CUBA-CHINA:
Firm Friends and Excellent Business Partners
Patricia Grogg

HAVANA,  (IPS) - Trade between Cuba and China is growing at a breathtaking rate, and is the most visible expression of the close ties between the two countries, which appear to have overcome past differences and reached a high point in their relations.

The rise in commerce was further accelerated by the visit to Havana of Chinese President Hu Jintao in November 2004. He was accompanied by a delegation of 200 entrepreneurs and investors, avid for business to further augment the fast-growing Chinese economy.

In the space of just one year, from October 2004 to October 2005, bilateral trade increased from 551 million dollars to 775.3 million dollars, moving the Asian giant up from fourth to second place among Cuba's trading partners.

Venezuela continues to be Cuba's chief trading partner, selling this Caribbean island nation 90,000 barrels of oil a day on favourable terms of payment.

Trade with China is likely to climb quickly to the one billion dollar level, and Cuban foreign trade experts call Beijing "the most dynamic agent" in the economy of this socialist nation.

According to analysts, Cuba sees China as "a reliable, stable partner that does not impose political conditions" on business deals. Elsewhere, the international context is unfavourable to Cuba: relations with the European Union are tense, and the United States has tightened the trade embargo it put in place more than four decades ago.

China's support "is a big help in overcoming the economic crisis that began in the 1990s, after the demise of the socialist bloc in eastern Europe and the disintegration of the Soviet Union, but it is also a decisive factor in propelling a return to the centrally planned economy," a researcher, who preferred not to be named, told IPS.

In 2005, the government of Fidel Castro struck the latest blow against reforms which were timid, but helped to keep the economy afloat after the loss of Cuba's privileged relationship with Moscow in the 1990s. It enacted a series of measures to recover state control of finances and other strategic sectors.

"Our relations are based on mutual interest and devotion to peace, in the context of cooperation and integration," Castro said on Feb. 16, at the reception of another lot of Chinese-made buses which are intended to improve intercity public transport services.

Castro announced that the purchase of 8,000 additional buses is being negotiated with the mayor of Zhengzhou, in the eastern Chinese province of Henan, where the Yutong factory is located. Other purchases for the transport sector include railway engines and carriages.

Chinese exports to Cuba include domestic appliances, the machinery for manufacturing bicycles, and equipment to modernise the country's telecommunications, for a total cost of 200 million dollars.

Havana in turn exports sugar, nickel, tobacco, Biorat rat poison, the medical drug interferon, high-technology medical equipment, vaccines and shellfish.

So far, the two nations have entered into ten joint ventures, according to the Ministry for Cooperation and Foreign Investment.

Official sources informed IPS that China has extended credit of 400 million dollars to pay for infrastructure and development exports.

Negotiations between the two countries are based on mutual advantage. Beijing keeps politics out of business, in accordance with its market economy, but insists on guarantees and strict fulfilment of contractual obligations.

In this regard, Castro has ruled out any possible default on Cuba's debts, not only with China but with other countries as well.

According to Castro's forecasts, Cuba will be able to pay off its debts thanks to its "growing development," and to the energy savings he expects from a massive plan to regulate domestic and industrial consumption, which could amount to one billion dollars.

China's most important strategic investments are in nickel and oil, two natural resources that are essential for its fast-growing economy. According to specialists, these two resources are solid foundations for developing long-lasting economic relations with Cuba.

The Chinese oil and gas corporation Sinopec, the second largest state oil company and one of the top ten oil companies in the world, signed a shared production agreement in January 2005 for prospecting and exploiting crude oil, with the state Cubapetróleo company.

The prospecting area is on the coast of the western province of Pinar del Río. Participation by the Asian giant in prospecting for oil in Cuban waters in the Gulf of Mexico is also a possibility.

Investments of more than 500 million dollars are planned in Cuban nickel, which is very important for the growth of Chinese steel production. The island has one of the largest nickel reserves in the world, and has agreed to sell China 4,400 tons a year.



Nickel-related investments are situated in two zones: the reserves in the eastern province of Holguín, and an unexploited deposit in Camagüey, also in the east.

The Chinese government views its ties with Cuba as part of its intense and growing relationship with Latin America. Trade between China and this region has increased at an annual rate of 42 percent for the last five years.

Experts believe that Cuba is not only a growing participant in this trend, but could become a platform where Beijing could establish industrial parks - in fields like electronics and computers - within easier reach of the Caribbean and Latin America.