CUBA FACTS

Issue 36 - November 2007

Cuba Facts is an ongoing series of succinct fact sheets on various topics, including, but not limited to, political structure, health, economy, education, nutrition, labor, business, foreign investment, and demographics, published and updated on a regular basis by the Cuba Transition Project staff.

Who Bankrolls the Castro Regime?

     Contrary to conventional wisdom, Venezuela and China alone do not account for the well being of the Castro regime in recent years. Before the rise of Hugo Chavez and at a time when Chinese aid to Cuba amounted to little more than shipments of poor-quality rice and bicycles, European financiers began playing a leading role in resuscitating a near-bankrupt Castro regime. From processing Havana's secretive international business transactions to providing lucrative high-interest loans to the Cuban government, European Union-based institutions have collectively bankrolled the Castro regime since the fall of the Soviet Union.

     Today, quietly and behind the scenes, more hard currency flows in and out Cuba via European financial capitals than through Beijing or Caracas. While Venezuela's [1] and China's [2] multi-billion dollar credit lines for Cuba have done much to offset the loss of Soviet-era subsidies, such politically-driven deals are largely in the form of in-kind aid (oil and refined fuels from Venezuela and "soft" trade credits from China for the purchase of Chinese-made goods) rather than in convertible currency.

     With more than US$1.6 billion in hard credit lines (see Table I) from European lenders, Cuban authorities have been able to conduct strategic international transactions ranging from policy-motivated imports of agricultural products from U.S. Congressional farm districts to financing the expansion of the island's nickel industry, in turn a major source of foreign revenue for the regime.

     European capital also sustains foreign direct investment. Of 185 foreign-financed joint ventures with the Cuban government (see Table II), two-thirds originate in Europe. The strong correlation between foreign financing and foreign investment is best exemplified by Spain's leading role in the Cuban economy. Home to nearly 40 percent of all joint ventures currently operating in the island, Spanish lenders are also the largest source of private capital -- upwards of US$581 million -- for the Castro regime.

Table I. Foreign Private Financing to Cuba, 2007*

Table II. Foreign Direct Investment, 2007

Notes

1. Cf. Jorge Piñon, "Venezuelan Oil Subsidies to Cuba Surpassed $3 Billion in 2006," University of Miami, Cuba Transition Project, Cuba Facts, August 2007, http://ctp.iccas.miami.edu/FACTS_Web/Cuba%20Facts%20Issue%2034%20August2007.htm. See also "Cuba's economy: Raul's talking cure," The Economist, October 25, 2007, valuing Venezuelan trade with Cuba at $3 to $4 billion per year.

2. Cf. Marc Frank, "Cuba, China pledge to build on growing trade," Reuters, Havana, March 27, 2007. In 2006, Sino-Cuban bilateral economic relations reached a record US$1.8 billion, largely Chinese industrial and consumer goods imported by Cuba with "soft" (non-cash) Chinese government-financed trade credits.

3. Cf. EFE, "Empresas españolas negocian contratos [con] Cuba por 180 millones [de] euros," Havana, 5 May 2006, http://www.cubanet.org/CNews/y06/may06/05o4.htm/.

The CTP can be contacted at P.O. Box 248174, Coral Gables, Florida 33124-3010, Tel: 305-284-CUBA (2822), Fax: 305-284-4875, and by email at ctp.iccas@miami.edu. The CTP Website is accessible at http://ctp.iccas.miami.edu/.