Reuters Market News
May 27, 2002

Cuba cuts power use in latest sign of cash crunch

By Marc Frank

HAVANA, May 27 (Reuters) - Cuba has ordered state-run companies and other government operations to cut power use by 10 percent, the official media said on
Monday, in the latest sign the country does not have the dollars it needs to import oil and food.

Cuba had already slashed 2002 import plans and cut back state enterprise budgets and power consumption due to the world economic slowdown, fallout from the Sept. 11 attacks and last year's Hurricane Michelle, the island's most damaging storm in half a century.

The official trade union weekly, Trabajadores, said energy-saving measures adopted in December had reduced consumption, but with increased summer demand
expected, state entities have to further cut power use. About 90 percent of Communist Cuba's economy is state run.

"This reality has forced the application of a new reduction of 10 percent in electricity use by the nonresidential sector," Trabajadores said, adding that Cuba's power
plants were burning 60,000 to 70,000 barrels per day of oil.

Cuba produces the equivalent in oil and natural gas of around 65,000 bpd. Between 60 percent and 70 percent of the country's electricity is generated using
domestic fuels.

Venezuela, which was providing the island with up to 53,000 bpd of crude on preferential terms, suspended shipments last month because Cuba had repeatedly
missed payments for the oil.

A Western diplomat said Cuba had been purchasing oil from traders since April to make up for the Venezuelan shortfall.

"Different traders have told me they are getting the oil for Cuba, but at prices up to 15 percent above what Havana was paying Venezuela," the diplomat told

"The Venezuelan situation means Cuba has to cut oil imports even more than it planned this year," he said.


Cuba has been recovering from a crippling 35 percent decline in its gross domestic product in the 1989-1993 period after the collapse of European communism. The
Soviet Union had been Cuba's main economic benefactor and partner, supplying it with subsidized oil.

The 1990s crisis led to widespread power outages and food, transportation, and other shortages, which the country is still struggling to overcome. At the start of
2002, economic output was reported at 88 percent of its 1989 level.

Tourism has driven the recovery in the 1990s, expanding at an annual rate of 19 percent and generating jobs and hard currency.

But the Tourism Ministry reported that growth was less than 1 percent in 2001, and declined 15 percent from January through April of this year due to the Sept. 11

Economic growth, which averaged 4.7 percent annually since 1996, slowed to 3 percent in 2001, the government said.

Most diplomats and some local analysts believe an economic downturn is now under way, though it is impossible to determine its extent due to a lack of information
from the government.

President Fidel Castro's government has little access to credit, due to U.S. sanctions on the island and chronic debt payment problems, so the lost dollar revenue
from tourism and other sources needed for essential imports are hard to replace.

Various governments, including those of Spain, France, Italy and Japan, froze trade credits this year because Cuba defaulted on payments for credits granted in
previous years.