Cuba_Trade

CUBAN INTERNATIONAL TRADE A Brief History About Cuba’s Trading Partners Before 1959, the United States was Cuba's most important trading partner, a natural development due to its geographic proximity. That relationship ended in 1960 with the U.S. trade embargo. Cuba then courted the Soviet Union and its Eastern European allies to become its primary trading partners. Due to the strict economic organization of the Communist system, only 50 Cuban companies were allowed to participate in foreign trade until 1987. After the fall of the Soviet Union in 1989, Cuba was soon trading with a number of countries, including Spain, France, Italy, Mexico, Canada, Russia, the Netherlands, and Venezuela. About 40 percent of Cuba's trade is within the Americas and 50 percent is with Europe. Main imports include fuel, food, semi-finished goods, wheat, vegetables, machinery, feed, and corn. Main exports are sugar, fish, nickel, medicinal products, and fruit. Cuba has consistently faced an unfavorable balance of trade; in 1999 imports were valued at US$3.2 billion and exports at US$1.4 billion. This situation places Cuba in a dependent position, unable to earn hard currency and reliant on other countries for vital goods. Traditionally, trade is divided into two large categories: Merchandise Trade and Service Trading. Merchandise trade deals with the trade of tangible products such as goods and service trade refers to finances, insurance and any other services that are originated from the ‘services’ sector of the economy. Firstly, we’re going to take a look at Merchandise Trade. Cuba’s Merchandise Trade Statistics. Year | Exports | Imports | Trade Balance | 2001 | 1621.9 | 4793.2 | -3171.3 | 2002 | 1421.7 | 4140.8 | -2719.1 | 2003 | 1671.6 | 4612.6 | -2941.0 | 2004 | 2188. | 5562.0 | -3374.0 | 2005 | 1994.6 | 7533.3 | -5538.7 | 2006 | 2759.4 | 9420.2 | -6660.8 | 2007 | 3701.4 | 10082.6 | -6381.2 | - Information from the above table was taken from Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba 2006 (La Habana, 2007). So, as seen from the above table we can determine one major thing. That for every year between the period of 2001 – 2007, Cuba’s merchandise trade was in deficit. A deficit refers to a sort of shortage. In other words, the Cuban government was spending more money than that of which was coming in, and this was clearly demonstrated in the table above. If you take a look, the exports [money, goods and services which are going out] exceeded the imports [money, goods and services which are coming in], thus the Trade Balance always resulted to be negative. In 2006, we see that Cuba’s trade deficit peaked at nearly 6.7 billion pesos, a new record. Basically, within that chosen timeframe, Vuba was spending way more money than they had or owned, with reference to t0 Merchandise Trade. They spent money, that in reality, did not exist yet. Now, we’re going to take a look at a few of Cuba’s Merchandise Trading Partners, within the time period of 2001- 2006. Top-Five Cuban Merchandise Export and Import Trading Partners in 2006 (million pesos) Exports | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | NetherlandsCanadaVenezuela China Spain Total Top Five Total Top Five as a Percentage | 334228227314380049 | 297203197514573952 | 41926717677179111867 | 64748722580174161374 | 599438240105161153477 | 774546296246149201173 | Imports Venezuela China Spain Germany USA Total Top Five Total Top Five as a Percentage | 2001951549694994229748 | 200272551759578174208950 | 2003683502581115327220848 | 20041143583633130444293353 | 20051860885654310476418556 | 200622091569846616484572461 | Source: Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba 2006 (La Habana, 2007). Okay, so we are now about to analyze the preceding table and come up with a few patterns or trends that we’ve noticed taking place. In 2006, Cuba’s top five merchandise export markets took nearly three quarter of Cuba’s exports. Cuba’s two top merchandise export markets [Netherlands and Canada] held these positions at the top, partly because they are the primary outlets for Cuban mineral exports, predominantly nickel. It is also noteworthy that Venezuela and China have emerged as significant markets for Cuban merchandise exports, consistent with the strengthening of political relations between Cuba and these nations. Analyzing the second half of the table we see that the top five sources of Cuban merchandise imports in 2006 accounted for over 60% of such imports. Venezuela is Cuba’s top supplier of merchandise imports because of oil shipments. Cuba’s rapidly growing merchandise imports from China, have been financed by a series of credits extended to Cuba to purchase Chinese goods. Among the principal Cuban imports from China supported by such credits are electro domestic products, transportation equipment and electronic products. Lastly, we see the USA has been one of the top five merchandise importers in 2006. In 2001, Cuban authorities agreed to purchase these US agricultural commodities and since then, the USA has remained one of the main merchandise importers throughout the selected time period. Now that we’ve had a look at the merchandise trading aspect, we would now analyze the Services Trade in Cuba. Services Trade Trade in services refers to the sale and delivery of an intangible product, called a service, between a producer and a consumer. With reference to Cuba, the country ran a surplus in its balance of international trade sevices every year within the time period of 2001 – 2006. Cuba’s internationally traded services is divided into three categories: transportation services, travel and other commercial services. Transport In the early 1970’s and 80’s Cuba made attempts at expanding their national shipping fleet by working with intra-COMECON trade. However, in the midst of the 1990’s an economic crisis arose, causing a downfall in the volume of cargos transported in Cuban bottom. However, up to 2006, it is said that the transport services sector is not sufficient or even large enough to account for the growth within the Cuban Services Export Sector. Tourism The tourism industry has had a positive outlook since the 1990’s. By the second half of the 1990’s tourism was the main generator for foreign exchange. Gross revenue from tourism amounted to 1.5 to 2.0 billion pesos per annum in 2001–2003 and reached 2.4 billion pesos in 2006. It seems that tourism was mainly responsible for the bulk of Cuba’s exports of services, until the recent take off of professional services. Professional Services Exports Cuba’s heavy investments in public health and education over the last five decades created an environment within which Cuba could benefit from the export of professional services in health, education, sports, and science. The large increase in the value of the Cuban services export from 2571 million pesos in 2001, to 6701 million pesos to 2006, corresponds to the time period when Cuban experts have been providing health services to Venezuela. Cuba also began to value its medical and social services in a manner that is not consistent with international national income accounting methodology, thus resulting in faster growth rates than the usual. Conclusion So, Cuba now continues to run a constant deficit in its merchandise trade balance, and as seen in the tables above, it is continuing to grow each year. However, within the services sector, Cuba has run a bit of substantial trade surpluses, which expanded within 2005- 2006 mainly because of booming exports to Venezuela and a few other nations.