In 2005, the Cuban Government was also in negotiations with Corporación de Desarrollo de la Región Zuliana (Corpozulia) to import more than 500,000 metric tons per year (t/yr) of Venezuelan coal to Cuba, where it was to be used by a Chinese company (name not disclosed) to generate electricity for a ferronickel plant. Other projects included the creation of a joint-venture among China, Cuba, and Venezuela to produce stainless steel; the construction of a coal-fired thermoelectric plant in Mariel by Sherritt International Corp. of Canada and the Government of Venezuela; and the acquisition by Venezuela of a stake in the Cienfuegos petroleum refinery. Venezuela planned to use Cuban installations to store and distribute petroleum to Caribbean countries (Mesa-Lago, 2005, p. 9; Embassy of the Bolivarian Republic of Venezuela in the United Kingdom, 2005§; Venezuelanalysis.com, 2005§). The Government also signed a letter of intent with Venezuela for the creation of a strategic alliance to develop nickel and cobalt mining projects in the regions of Aragua, Carabobo, and Cojedes, and for the refurbishing of the Cienfuegos petroleum refinery, which included the refurbishing of an oil pipeline connecting the refinery to an oil tanker terminal in Matanzas.

Also in 2004, the Government had signed a series of agreements with China, which included a credit of $500 million from Chinese banks for the creation of a joint-venture company between the Government (51%) and China (49%) to resume construction of the Camariocas ferronickel plant. Upon completion, the plant would have a production capacity of 22,500 t/yr of nickel. The loan was to be paid in 15 years, upon completion of the plant facilities. Other agreements included the establishment of another Sino-Cuban joint venture for the development of a nickel deposit in San Felipe, Camaguey, which was expected to produce about 50,000 t/yr of nickel at a cost of $1.3 billion, and a petroleum exploration contract with Sinopec Corp.

In February 2005, the Government signed economic and trade agreements on education, energy, health, and technology with Brazil, which included an agreement with Government-owned Petroleos Brasileiros S.A. to conduct petroleum exploration in the country and to examine the possibility of establishing a factory to produce lubricants in association with Venezuela’s PDVSA.

Trade

According to Cuba’s Ministry of Foreign Affairs, Venezuela continued to be Cuba’s principal trading partner in 2005 followed by China (which displaced Spain as the second ranked trading partner), Spain, and Canada. Cuba’s main exports were nickel, medicine, sugar, technology, and tobacco (Ministerio de Relaciones Exteriores de Cuba, 2006§). Nickel accounted for about 61% of Cuba’s exports to China.

Outlook

The signing of the ALBA, which arranges for cooperation and bilateral relations between Cuba and Venezuela and allows for an increasing number of Venezuelan subsidies to Cuba, will perhaps become one of the most significant contributors to the country’s economic development in the coming years. The Institute for Cuban and Cuban-American Studies estimates that Venezuela is rapidly approaching the amount of free aid that the former Soviet Union used to provide Cuba before its collapse. The subsidy from Venezuelan petroleum alone was estimated to be $800 million in 2005. The Institute’s report estimates that if Chinese investments in the nickel sector materialize, in addition to Sherritt’s expansion plans at Moa, the result would be a significant expansion in Cuba’s installed nickel capacity; however, the timeframe for the commissioning of these projects is still uncertain and questions remain regarding the adequacy of the technology that will be used at the Camariocas plant. The report also indicates that Chinese investors only intend to finish the work started by the Soviets at the Camariocas plant. This would imply the use of old technology and the commissioning of an energy-intensive nickel plant, which, according to the Institute for Cuban and Cuban American Studies, would consume about 18 t of petroleum for each ton of nickel produced. If this is the case, then the Chinese, as the Soviets did in the past, would end up subsidizing nickel prices.