Author Archives: Reuters

SPECIAL REPORT: HOW CUBA TAUGHT VENEZUELA TO QUASH MILITARY DISSENT

Angus Berwick,  REUTERS, CARACAS, AUGUST 22, 2019

Original Article:     HOW CUBA TAUGHT VENEZUELA,,,,

In December 2007, Venezuela’s Hugo Chavez suffered his first defeat at the polls.  Although still wildly popular among the working class that had propelled him to power nearly a decade earlier, voters rejected a referendum that would have enabled him to run for re-election repeatedly.

Stung, Chavez turned to a close confidant, according to three former advisors: Fidel Castro. The aging Cuban leader had mentored Chavez years before the Venezuelan became president, when he was still best known for leading a failed coup.

Now, deepening economic ties were making Cuba ever more reliant on oil-rich Venezuela, and Castro was eager to help Chavez stay in power, these advisors say. Castro’s advice: Ensure absolute control of the military.

Easier said than done.  Venezuela’s military had a history of uprisings, sometimes leading to coups of the sort that Chavez, when a lieutenant colonel in the army, had staged in 1992. A decade later, rivals waged a short-lived putsch against Chavez himself.

But if Chavez took the right steps, the Cuban instructed, he could hang on as long as Castro himself had, the advisors recalled. Cuba’s military, with Castro’s brother at the helm, controlled everything from security to key sectors of the economy.

Within months, the countries drew up two agreements, recently reviewed by Reuters, that gave Cuba deep access to Venezuela’s military – and wide latitude to spy on it and revamp it.  The agreements, specifics of which are reported here for the first time, led to the imposing of strict surveillance of Venezuelan troops through a Venezuelan intelligence service now known as the Directorate General of Military Counterintelligence, or DGCIM.

Under Cuban military advisors, Venezuela refashioned the intelligence unit into a service that spies on its own armed forces, instilling fear and paranoia and quashing dissent.  Now known for its repressive tactics, the DGCIM is accused by soldiers, opposition lawmakers, human rights groups and many foreign governments of abuses including torture and the recent death of a detained Navy captain.

According to the documents reviewed by Reuters, the agreements, signed in May 2008, allowed Cuba’s armed forces to:

  • Train soldiers in Venezuela
  • Review and restructure parts of the Venezuelan military
  • Train Venezuelan intelligence agents in Havana
  • And change the intelligence service’s mission from spying on foreign rivals to surveilling the country’s own soldiers, officers, and even senior commanders.

The first agreement, according to the documents, would prepare Venezuelan intelligence agents to “discover and confront the subversive work of the enemy.” The second agreement authorized Cuban officials to oversee the “assimilation” and “modernization” of Venezuela’s military.

The presence of Cuban officials within Venezuela’s military has been known for years. President Nicolas Maduro, Chavez’s disciple and increasingly beleaguered successor, said in a 2017 speech: “We are grateful to Cuba’s revolutionary armed forces. We salute them and will always welcome them.”  But neither country has ever acknowledged details of the agreements or the extent of Cuba’s involvement.

In March, after U.S. Vice President Mike Pence denounced Havana’s “malign influence” on Caracas, Cuban Foreign Minister Bruno Rodriguez downplayed the relationship. “I strongly reject repeated and false accusations,” he tweeted, “of Cuban military ‘training,’ ‘controlling’ or ‘intimidating’ in Venezuela.”  Neither Venezuela’s Defense Ministry nor its Information Ministry, responsible for government communications including those of Maduro, responded to emails and phone calls for this article. Cuban officials didn’t respond to requests from Reuters for comment.

Eleven years after they were forged, the military agreements have proven crucial for Maduro’s survival as president, according to security experts, people familiar with the administration and opposition politicians.  With Cuba’s help and training, the military has stood by Maduro and helped him weather an economic meltdown, widespread hunger and crime, and the emigration of more than 4 million people – more than 10 percent of Venezuela’s population in recent years.

In June, Reuters explained how a reshuffling of the armed forces, and proliferation of senior officers, has kept military leadership beholden to Maduro.

Now, the documents laying out Venezuela’s agreements with Cuba – and interviews with dozens of current and former members of the armed services, government officials and people familiar with the relationship between Caracas and Havana – show how instrumental Castro’s help has been as well.

The transformation of the DGCIM, these people say, has been particularly effective. “The most important mission for the intelligence service once was to neutralize any threat to democracy,” said Raul Salazar, a former defense minister under Chavez who opposes Maduro. “Now, with Cuba in charge, the government uses it to stay in power.”

Once Cuba began training DGCIM personnel, the intelligence service embedded agents, often dressed in black fatigues, within barracks. There, they would compile dossiers on perceived troublemakers and report any signs of disloyalty, according to more than 20 former Venezuelan military and intelligence officials.  The DGCIM also began tapping the phones of officers, including senior military commanders, to listen for conspiracies.

The crackdown has led to hundreds of arrests. At least 200 military officials are currently detained, according to the opposition-led National Assembly. Citizen Control, a Venezuelan organization that studies the armed forces, says the number is over 300.

In a June 2017 report, reviewed by Reuters, the DGCIM accused a soldier, who enrolled in a university considered to be aligned with the opposition, of “ideological and political subversion.” Speaking out for the first time, the former lieutenant recounted how he was handcuffed to a chair in a continuously lit room and beaten until two vertebrae broke.  “Those days had no end,” he recalled. He revealed his story to Reuters on the condition that the news agency use only his first name, Daniel, and not disclose his age.

Since its remaking, the DGCIM’s ranks have swelled – from a few hundred agents early in the Chavez administration to at least 1,500 now, according to former military officials.

A recent United Nations report accused the DGCIM of torture – including electric shocks, suffocation, waterboarding, sexual violence, and water and food deprivation. Under Maduro, DGCIM officers have been promoted to senior positions, including the command of his personal security detail.  The repression, opposition leaders say, has cowed the armed forces. Juan Guaido, head of the National Assembly, early this year denounced Maduro’s 2018 re-election as a sham and declared, with the support of most Western democracies, that he was Venezuela’s rightful leader.

But opposition pleas for a military rebellion have gone unheeded. “We have failed,” said a senior opposition official involved in attempts to broker talks with military leaders. “We have nothing to offer to convince them.”

“A BASTION OF LATIN AMERICAN DIGNITY”

For Chavez, the changes foreseen by the two agreements resonated on a personal level.  Castro, whom he had long admired, was the first international leader to embrace Chavez as a rising politician in the 1990s.

Venezuela’s military intelligence unit, meanwhile, was run by officers allied with the conservative elite and opposed to Chavez’s vision of transforming a country which, despite boasting the world’s biggest oil reserves, suffered rampant poverty.

When Chavez’s 1992 coup failed, officers from the unit, then known as the Directorate of Military Intelligence, or DIM, were the ones tasked with arresting him. They initially jailed him in one of the same underground cells at the DIM’s Caracas headquarters where Chavez would later detain some of his own political opponents, according to several former officials.

Months after his release from prison because of a presidential pardon, Chavez in 1994 flew to Havana, where Castro, in their first in-person meeting, greeted him at the airport.

In Chavez, Castro saw a like-minded leftist leader of the sort that had become rare since the end of the Cold War. In Venezuela’s vast oil wealth, Castro saw potential nourishment for a Cuban economy starved by the collapse of its former sponsor, the Soviet Union.  With Castro looking on, Chavez in a speech at the University of Havana called Cuba, then in its fourth decade of authoritarian rule, “a bastion of Latin American dignity.” He vowed to cure the capitalist “gangrene” afflicting Venezuela.

After the visit, the two men began to speak regularly, former advisors said.

By the late 1990s, high inflation, low economic growth and increased poverty made Chavez’s Socialist message attractive to a growing number of Venezuelans. In 1998, he was elected president. Almost immediately, he deepened formal links with Cuba.

In October 2000, Castro traveled to Caracas to sign a series of economic agreements. Venezuela would give Cuba enough oil to meet half its energy needs.

Since then, Venezuela has sent at least 55,000 barrels per day to the island, or more than $21 billion worth of oil, according to government figures and average prices over the period. In exchange, Cuba sent thousands of doctors, teachers and agricultural specialists to help diversify Venezuela’s grass-roots economy.

By 2002, many of Venezuela’s elite had tired of Chavez. That April, conservative opposition leaders teamed up with military chieftains, including senior DIM officials, and detained him. But the coup, after a massive popular uprising on his behalf, failed within two days.

Back in power, and with Castro’s blessing, Chavez placed Cuban advisors within his inner circle to tighten security, according to his former advisors and several former military officials. He began a purge of the intelligence service and other top ranks of the military.  He appointed Hugo Carvajal, a lieutenant colonel who had joined Chavez’s 1992 coup effort and later headed the DIM’s investigations division, to be its subdirector. Within two years, Carvajal became its director general.  Carvajal began modernizing the DIM. In an email to Reuters, Carvajal said Venezuela’s central bank provided millions of U.S. dollars in cash to the DIM for new technology, including surveillance equipment and a database to centralize intelligence.

The intelligence boss would lead the service for nearly a decade. Now out of office, he has been sanctioned by the United States Treasury Department for allegedly helping Colombian guerrillas. Last April he was arrested in Spain and remains detained in response to a U.S. warrant for alleged drug trafficking.

In the email, sent through his lawyer in Spain, Carvajal denied the accusations.

In July 2007, Chavez named Gustavo Rangel, a loyalist who headed the army reserves, as defense minister.

At his swearing-in, Rangel spoke of the need for “new Venezuelan military thinking” to counter the “real enemy.” The “empire,” he said, using common Caracas shorthand for the United States, was sponsoring “subversive groups” bent on destroying the revolution.

Reuters was unable to reach Rangel, now retired, for comment.

That December, Chavez lost the referendum on term limits. On television, he vowed a “new offensive” to pursue the goal.

Defense talks with Cuba began. At a meeting in Caracas on May 26, 2008, Rangel and General Alvaro Lopez, Cuba’s vice minister of defense, signed the two agreements.

Under the first agreement, Cuba’s defense ministry would oversee a restructuring of the DIM and advise on creating “new units” inside the service. The DIM would also send groups of as many as 40 officers to Havana for up to three months of espionage training.

According to the documents, Venezuela would send resumes of training candidates for Cuba to vet. Courses included how to handle “secret collaborators,” how to conduct criminal investigations and how to select new intelligence agents.

Most of the training, according to the documents, took place at the Comandante Arides Estevez Sanchez Military Academy in western Havana. At the academy, a cluster of white four-story buildings and parade grounds, Cuban instructors told DIM agents their mission henceforth would be to infiltrate and control the military, according to five people familiar with the courses.

The second agreement created a committee known as the Coordination and Liaison Group of the Republic of Cuba, or GRUCE. The GRUCE, comprising eight Cuban “military experts,” would send Cuban advisors to Venezuela to inspect military units and train soldiers.

One former Venezuelan intelligence official recalled training he received by Cuban instructors on a farm in the eastern Venezuelan state of Anzoategui. Instructors, he told Reuters, drilled students with questions about their political beliefs. The DIM, they said, must be the “tip of the spear” in the fight against “traitors.”

Chavez, fortified by increases in government spending that boosted his popularity, won a new referendum to end term limits.

In 2011, he changed the DIM’s name to include the term “counterintelligence,” reflecting its mission to thwart sabotage from within. By then, the new DGCIM was several hundred agents stronger, former officials said.

Fresh from Cuban training, the new agents began infiltrating barracks. “We lived and trained with the troops to monitor them, keeping the bosses informed,” another former DGCIM officer told Reuters. “We had an iron grip.”

Some agents pretended to be regular soldiers. Others donned their DGCIM uniforms and regularly encouraged soldiers to report on each other. They came to be known as “the men in black,” according to several former soldiers. “I’ll hand you to the DGCIM,” a battalion commander warned would-be rebels, one soldier recalled. Stories of detentions and torture by DGCIM agents, sometimes wearing skeleton masks and balaclavas, spread through the ranks.

“YOU CAN’T FIGHT THE STATE”

Chavez, following four surgeries in Cuba, died in 2013. Castro in a newspaper column called him “the best friend the Cuban people had in their history.” Voters elected Maduro to succeeded him.

In 2014, oil prices plummeted.  Maduro’s effort to spur the economy failed.  Hunger and shortages hit even the armed forces. A military doctor told Reuters recently that many enlisted soldiers are underweight, subsisting primarily on pasta and lentils.

As growing numbers of troops sought to desert, the DGCIM grew more aggressive. It expanded surveillance, wiretapping senior officers.

On the top floor of its headquarters, some 40 agents in its Operational Communications Division used a platform called Genesi, according to a former member of the team.

The system, designed by Italian telecommunications firm IPS SpA, allows users to “intercept, monitor and analyze every kind of information source,” according to the company’s web site.

IPS didn’t respond to calls, emails or a letter seeking comment at its Rome headquarters. Reuters couldn’t identify an IPS office or personnel working in Venezuela.

In July 2017, Daniel, the Army lieutenant in Caracas, was summoned to his battalion commander’s office. Once a Chavez supporter, Daniel had joined the army in 2004 but under Maduro lost enthusiasm and told superiors he planned to leave. He had enrolled in law classes at a local university while still in the military and taken part in some opposition marches. Daniel’s behavior, according to the intelligence report reviewed by Reuters, was “counter-revolutionary.” The report described the university, whose name Daniel asked Reuters not to disclose, as a school for the opposition.

Upon reporting to the commander’s office, Daniel said, three uniformed counterintelligence agents confiscated his phone and said he was needed for an “interview” at DGCIM headquarters.

Daniel said agents transferred him to an underground cell and handcuffed him to a chair. Each day, a man entered and punched him repeatedly. The beatings broke two vertebrae, according to a physician’s report reviewed by Reuters. The cell was lit all hours, causing Daniel to lose track of time.

After 20 days, a military court charged him with treason, rebellion and violating military decorum. Pending a trial, he was transferred to another prison. Six months later, after entering a guilty plea, the court released Daniel on condition he remain in the country. He was expelled from the Army.

Daniel returned to law classes, but regrets pleading guilty. “I’m not sure it was the right thing to do,” he said, but noted that many who don’t enter a plea remain detained indefinitely. “You can’t fight the state.”

The surveillance has hurt even senior officers.

One case sparked national outrage, forcing the government to recognize DGCIM abuse. Rafael Acosta, a 50-year-old Navy captain, died in DGCIM custody on June 29, eight days after agents arrested him.

Tarek Saab, Venezuela’s chief prosecutor, said Acosta was detained for participating in an unspecified “right wing” plot. Acosta’s wife, Waleswka Perez, said the accusations were untrue and accused the DGCIM of torture.  On July 1, Saab said the government had charged two DGCIM agents with homicide. He gave neither a cause of death nor the circumstances in which it occurred. The charges, Saab said in a statement, followed an “impartial” investigation into the “unfortunate event.”  Most DGCIM handiwork never comes to light.

In March 2018, five DGCIM agents summoned Lieutenant Colonel Igbert Marin, commander of the 302nd mechanized Army brigade, in Caracas. Marin, now 40 and the father of two young children, for most of his career was a rising star who had excelled at Venezuela’s top military academy.

His wife, Yoselyn Carrizales, told Reuters the agents took Marin to the Defense Ministry, where he was met by officials including Defense Minister Vladimir Padrino and Ivan Hernandez, the current head of the DGCIM.

The officials accused Marin of scheming against the government, said Carrizales, who is acting as one of Marin’s attorneys. They said they had video evidence of Marin and eight other officers conspiring, she added, but didn’t show him the video.  Marin denied the allegation, saying that the meeting in question had been merely a gathering of old academy classmates. Indignant, he told the defense minister that such accusations were counterproductive, especially at a time when most of the military was suffering from shortages of food, pay and equipment.

The minister should “leave his office, open his eyes and see how soldiers actually feel,” Marin told Padrino, according to Carrizales. Another lawyer defending Marin, Alonso Medina Roa, confirmed her account.  Neither Padrino nor Hernandez could be reached for comment.

The agents took Marin and the eight other officers to DGCIM headquarters. Marin later told his attorneys that agents handcuffed him to a chair, placed a bag over his head and filled it with tear gas. His lawyers detailed the alleged abuse to Reuters.  A week later, at a hearing Carrizales attended, a military court charged Marin with treason, instigating rebellion and violating decorum. Agents then took Marin away. He remained incommunicado for 78 days.

“I didn’t know if he was alive or dead,” said Carrizales.

Marin remains detained, and his wife continues to work for his release. Venezuelan officials haven’t publicly commented on the case or shown Marin’s lawyers the alleged video. No trial date has been set.

“They fear him,” Carrizales said. “He is an obvious leader within the armed forces. That’s why they arrested him.”

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NESTLE, CUBA LAY FIRST STONE FOR $55 MILLION COFFEE AND BISCUIT FACTORY

Reuters, November 28, 2017.

Original Article: Cuba Nestle

By Sarah Marsh

HAVANA (Reuters) – Cuba and Swiss firm Nestle on Tuesday laid the first stone of a $55 million coffee and biscuits factory joint venture in the Mariel special development zone, the latest major foreign investment in the Communist-run island.

Nescor is Cuba’s third joint venture with Nestle and reflects President Raul Castro’s drive to attract international capital to help update the Soviet-style command economy and stimulate growth.

Cuba created the zone around the Mariel port just west of Havana four years ago, offering companies significant tax and customs breaks. Its aim to replace imports with Made in Cuba goods has become all the more pressing because aid from socialist ally Venezuela is falling, resulting in a cash crunch.

Nestle Vice President Laurent Freixe said in an interview after the symbolic stone-laying ceremony that negotiations with Cuban partner Coralsa and Mariel authorities had taken just 18 months, a “record speed”.

The factory would be operating at the end of 2019 manufacturing coffee products, said Freixe, head of Nestle’s Americas division. Biscuits and other culinary products would come later. The company exports goods to Cuba and the other two joint ventures are one producing ice cream and the other bottled water and other beverages.Nescor goods would be destined both for the Cuban market and tourists visiting Cuba, while it could eventually also export Cuban coffee, Freixe said.

Nestle last year already exported Cuban coffee as a limited “Cafecito de Cuba” edition of Nespresso single-use brewer pods, including to the United States.

“It sold at an impressive speed,” said Freixe. “Within a few days that line was sold out, which shows the potential.”

Before being able to export Cuban coffee, Nestle would first need to help Cuba increase its harvest, Freixe said, which has steadily declined since the 1959 revolution.

The new factory could double Nestle’s turnover in the country over the medium term from $135 million currently, he said.

So far, Cuba has approved 31 projects for the Mariel zone including nine with multinationals, Director Ana Teresa Igarza said at the ceremony. There was no longer the same flurry of business interest in the zone as when it was created but the interest that remained was more serious, she said. Mariel was on the list of Cuban entities that the administration of U.S. President Donald Trump banned U.S. firms from doing business with.Just one U.S. company, Rimco, the Puerto Rican dealer for heavy machine maker Caterpillar , has signed a deal with Mariel to open up shop there, getting approval just on time before the new U.S. regulations were issued earlier this month.Igarza declined comment on whether Mariel continued to negotiate with other U.S. companies but said it would be open to doing so.

Mariel, April 2015. (Photo by Arch Ritter)

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EU to start talks with Cuba on a co-operation accord

Original Essay here: http://www.bdlive.co.za/world/americas/2014/01/31/eu-to-start-talks-with-cuba-on-a-co-operation-accord

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BRUSSELS, JANUARY 31 2014 (Reuters) — The European Union (EU) will agree next month to deepen relations with Cuba in its most significant overture to the communist island since the bloc lifted diplomatic sanctions in 2008, people close to the matter have told Reuters.

Foreign ministers from the EU’s 28 countries will give the go-ahead on February 10 to launch talks with Havana on a special co-operation accord to increase trade, investment and dialogue on human rights. The pact could be agreed by the end of 2015.

“Cuba wants capital and the EU wants influence,” said one person involved in the talks who declined to be named because of the sensitivity of the issue. “This co-operation could serve as a prelude to much more.”

Two other people with knowledge of the negotiations told Reuters that a consensus had been reached in Brussels to give momentum to Cuba’s market-oriented reforms under President Raul Castro and to position European companies for any transition to a more capitalist economy there in the longer term.

While the initial effect of a co-operation agreement will be limited, the symbolism is huge for the EU, whose ties with Cuba had been strained since it imposed sanctions in 2003 in response to Havana’s arrest of 75 dissidents.  Although the EU lifted those sanctions in 2008, the normalisation of relations has been tortuous because of resistance from Poland and the Czech Republic due to their communist past.

Havana has rejected the EU’s “common position” on Cuba that the bloc adopted in 1996 to promote human rights and democracy in the country.

Furthermore, the US, Cuba’s long-time foe that has kept an embargo against the Caribbean island since 1962, had exerted pressure on Brussels to try to isolate Havana. Washington has not sought to block the EU’s latest efforts, people close to the talks said, while Poland and the Czech Republic now back a deal with Cuba.

In a sign of impatience with the status quo, the Netherlands sent its foreign minister to Havana in January. This first such trip by the Dutch since the 1959 Cuban Revolution broke with EU policy to limit high-level visits. Spain, a former colonial power in Latin America and the Caribbean, has also been pushing for a change of approach since ailing, long-time Cuban leader Fidel Castro handed power to his younger brother Raul in 2008. Some EU countries see the 1996 “common position” policy as outdated because 18 EU governments have bilateral agreements with Cuba outside the common position, making it hard for the bloc to speak with one voice.

Still, Spanish Foreign Minister Jose Manuel Garcia-Margallo has been adamant that the “common position” will remain for the time being while the European Commission, the EU executive, negotiates the co-operation pact.

“If Europe wants to have a presence when there’s a transition in Cuba, the EU has to start working now.

“It’s right to start dialogue now so that Europe isn’t absent when a transition happens,” said Carlos Malamud, head of Latin American research at the Real Instituto Elcano, a think-tank in Madrid.

A co-operation pact, which the EU has used as a tool in the past to strengthen relations with Central America and Asia, is not likely to increase trade greatly because Cuba sells very little to Europe. Besides cigars and rum, Cuba’s exports are not of huge interest to the EU, but Brussels believes developing business ties is the best way to press for change in Cuba. The EU is Cuba’s biggest foreign investor and Cuba’s second biggest trading partner after Venezuela, and a third of the tourists to the island every year come from the EU.

Cuba recently opened a Chinese-style special economic zone and is preparing a new foreign investment law. The country is seeking foreign investment at its port facilities in Mariel Bay to take advantage of the expansion of the Panama Canal.

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Jeff Franks: Key political risks to watch in Cuba

By Jeff Franks, for Reuters; HAVANA | Fri Feb 3, 2012 10:57am EST

HAVANA Feb 3 (Reuters) – Cuba is opening the door to private management of some state-run cafes and food service outlets in an apparent test of further reforms aimed at keeping the island one of the world’s last communist countries.

The government said food prices rose nearly 20 percent in 2011 in a warning sign that economic change will not be painless.

Spain’s Repsol YPF brought the massive Scarabeo 9 drilling rig into Cuban waters and began drilling what Cuba hopes will be the first of many wells in its untapped offshore oilfields.

ECONOMIC REFORMS

In eastern Holguin province, officials said 211 state-owned cafeterias would be leased to employeesin a semi-privatization similar to what has been done nationally with barber shops and beauty salons the past year and recently expanded to other service businesses such as watch repair and carpentry shops. The Holguin program has not been mentioned in national media, but is likely a trial run before it becomes generalized, as was done with the other services.

The government, which wants to slash a million jobs from its payroll and encourage more private initiative, has said it will turn many small businesses, nationalized since the 1960s, over to employee cooperatives. It is encouraging self-employment, with more than 362,000 people now working for themselves. Economy Minister Adel Yzquierdo Rodriguez told the National Assembly in late December that 170,000 state jobs would be cut in 2012 and as many as 240,000 new non-state jobs added. The government’s goal is to have up to 40 percent of the island workforce of 5.2 million in non-state jobs by 2015.

President Raul Castro has made reform of Cuba’s lagging agricultural sector a top priority and the Cuban state, which owns 70 percent of the country’s land, has leased 3.5 million acres (1.4 million hectares) to 150,000 private farmers since he succeeded older brother Fidel Castro as president in February 2008. In some areas, the state has increased the land farmers can lease to 165 acres (67 hectares), extended their leases to 25 years, allowed them to build homes on the land and will let them pass the leases on to family members. Yet food output was up just 2 percent in 2011 and still below 2005 levels.

That, reduced food imports by the cash-strapped government and reforms allowing farmers to sell more of their production for market prices combined to make food prices shoot up in 2011. The National Statistics Office reported that meat prices rose 8.7 percent while produce prices increased 24.1 percent, for an average of 19.8 percent on the year..

At the same time, the average monthly salary inched up only a few percentage points to the equivalent of $19 a month, the government said. The statistics stated what Cubans already knew — their buying power has shrunk under Castro’s reforms.

President Castro told the National Assembly that Cuba still expected to spend $1.7 billion on food imports in 2012.

He also emphasized at a Communist Party conference the importance of an ongoing crackdown on corruption, which already has shuttered three foreign firms and sent executives of some of Cuba’s biggest state-run firms to prison. He said the party would implement term limits for the country’s leaders, but he gave no details.

What to watch: The pace of reforms and their consequences; The development of small businesses; Agricultural production and food prices.

FINANCIAL HEALTH

Castro said the economy grew 2.7 percent in 2011 and was expected to rise 3.4 percent in 2012. Cuba said it drew a record 2.7 million tourists in 2011, bringing in revenues of about $2.3 billion.

Travel industry experts say tourism has boomed this winter as the Arab Spring scared Europeans away from northern Africa, relaxed U.S. regulations made it easier for Americans to visit the island and Castro’s reforms drew visitors curious to see the effects of changes. They said Cuba needs more hotels to accommodate its growing tourism industry, which is a top hard currency earner for the country.

Cuba is heavily indebted and still recovering from a liquidity crisis that led to a default on payments and freezing of foreign business bank accounts in 2009. Castro told the National Assembly that accounts for foreign suppliers to Cuba had been unfrozen and steps taken to prevent the problem from happening again.

Hopes that reforms would bring more foreign investment have been slow to materialize, but Brazilian company Odebrecht said it would sign a contract to help Cuba improve its troubled sugar industry. One executive said the deal would include ethanol production. Long-awaited golf course developments, aimed at attracting wealthier tourists, remain on hold.

What to watch: Resolution of outstanding short-term debt; Signs of increased interest in foreign investment; Growth of tourism and Cuba’s ability to handle it

OIL PLANS

The Chinese-built Scarabeo 9 arrived in Cuban waters and at January’s end began drilling the first of three exploration wells in Cuba’s part of the Gulf of Mexico. Spain’s Repsol YPF and its partners plan to drill two of the wells and Malaysia’s Petronas and its partner, Russia’s Gazprom Neft, will drill the other, all this year and with the same rig.

The project has drawn opposition in the U.S. Congress, but, to allay safety concerns, Repsol allowed U.S. experts to inspect the Scarabeo 9 in Trinidad and Tobago. They said it met all international engineering and safety standards.U.S. companies are forbidden from operating in Cuba by the U.S. trade embargo.

Cuba depends on imports from its oil-rich ally Venezuela, but says it may have 20 billion barrels of oil offshore. The U.S. Geological Survey has estimated 5 billion barrels.

What to watch:  Results of Repsol’s exploratory well;  U.S. pressure to stop the drilling.

FOREIGN RELATIONS

A planned Papal visit in Marchimproved ties with Brazil, whose President Dilma Rousseff paid an official visit in January,are bright spots even as Cuba faces a more hostile Spanish government elected in November.

A major concern for Cuba is the health of Venezuelan President Hugo Chavez, a loyal ally whose government provides 114,000 barrels of oil a day and investment to Cuba. He underwent chemotherapy in Cuba and has declared himself cancer free, but experts say it is too soon to tell. If he were unable to continue in office, it would be a big blow to Cuba.

U.S.-Cuba relations, which thawed briefly under President Barack Obama, have been frozen by the imprisonment of U.S. aid contractor Alan Gross.He is serving a 15-year sentence for providing Internet gear to Cuban Jews under a U.S. program promoting Cuban political change. A document reported to be the court’s sentence said Gross knew the political aims of his work and tried to hide it from Cuban authorities despite his claims to the contrary.

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Cuba accepts Brazilian investment in its most emblematic economic sector: sugar

(Reuters).—The Brazilian giant Odebrecht plans to produce sugar in Cuba, the company reported Monday in the first injection of foreign capital in a sector so far closed in the communist-ruled island.

 

Steam Locomotives at the now defunct Australia sugar mill, November 1994, photo by Arch Ritter

Odebrecht Group signed with the state of Cuban Sugar Business Administration a “productive management contract” to wit “September 5” in the central province of Cienfuegos.

“The agreement for a period of 10 years is to increase sugar production and milling capacity and help the revitalization” of the industry, Odebrecht said in an email sent to Reuters through his press office.

The project would open to foreign capital, the underfunded Cuba’s sugar industry, whose production has plummeted from about 8.0 million tons in the 1970s to just 1.2 million tonnes in the last harvest. In addition, it will deepen Brazil’s role in modernizing the dilapidated productive infrastructure of the island.

Odebrecht did not elaborate.

But a Brazilian sugar industry executive told Reuters that the contract could be signed this week during a visit to Cuba, Brazilian President Dilma Rousseff. Cuba allowed more than a decade, the inflow of foreign capital to develop other strategic industries such as tourism and oil recently, where a consortium led by Repsol-YPF this year will begin to explore Cuban waters in the Gulf of Mexico.

Private companies from other countries have spent years negotiating its entry into the sugar industry in Cuba, nationalized shortly after Fidel Castro’s revolution in 1959. The opening comes after a major restructuring of the industry in late 2011 as part of the efforts of President Raul Castro to modernize the island’s socialist economy.

Do you also ethanol?

According to the director of the Brazilian sugar industry with knowledge of the project, Odebrecht also produce ethanol from biomass energy in Cuba. “Cuba is opening up the possibility of producing ethanol accompanied by power generation and Odebrecht will mount a distillery there,” said the businessman.

“It’s a similar project that Odebrechtis developing in Angola,” he added in reference to a joint venture of $ 258 million Angolan oil company Sonangol with to produce some 260,000 tons of sugar, 30 million liters of ethanol and 45 megawatts of power power.

Ethanol production on a large scale in Cuba has met with opposition from former President Fidel Castro, an ardent critic of the use of food crops like corn to make biofuels. Some experts believe that if Cuba could revive its sugar industry to become the third largest producer of biofuels in the world behind the United States and Brazil.

Ron Soligo, an economist at Rice University in Houston who has studied Cuba’s sugar industry, estimates that the island could produce about 7,500 million liters of ethanol annually. “But developing the ethanol industry in Cuba will take a while, since much of the land has been abandoned for years,” he said.

“Due to the centralized nature of the Cuban economy, a large Brazilian company can be the right partner,” he added.

Brazil, the second largest ethanol producer in the world, has provided technical assistance the Cuban authorities for the production of biofuels from sugar cane. “The issue is on the table. There is planned investment in sugar and there is a possibility that at some point this can be extended to the ethanol industry,” said a Brazilian Foreign Ministry source.

Odebrecht’s entry in the modernization of the depressed sugar industry expand its role in the infrastructure of the island. The company is currently one of the leading ethanol producers in Brazil through its subsidiary ETH.

Brazilian construction works executed for 800 million dollars to upgrade the container port of Mariel west of Havana. The project largely funded by the government’s National Development Bank of Brazil is seen as a key business platform if the U.S. lifts its embargo on the island.

Repairs, at the now defunct Australia sugar mill, november 1994, Photo by Arch Ritter

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