulation and make more effective measures announced last August that seek to direct state and non-state enterprises and individuals to use banks and magnetic cards for most transactions. 

The policy limited cash withdrawals to CUP5,000 per transaction, required the payment of all salaries, pensions, and benefits to be by electronic means, and sought to encourage all future economic activity to be e.commerce based. (Details Cuba Briefing 4 September 2023). 

 The measures formed a part of a response to surging inflation in both the official and unofficial economy, and an ongoing government liquidity crisis. 

Speaking at this year’s just held annual audit meeting of the BCC, Julio Pérez, the Director General of Operations and Payment Systems, said that at the end of 2023, 91% of state entities and 74% of non-state forms of enterprise undertook their accounting activity through current accounts, but 30% of transactions still took place in cash compared to 68% carried out by electronic channels. 

 This was due in part, he said, to the obsolescence of technological equipment, including the country’s 800 ATMs “of which, on average, 77% dispense cash.” The meeting also heard that despite the measures introduced in 2023, the amount of cash outside the banking and financial system continued to grow “based on the presence of new actors in the national economy.” This group, it emerged are now permanently monitored by the BCC in relation to government’s macroeconomic stabilisation programme introduced in December. 

Among the other problems BCC officials identified in moving to a near cashless society is the continuing resistance to making and receiving payments by electronic means by many smaller mainly non-state providers of goods and services, “inadequate control measures” to ensure compliance by regulatory bodies, the availability of cash at banks, and the variable levels of service offered. 

Speaking at the BCC meeting, Cuba’s Prime Minister, Manuel Marrero said that additional incentives must now be sought to stimulate cash deposits in the country’s banks and an improvement in the quality and provision of services were required. He also stressed the centrality of the BCC to the 2 

implementation of the country’s macro-economic stabilisation programme, to monetary policy, as well as to the elimination of exchange rate duality, and the technically illegal informal exchange rates widely used by most Cubans to change convertible currency. 

Although there was no reported discussion about the steps Cuba might take to address the ever-widening gap between its two official exchange rates and the still surging street rate for the US Dollar and the Euro, the Minister President of the BCC, Juana Delgado, told the meeting that work is being done on “resizing the exchange market,” and that this year the BCC will identify projects that generate external income and promote the improvement of the flow of foreign currency to the country. The bank, she said, would additionally focus on expanding the Cuban banking and financial system’s international relations. 

In her reported remarks, Delgado stressed that the BCC would this year seek to consolidate the banking process so that it involved the full participation of Cuban society, by engaging with “the providers of goods and services, regulatory authorities, local governments and non-state forms of management (MSMEs).” 

Other planned actions, Delgado indicated, focus on standardising electronic payment systems nationally on all platforms, the design of new strategies which reduce the use of cash in transactions to stimulate deposits, and the adoption of measures that increase the availability of cash. 

The BCC would also, she said, seek to attract new financing with an emphasis on enhancing the activities of Cuba’s export sector, create a new mechanism for the allocation and management of liquidity for all economic actors, and introduce measures that recover remittance flows. No details were provided. 

18th March 2023

The outline of a possible approach to unifying Cuba’s multiple foreign exchange rates and addressing dollarisation has been published in Granma. The much-needed measure is widely believed to be the key determinant in the success or failure of government’s macroeconomic stabilisation reform package. (See Cuba Briefing 2 January 2024).

In a second commentary in a month to be published in the Communist party’s official publication by Joel Marill, an economist specialising in Strategic Macroeconomic Projections at the Ministry of Economy and Planning (MEP), he argues that because the price of currencies is transversal, addressing exchange rate policy in the short term is vital.

Marill writes that the issue forms an important part of the internal debate that is continuing in relation to the package of reform measures agreed in December as necessary to rectify past mistakes and create the conditions for future economic growth.

These discussions, he suggests, are in part focussed on “the implications of an official exchange rate of US$1 to CUP24 and another at US$1 to CUP120” (the Cadeca rate); both of which he describes as  “clearly disconnected from the economic reality” of the informal market (currently at US$1 to CUP325). This he suggests, needs to be “formalised” and used “to stimulate national production and macroeconomic stabilisation.”

To this end he proposes a solution requiring “correct management” and recognition that it will be  “one of the most complex transformations to undertake, in a scenario of currency restrictions and internal macroeconomic imbalances.”

Marill goes on to note that the two official exchange rates mean that national or foreign companies cannot directly access foreign currency. Instead, they must use a “complex and mostly inefficient centralised allocation mechanism” to legally exchange  CUP “which overvalues the Cuban peso.”  This he writes, severely impacts the export sector, limiting its ability to expand production, employment, and to create fresh foreign exchange.

By contrast, Marill argues, the informal exchange market used by the non-state sector and the Cuban population, “offers more flexible access to currency” at high prices, but is based on speculation and uncertainty, and excludes state and mixed companies.

To remedy this, the MEP economist proposes in the short-term the creation of a flexible scheme providing direct and legal access to foreign exchange for MSMEs, and state and mixed companies. This he suggests should be followed in the medium term by an approach that has as its strategic objective the gradual convergence and unification of the exchange rate “through successive iterations.”  An approach, he believes, that would eventually enable the recovery of the “full sovereignty of the peso as the single currency” for internal transactions, creating also a single exchange rate for all external operations.

To achieve this far from easy sequencing and objective, he proposes “first, the relaunch of the official exchange market and, subsequently, the slow devaluation of the official exchange rate.”  He also recommends that the informal exchange market be addressed by “the redirection” of the flows involved towards the formal financial system.

Although an institutionally complex task, he suggests that this could be achieved through three actions:

• The Central Bank of Cuba (BCC) setting an equilibrium exchange rate that is regularly modified by the movement in the supply and demand for the currencies the financial system receives and by underlying market conditions

• Providing foreign currency through the financial system to those who presently operate in the informal market

• And then, when foreign currency flows are oriented towards the formal financial system, granting state-owned companies gradual access to this market based on exports and the capture of foreign currency earnings in the financial system. 

Marell recognises that there are risks attached in relation to money supply, and that there would be constant pressure for the Central Bank to depreciate the exchange rate. He suggests, however, that the monetary and fiscal transformation accompanying the opening of an official exchange market would enable the changes required to deliver the country’s macroeconomic stabilisation programme.

No alternative commentaries have so far appeared in Granma. Both by Marell were published after the appointment  was announced on 2 February of Joaquín Alonso, the Minister President of the Central Bank, as the new Minister of Economy and Planning. Details of Marell’s earlier commentary on the macroeconomic stabilisation process can be found in Cuba Briefing19 February 2024.

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

Photo: cubaniatravel.com

4th March 2024

Jorge Pérez, the Commercial Vice President of Habanos SA, Cuba’s principal tobacco exporter, has said that sales of the joint venture’s cigars rose by 31% to US$721mn in 2023.  He was speaking in Havana during the twenty fourth annual Habano Festival which this year  was attended by more than 2,900 participants from 108 countries.

The growth, according to other Habanos executives, largely reflected market recovery after the COVID-19 pandemic and the increasing demand globally for “limited and exclusive” high end editions.  It also responded, they said, to strong growth in global demand in the luxury market for premium cigars.

Speaking to the media in the margins of the festival, José María López, Habanos’ Vice President for Development, said that the outcome reflected the strong positioning strategy that had been developed for the company’s brands, its policy of permanent innovation including the launch of 31 new products, and improvements to its supply chain. By value, he said, the company’s most important market was China, followed by Spain, Switzerland, Germany, and the UK. In the Americas the principal markets were Mexico, Canada, and Cuba itself. Habanos sales by region were Europe (56%), followed by Asia-Pacific (21%), the Americas excluding the US (13%), and  Africa and the Middle East (10%).

Separately, Luis Blanco, the Agricultural Director of the Tabacuba business group, confirmed that the present planting campaign for the 2024-25 harvest will see about 14,000 hectares planted from which some 20,000 tons of tobacco will be obtained, guaranteeing the industry’s production plans for 2025. He said that the province of Pinar del Río, Cuba’s largest producer, will  plant 10,200 hectares of tobacco, with yields expected to be between 1.37 and 1.4 tons per hectare. In the case of covered tobacco from which the best leaf comes for Cuba’s premium cigars, he confirmed there are no problems with planting.

As reported previously (Cuba Briefing 19 February 2024) to try to achieve the optimum outcome, Tabacuba is now concentrating on having farmers with the best historical results plant in the best soil in the Vueltabajo tobacco massif. In mid-February Granma quoted a local official as saying that the supplies and fuel necessary for growers to conclude the campaign had been received. It additionally quoted Tabacuba as indicating that full recovery of the industry’s infrastructure will take at least two years with the 2024-2025 harvest envisaging 14,000 ha under tobacco, a figure still below that when Hurricane Ian crossed the Western end of Cuba in 2022. Farmers not able to plant tobacco are being encouraged to engage with a Tabacuba programme to plant other crops.

Habanos SA is a 50/50 joint venture between the Cuban state and Asia Uni Corp, a BVI registered company reportedly bringing together a consortium of Asian investors.

The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.

Photo by: www.cigaraficionado.com