Cuba Country Brief - December 2007
Introduction
Australia and Cuba have maintained diplomatic relations since January 1989. Australia has non-resident accreditation to Cuba from its Embassy in Mexico City. Cuba has a Consulate-General in Sydney.
In April 1999, the then Environment Minister Senator Robert Hill visited Cuba. A Parliamentary delegation visited Cuba in April 2001 for an annual Inter-Parliamentary Union conference. The most recent official visit to Cuba was a brief study tour in April 2007 by two members of the then Trade Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) as part of an Inquiry into Australia’s Trade Relations with Mexico and the Region.
There is limited official contact between Cuba and Australia. Cuba has been subject to a US economic, financial and trade embargo since 1962, codified into law under the Cuban Liberty and Democratic Solidarity Act (also known as the Helms-Burton Act) of 1996. This is the subject of a resolution each year in the United Nations General Assembly. Since 1993, Australia has voted in favour of Cuba's resolution in the United Nations General Assembly calling for an end to the US embargo because Australia believes that confrontation and isolation are not productive policies in relation to Cuba. Australia has consistently supported similar resolutions on the issue each year since 1996. Australia is nonetheless concerned by the human rights record of the Castro regime, one of the main reasons cited by the United States for the continuation of its 45 year old trade embargo.
Political Overview
Background
Cuba was the last major Spanish colony to gain independence, following a 50-year struggle which began in 1850. On May 20, 1902, the United States granted Cuba its independence but retained the right to intervene to preserve Cuban independence and stability under the Platt Amendment. Cuba was, until 1959, often ruled by military figures who obtained or remained in power by force. However, during this period, the influence of Marxist revolutionary thought was sweeping across Latin America.
On January 1, 1959, following a three-year guerrilla campaign, a young lawyer, Fidel Castro, flanked by military leaders 'Che' Guevara and Camilo Cienfuegos, overthrew the dictatorship of General Fulgencio Batista. President Castro declared Cuba a socialist state on April 16, 1961. This move caused relations between Cuba and the West, especially the United States, to deteriorate. For the next 30 years, President Castro pursued close relations with the Soviet Union. During that time Cuba received substantial economic and military assistance from the USSR, estimated at US$5.6 billion annually, which kept Cuba's economy afloat and enabled it to maintain a large military establishment.
Political Outlook
Cuba remains a heavily authoritarian state, with severe limits on political freedoms, including freedom of expression and the media. President Fidel Castro dominated Cuban politics as the head of the one-party system of ‘Cuban Socialism’ from 1959-2006. In contrast to other nominally communist regimes, (such as China and Vietnam) President Castro resisted making large-scale economic reforms.
However, a serious illness saw him nominally transfer power to his brother (and designated successor) Raul on a temporary basis in August 2006. President Castro underwent surgery for intestinal bleeding in August, and television footage of him recovering in hospital was released shortly thereafter. He has since made radio and television appearances, and official comments indicate that his health is improving. Fidel Castro’s temporary hand-over of power to Raul Castro has, to date, been a smooth process and has not provoked political upheaval. On the 21 October 2007 the first round of the Cuban electoral process began and the six month electoral process will continue until March 2008.
Foreign Policy Outlook
Cuba's antagonistic relations with the US continue to dominate its foreign policy. The US maintains an economic embargo on Cuba, under the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (also known as the Helms-Burton Act). Since the end of the Cold War, Cuba has sought to gain further international support for the lifting of the US economic embargo. The European Union, the United Kingdom and Mexico have enacted 'antidote' laws designed to counteract the effects of the Helms-Burton legislation on their trade with Cuba. Australia does not support the embargo.
The US military base, which has operated at Guantanamo Bay since 1903, continues to be a point of contention. US policy towards Cuba has focused on the lack of political and economic freedom and on the outstanding claims for compensation for property expropriated from US citizens and Cuban Americans in the 1960s. President Bush's Initiative for a New Cuba challenges the Cuban Government to undertake political and economic reforms and to maintain multilateral and international momentum on human rights issues generally, through institutions such as the UN Human Rights Commission.
Economic Overview
Background
The collapse of the Soviet Union in 1991 lost Cuba its main economic and political benefactor. Cuba underwent a 35 per cent decline in GDP in the period 1989-93 as a result of the loss of Soviet subsidies. Limited reforms since then, as well as increasing levels of tourism and investment from the EU and Canada (in spite of the US embargo), have seen the economy make some recovery. Cuba’s strong economic ties with leftist states have also helped fuel its growth. China is an important market for Cuban commodities, and Venezuela provides oil in exchange for Cuban health services.
Economic Outlook
Cuba’s GDP for 2007 was US$45 billion, up from US$41.4 billion in 2006. GDP growth was 6.4 per cent in 2007 and economists predict growth of around 5.4 per cent in 2008. Growth is mainly the result of a recovery in tourism and increased activity in the mining, energy, telecommunications and manufacturing sectors. Growth in tourism, energy, and nickel exports, combined with better terms of trade, will ease the constraints on external financing brought about by US efforts to tighten economic sanctions.
Growth in the global tourism market will create increasingly favourable conditions for Cuba's economy. However, because of Cuba's heavy reliance on hard currency tourism, the continuing recovery of its economy remains highly vulnerable to external shocks, and Cuba's tourism income would suffer if world economic growth were to slow.
Bilateral Economic and Trade Relationship
Commercially, Australia has relatively little trade with Cuba, although our exports to Cuba reached a high of A$28.9 million in 2001-2002, primarily due to milk and cream exports.
Total trade between Australia and Cuba in 2006-07 totalled almost A$18 million. Australia's exports to Cuba in 2006-07 totalled approximately A$8 million, comprised primarily of electrical circuits equipment, specialised machinery and clay construction materials. Australia's imports from Cuba, mainly crustaceans, tobacco and fruit juices, totalled approximately A$9.5 million.
The potential for expanding Australian trade with Cuba is limited because of the existence of the US Helms-Burton legislation, which offers a disincentive to overseas businesses considering trade with both Cuba and the United States. Limited exceptions to the Helms-Burton legislation exist, covering some food and medical products.
A running issue of some concern for our relations with Cuba has been the non-payment of loans. During the mid-1980s, Australia's export credit agency, the Export Finance and Insurance Corporation (EFIC), made a number of loans to the Cuban Central Bank, on behalf of the Australian Government, for the purchase of sugar cultivation and harvesting equipment from Australia by Cuba. In May 1986, Cuba defaulted on loan repayments, leaving debts of approximately A$14.5 million. The full amount of the loan is yet to be repaid. The Australian Government has been seeking to recover this debt through the Group of Creditors to Cuba, an informal group of creditor nations which meets on an ad hoc basis in Paris.