CHAPTER IV. REPERCUSSIONS OF THE EMBARGO ON OTHER SECTORS OF THE CUBAN ECONOMY
Cuban light industry has also suffered the effects of the embargo. Its repercussions have negative effects on the improvement of the essential needs of the population. In the period being analyzed the losses are calculated at
12 million 891 thousand dollars, from imports of products from more distant markets and the increase in the cost of freight and insurance, added to which is the additional cost of immobilized resources in inventories.
It is impossible for the Suchel Union to buy their raw materials for the manufacture of products like soaps, detergents and creams in the US market, and this had meant additional expenses of 6 million 716 thousand 600 dollars. With this amount we could have produced 7 thousand 348 tons of soap that would be equivalent to 58 million 700 thousand bars of soap for the population.
The Unión Poligráfica had to acquire their consumables in Asian markets, and this represented an additional expense of 1 million 999 thousand dollars. If we had been able to count on these resources, we would have been able to finance the manufacture of 16 million 700 thousand good quality school notebooks, which accounts for 18% of the notebooks required for one school year.
The transportation sector has not escaped the negative effects of the embargo.
The ARIES S.A company’s basic function is attending to cruise ships and passengers that arrive in the country. Its operative capacity varies in an approximate traffic of 1 million 200 thousand cruise passengers and 1092 landings of cruise ships each year. If the Cuban embargo did not exist, and according to indicators drawn up by the Association for Caribbean and Florida Cruise Ships (FCCA), the earnings for our country would be in the range of 125 million 300 thousand 442 dollars per year.
The NAVEGACION CARIBE Company cannot acquire spare parts and other materials necessary for its ships on the American market, and so it has had to seek out European markets with the corresponding increase of freight charges. Between April 2009 and March 2010 the repercussions for this amounted to
525 thousand dollars.
The activity of Harbour Pilots of Cuba has been affected by the delay and increased cost generated by repairs to passenger maritime transportation vessels. Such is the case of the vessel Río “Las Casas” that needed to have its propeller engines replaced. Those engines are manufactured in the US and so it was necessary to transport them from the United States to a third country on another continent and from there to Cuba, with the additional cost of freight involved, causing losses of $ 16,788.
The Informatics and Communications sector has also been severely affected by the application of the embargo. In the period being analyzed, around 61 million 240 thousand 430 dollars of income have been lost.
Despite the talks which began in September 2009 between the Cuban Postal Corporation and the United States Postal Service, with the intention of returning regular service, the embargo policy continues to prevent the sending of direct mail, bringing with it the corresponding repercussions. Should mail traffic between the two countries increase, it is calculated that Cuba would be benefitted by at least
1 million 500 thousand dollars.
During this period, the Telecommunications Company of Cuba (ETECSA) has lost around 52 million 868 thousand dollars due to repercussions on production and services, additional freight charges, repercussions because of not being able to access American technology, etc. Acquisition of equipment and spare parts having US patents and which are essential for the development and maintenance of the Cuban telecommunications companies are acquired on the international market under severe control and supervision measures, as well as at a considerable increase in their value.
The Cubaelectrónica Company continues to suffer from the blows of the embargo. No access or no service on the numerous websites is being firmly maintained regardless of the type of site. Cuba is prevented from access to the free services offered on the net. Such is the case of www.vivalinux.com.ar from Argentina which stores code-related solutions that are needed by all software developers for their work.
Cuba is forbidden from importing computers manufactured by the major world manufacturers such as INTEL, HEWLETT PACKARD, IBM and MACINTOSH. In order to obtain one of these, the country must pay up to 30 % above the regular price.
The Cuban National Software Company (DESOFT S.A) has been seriously affected by application of the embargo. Work links with the Costa Rican company MOVIL MULTIMEDIA and the Spanish company OESIA have been interrupted due to the fear of being fined or of receiving reprisals for doing business with Cuba; this has meant that projects have been paralyzed, bringing with it the corresponding monetary repercussions.
In the science and technology sector, crucial for the growth of any country, repercussions remain in effect.
EMIDICT, the Specialized Importing, Exporting and Distribution Company for Science and Technology attempted to acquire the electronic components for the ICIMAF and CEADEN institutes from the distributor Farnell, one of the main worldwide distributors for electronic and electric products. This company which is part of the Premier Farnell group, principal distributor of electronic components in the US with branches in more than 40 countries, refused those electronic components that originate in the US. That caused delays in the production of medical equipment for CEADEN and ICIMAF for the national health system and export and forced us to seek other alternatives.
The Centre for Environmental Engineering of Camagüey (CIAC), whose mission is to obtain, apply and spread knowledge for the management of science, technology and the environment, from the execution of research projects, high aggregate value technical scientific services and specialized productions using nuclear and cutting-edge technologies, faces serious difficulties for the publication of scientific results in leading reviews that are printed in the US and the UK.
In the tourism industry, the effects of the embargo in 2009 were estimated at one thousand 108 million 900 thousand dollars.
These losses are broken down into one thousand 30 million dollars, just for the income lost as a result of forbidding US citizens from travelling to Cuba;
11 million 500 thousand dollars for American yachts and sailboats that cannot visit Cuban marinas; 27 million 400 thousand dollars for the increased purchase expenses for freight, prices, higher taxes and interest, greater inventory and immobilization of financial resources, mainly of the Caracol chain of stores and the Comercializadora ITH, and 40 million for restrictions in electronic business and other online facilities.
Because of the prohibition on trips to Cuba by US citizens, the Cuban tourism industry in 2009 lost one thousand 30 million dollars, starting from the premise that 15 % of Americans who travel to the Caribbean as tourists would have also come to Cuba if the trips were not prohibited.
One can presume, bearing in mind the statistics of the Caribbean Tourism Organization at the end of March 2010, that just like other destinations in the region and as an effect of the crisis, the flow of Americans to Cuba – if one were to eliminate the prohibitions on travel – would also have been affected for around
8 %. Thus, one can estimate that during 2009, approximately 1 million
585 thousand US tourists could have travelled to Cuba.
Also, Cuban hotels can only use the Amadeus system, one of the four great global distribution systems, GDS international, since three of them —Sabre, Galileo and Worldspan— are US companies. Other intermediary suppliers of these services are unable to associate with Cuban tourist entities for fear of being fined and seeing their sales to the US threatened.
In civilian aeronautics in Cuba repercussions from the embargo from
May 1st 2009 to April 23, 2010, are estimated at 265 million 830 thousand
210 dollars.
The US world monopoly on the manufacture of commercial planes and their components, spare parts and aircraft, airport and airplane services technology, as well as their participation in manufacturing and an important percentage of shares in other commercial aviation industry consortiums as in Europe, prohibits Cuban airlines from purchasing aircraft, equipment and parts that are not just American but which also come from other aeronautical industries such as the European industries. For those reasons, Cuba must also lease less efficient aircraft under abnormal and unfavourable conditions.
There are regular charter flights operating to and from Cuba, various US airlines such as Miami Air, American Eagles, Gulf Stream, Sky King and others flying from Miami, Los Angeles and New York to several Cuban airports where the Cuban State provides all the facilities for their operations. Nevertheless, the
US government does not authorize Cuban airlines to fly in their territory.
On the other hand, while hundreds of American airline flights are daily flying over Cuban air space en route to Central and South America, because of the limitations on flying over US territory from Canada towards the central-eastern area of Cuba (Cayo Coco, Ciego de Ávila, Camaguey, Holguín and Santiago de Cuba),
Cuban aircraft are forced to fly routes that are not direct, at speeds greater than those recommended and during the night in order to adapt to the hours of closure at Canadian airports, with the subsequent additions to flight times of between
14 and 47 minutes, depending upon the destination in Cuba, and increased fuel consumption which all contributes to lesser efficiency and competitiveness of the flights.
Also, Cuban companies dealing in air travel services are affected by not being able to provide, in turn, handling services for passengers, baggage and cargo,
on-board catering, fuel sales and services in the navigation area, and the rates for use of airport facilities. Bearing in mind the estimates for US visitors to Cuba, in the period being reported, the losses of income for these reasons ascends to
205 million 484 thousand 638 dollars.
In civil aeronautics, as in all sectors of the economy, the embargo causes
over-spending for various reasons.
We had to buy a baggage handling system for the West Hall of Terminal 3 of
José Martí International Airport in Havana from a European country at a cost of
3 million 703 thousand 178 dollars. Freight charges from Europe have gone up to 91 thousand 854 dollars and the intermediary’s commercial commission for its acquisition was 17 thousand 530 dollars, to which we must add the cost of
2 European experts for 14 days to look after the set-up, installation and start-up.
If we had been able to acquire this equipment directly from the US it would have cost the country 100 thousand 626 dollars less, bearing in mind referential prices for similar or superior quality equipment on the American market, as well as the considerable reductions for expenses for accomodations and transportation for the installation experts and the 5% commission for the intermediary.
With that amount saved we could have acquired a similar baggage carrousel to be installed in the East Hall of this Terminal to replace equipment that is in poor condition, thus improving the quality of service provided to the passengers who arrive in Cuba by air.
The embargo measures in this sector are in violation of the Chicago Convention on International Civil Aviation, signed by 190 States including the United States, especially the precepts that state that international air transportation services must be established on a basis of equal opportunities and be done in a healthy and economic fashion, and its Article 44 that establishes among the aims and objectives of the International Civil Aeronautical Organization (ICAO) that the rights of the contracting states be fully respected and avoid discrimination among them.
In the metal industry the increase in expenses or losses because of the embargo is 36 million 343 thousand 500 dollars, representing 9.6 % of the 377 million
618 thousand dollars of imports in the period being analyzed.
With this amount, we might have acquired or produced:
- 11,162 diesel engines for the change of engine or repairs for heavy vehicles, or
- 382 4 X4 platform trucks for haulage of goods, or
- 1,953 buses to improve transportation, or
- 12,349 motor-pumps to be used in social works or in agriculture, or
- 103 sugar cane harvesters to improve cutting and hoisting of sugar cane, or
- 3,028 growing houses, 800 m2 each, to increase food production.
During this period, The Hotel Engineering Commercial Company which markets raw materials, components, equipment, furnishings and medical instruments, used 40 containers at a cost of $156,000, to move cargo imported from Europe and China. If these purchases had been made in the US the transport of that amount of containers would have cost $36,000, thus saving us $120,000, allowing us to buy some 250 hydraulic hospital beds or 20 universal centrifuges for 24 tubes for the labs at the Cancer Hospital.
The ALCUBA Industrial Group had to spend close to 1 million 274 thousand
700 dollars above what it would have really paid if it could have bought the raw materials for the production of aluminum carpentry for the construction of homes and social works. With that amount we could have bought 700 additional tons of aluminum levers to manufacture 6,375 square metres of carpentry work, equivalent to the amount needed to construct 265 3-bedroom home or
3 400-bed hospitals.
The Metal-working Industrial Group ACINOX suffered repercussions in this period for 9 million 70 thousand dollars with which more than 37,300 tons of corrugated bars could have been manufactured, enough to build some
24,800 apartments in multi-family buildings, representing a benefit for more than 99,200 Cubans.
The metal factory Antillana de Acero cannot obtain spare parts for the engines of the continuous casting machine of the US-based EMERSON group. They have to be purchased through other suppliers and manufacturers. If we had direct access to the manufacturer, the cost of the replacement parts would have been 10,200 Euros, a price that increases to up to 21,000 Euros because intermediaries are being used.
The ALCUBA Industrial Group requested an offer from a branch of Alcoa Brasil to acquire 5 thousand 228.47 tons of 78 and 8-inch aluminum levers to extrude profiles. The company stated: “Since Alcoa is a US company, it is not allowed to do business with Cuba because of the embargo”.
The Cuban nickel industry CUBANIQUEL has been affected in this period for a value of 101 million 300 thousand dollars.
Because of the prohibition in exports to the US of any product which is totally or partially manufactured with Cuban nickel, even if it was manufactured in a third country, Cuba has lost 75 million 700 thousand dollars.
In this phase, repercussions were as follows:
- Discounts applied to the price because of risk country with an estimated repercussion of $478 dollars per each ton sold, losing approximately
18 million dollars.
- Increased marketing expenses due to payment of high freight rates, handling, supervision, shipping and sales commission charges for the export of nickel. In the phase being analyzed, we spent approximately
11 million. If we had been able to export to nearby markets, we would have saved 4 million 300 thousand dollars.
- Repercussions on the increased payment cycle from 30 days to 60 days due to the distant markets, with repercussions for postponed income to be received in the year were 53 million 400 thousand dollars.
Production of oil and natural gas has also suffered numerous repercussions.
Just because it is impossible to import explosive charges to drill oil wells, in 2009 we lost more than 480 thousand barrels of crude valued at 20 million dollars at the average sale price in 2009.
Drilling charges perforate the covering of the well connecting it to the productive layer, facilitating flow and collecting the oil and increasing production levels.
In 2007, supplies of these charges were made by INNICOR Subsurface Technologies, a Canadian manufacturer that was bought by an American company. In 2008, we managed to get offers from another Canadian company, LRI Perforating Systems Inc, but in October of 2009, just before signing the first contract, the LRI supplier was bought by DMC (Dynamic Materials Corporation) of the United States.
From October 2009, until the closing date for this report, we have been trying to find other ways to buy these products in Germany, Canada and Argentina, but without any luck.
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