September 26, 2001

Cuba's economic outlook clouded by attacks in United States

                 HAVANA, Cuba (Reuters) -- Cuba is reviewing growth forecasts through
                 2002 in the wake of the recent attacks in the United States and the war and
                 recession fears they have generated, government and diplomatic sources

                 Officials had announced the gross domestic product would increase up to 5 percent
                 in 2001 and they were expected to make a similar forecast for 2002.

                 But the attacks on the World Trade Center and Pentagon caused a decline in tourist
                 arrivals and in the money sent by Cubans living in the United States to relatives on
                 the island -- the cash-strapped country's two most important sources of dollars.

                 "Some kind of war is a certainty, and the world economy is weakening, so logically we are
                 reviewing our forecasts for this year and next," an official involved in the Caribbean island's
                 economic planning said, making the usual request in Cuba that his name not be used.

                 Communist-governed Cuba has been struggling to recover from a 35 percent fall in
                 its gross domestic product in the early 1990s following the collapse of the Soviet
                 Union a decade ago.

                 Tourism and other hard currency earners are considered the key drivers of the
                 effort, as the local peso currency has no value on the international market and
                 cannot be used to import much-needed fuel, food, and other products.

                 The government reported growth was 3.6 percent in the first half of this year, after
                 increasing an average 4.7 percent annually over the last five years.

                 Tourism generated around $2 billion and family remittances $800 million, of the
                 estimated $5 billion that entered the country in 2000, according to various reports.

                 The spinoff provided cash that fed sales of around $1.1 billion at state-run dollar
                 retail stores.

                 Cuba's food processing, light industry, and other sectors, in turn, depend on
                 demand from the tourism sector and dollar stores, at last report providing 60
                 percent to 65 percent of their supplies.

                 "Sales at our stores have fallen 15 percent since September 11," said a top official
                 of a state-run chain of dollar stores.

                 "And the Tourism Ministry informed us this week that arrivals were off 25 percent
                 from what was expected," he added.

                 But the worst may still be to come as war and economic jitters abroad result in
                 canceled Caribbean vacations and more frugal Cuban American spending in the
                 months ahead, a time when tourism usually booms and remittances flow to
                 celebrate the holidays.

                 "This has hurt all countries," a European diplomat said, referring to the attacks.
                 "Cuba more than many because of its already fragile economy and dependency on
                 tourism and Cuban-Americans for the dollars it needs to buy fuel and food."

                 He said it was difficult to predict the impact on European tourist arrivals during the
                 December-February high season.

                 Over 50 percent of the two million tourists forecast to visit the Caribbean island this
                 year were expected from Europe.

                 "It depends what the United States does. No one knows and that makes the
                 situation worse. If they are selective and careful it might not be so bad, but if there
                 is a large-scale war, tourism could seriously suffer," the diplomat said.

                 "Either way, I think Cuba's plan to reach 2 million visitors this year is shot," he

                    Copyright 2001 Reuters.