Monday, October 20, 2008

Business news

Contrary to what you may have read in some Castro-friendly newspapers, it is becoming increasingly clear that Cuba will not be immune to what has become known as the global financial crisis.

Sure, the Communist Party regime in Havana still pretends to run a “socialist" economic model, far removed from the evils of rampant capitalism and sharemarket speculation, but the reality is very different.

In fact, the great financial meltdown of 2008 will have a serious impact on the two biggest money-earners for the Castro brothers.

The second biggest money-earner is tourism, which was worth an estimated USD2.2 billion last year. But a recession in Western Europe will mean fewer Spaniards, Germans and Italians travelling to Cuba on holidays, which will result in deserted beaches, empty hotel rooms and a sudden drop in the consumption of over-priced mojitos.

And there are equally serious problems with the regime’s number one money earner: the nickel industry.

After years of high prices and continuing growth, driven largely by China’s insatiable need for raw materials, the demand for nickel is on the way down – and so, too, are the prices paid for the metal.

As you can see from this Reuters article of only 10 months ago, Cuba has the third-largest nickel reserves in the world, with nickel exports earning the country about USD2.7 billion in 2007.

However, new figures produced by a body known as the International Nickel Study Group show that global demand for nickel fell again in August – the fifth month of decline in a row. And the price of nickel has also tumbled: at USD10,800.00 a tonne, it is now less than a third of the price a year ago.

In short, more bad news for Havana.


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