Latin American Network Information Center - LANIC
FBIS-LAT-95-028-S Daily Report 29 Jan 1995 CARIBBEAN Cuba

Mexican Newspaper Interviews Fidel Castro

Part IV Views Mexican Crisis

PA0102225895 Mexico City EL SOL DE MEXICO in Spanish 29 Jan 95 Section A, pp 1, 20 PA0102225895 Mexico City EL SOL DE MEXICO Spanish BFN [Part IV of nine-part "exclusive" interview with President Fidel Castro by EL SOL DE MEXICO Director General Mario Vazquez Rana in Havana; date not given -- first three paragraphs are EL SOL DE MEXICO introduction]

[FBIS Translated Text] Havana, Cuba -- The Mexican financial crisis, the so-called "tequila effect," has created shock and concern in developing Latin American economies, and even in Southeast Asian markets. Speculation is at its peak, and only some overseas capitals are escaping the phenomenon.

This has already had its first negative effects on the Mexican economy, which now faces a period -- although reportedly a short-term period -- of inflation and recession. But it could extend to other markets in which Mexican investments were beginning to exercise an increasing influence. That might be the case in Cuba.

Nevertheless, President Castro explains that Mexico is a trading partner, rather than a financial partner, in his country. Thus the effect of this could be less.

[Vazquez] We notice foreign investors' interest in Cuba has increased. Mexican capital acquired 49 percent of the telephone company. What other areas will be opened to private capital?

[Castro] "We have discussed the most varied possibilities. We have reached agreements on cement, one of the best factories we had.

"Not all cement factories have become mixed enterprises, only the most modern ones, particularly for export purposes, factories that did not operate due to lack of fuel and other resources.

"We have held discussions in other sectors. A hotel became a mixed enterprise with Mexico. In fact, it is now one of the hotels attracting the largest number of clients.

"We have held discussions in other areas. I already mentioned the oil refinery; we have also held discussions about glass, but the most important project with a Mexican enterprise with Mexican capital is the telephone project.

"We have a special situation with Mexico, meaning we have been honoring Mexican debts. We have made some financial arrangements, but we are complying with the Mexican debt payments.

"In other words, these economic partnerships have generally taken into consideration Cuba's debt with Mexico, and it has been a reasonable part of the debt negotiations. This way it is beneficial for all parties involved; it is beneficial for Mexican investors; it is beneficial for Mexican finances regarding our debt; and it is also beneficial for our country.

"We have sought a conciliation of interests bearing in mind those factors. We have a special relationship with Mexico because we have only established that type of relationship, in that manner, with Mexico. We have not done it with other countries.

"This is a result of our closeness with Mexico and due to the excellent historical relations which have prevailed between Mexico and Cuba, meaning that we have developed special relations on this.

"The telephone project is an important lucrative business which also allows us to achieve development. It is not simply a matter of conducting business for the sake of conducting business. We had no capital or technology. We had the market for telephones given the increasing tourism and given the Cuban community abroad, which communicates with families in the country.

"Therefore, we had the market, but the partnership with Mexico allows the possibility of achieving development which requires investments and much more modern technology because the technology we have in the telephone sector is very old.

"That would permit us to improve domestic communications. It would help expand, modernize, improve technology, and reduce costs, in general, of communications. But significant investment would have to be made.

"One of the most important operations we have carried out is with telephones. We have had long and involved discussions because these operations are voluminous and really require time for discussion and arrival at an agreement.

"We also had to reach agreement with U.S. companies. Because of the famous Torricelli law, which fosters anything that according to the U.S. Government encourages subversion or the political weakening of Cuba -- communications between the Cuban community residing in the exterior and the Cuban people was deemed favorable.

"We have decided to accept the challenge and have reached agreements with a number of U.S. companies on communications between U.S. residents and Cubans.

"This is already operating and is part of a mixed enterprise we have established with the Mexicans. That is all I can tell you about that operation, but I hope that the operations continue which are beneficial for all parties -- for Mexican businessmen; for the Mexican state, because, as I have said, it involves the debt issue; and for Cuba."

[Vazquez] Lone Star Industries says it owns the cement factory now being run by Cementos Mexicanos in Cuba. What is your reaction?

[Castro] "We have formed an association with a company that has more experience than we, that has a market, and that guarantees fuel for the factory's operations.

"As in the case of the hotels, in these cases we prefer a foreign administrator because of his broader experience. In general, in these cases -- even though we are equal partners -- we concede the administration to foreigners because they have more experience.

"Furthermore, we have reached agreements with tourist companies on the administration of many hotels which are wholly-owned by Cuba. These companies have more experience in these matters and also have access to the necessary market.

"Look, you need not only capital but also technology, experience, and a market. There is enough time for our country to learn to develop first-rate administrators because we have been isolated for so many years.

"Certainly those companies have much more experience; that is why we have often fostered foreign administrations. That is not a problem.

"This cement factory will be run by a Mexican, a Spaniard, or anyone the Mexican company may bring in, because Mexicans have administrators of various nationalities. But we have conceded the issue of administration. I can tell you that all these mixed enterprises are functioning perfectly well. I can point to hotels in which the businessmen and investors have recovered their capital investment in three and a half years because they have found a market and are efficient.

"These mixed enterprise companies are operating perfectly well. There are no problems. There is great cooperation between Cuba and the companies, and the workers cooperate because they too receive benefits.

"In these kinds of mixed enterprise companies, Cuban workers guarantee the good use of the hotels and they receive economic benefits. In addition to their patriotic spirit, their patriotic sense, they know that it benefits the country; hence there is close cooperation between the foreign company, the Cuban company, and workers in those centers.

"Our workers are learning a lot in those tourist centers. Investors are surprised, because don't forget about one of our people's greatest advantages -- that the majority our workers have a 12th grade education and instruction. One of the things foreign investors appreciate very much in Cuba is our workers' level of education.

"All these factors have helped mixed enterprises operate perfectly fine, with a great deal of satisfaction, and yielding reasonable and encouraging profits for the investors.

"Let me tell you that investors in Europe do not usually realize the kind of profit they earn by investing in tourism here. It is convenient for us: We bring in more tourists, earn more profits, and learn. It is convenient for them too, since they earn more profits, enjoy more fiscal incentives, and many other things.

"We both profit; we are partners. If business goes well, everything else goes well. The investing company makes sure everything goes well, and workers make sure everything goes well. We work in great harmony.

"This is why this system we are implementing has yielded very encouraging results, and there is more interest in investing in Cuba, because this interest is logically associated with the level of profitability they will obtain from investing their capital. It is a universal law."

[Vazquez] Mr. President, why can a foreigner purchase properties in Cuba when a Cuban cannot?

[Castro] "The Cuban citizen owns many properties in Cuba. I was telling you about 70,000 and 80,000 landowners who are already producing at a commercial level.

"Aside from this fact, tens of thousands more own smaller tracts of land for self-consumption and freely sell their production. That is to say, there are people who own other properties.

"But there is a problem, Mario. We have very large amounts of foreign exchange, and our basic need for convertible foreign exchange, which is required for the development of certain lines of business, has brought factories to a halt. The problem is that our fellow nationals have a shortage of convertible foreign exchange. They have money in national currency, but all these investments need 40, 50, 60, 70 percent of investments in convertible foreign exchange. You know that well.

"Cuban citizens are not excluded. Their lack of resources for these companies, which are very large companies, we are creating is the exclusion. In general terms, these are very large businesses that require million-dollar investments to import what is needed to create them, as is the case with you people in Mexico.

"Mexicans must import much of the machinery, equipment, and raw materials you need for your businesses; that is the case with us too.

"Therefore, there are no exclusions. This is life; this is reality. Their lack of convertible foreign exchange hinders the process, because, as you already know, the national currency is not and cannot, for the time being, be freely converted.

"If a Cuban suddenly finds a treasure, is entitled to $5 or $10 million, and wants to invest this money, we could create a mixed enterprise with the help of this Cuban citizen. There is no exclusion; the tangible and specific shortage of convertible foreign exchange in the country is what is excluding him.

"We have enough pesos, although we are now cutting back on the peso; we are determined to revalue it. After all, we are the ones who print the pesos, but not the convertible currency. Nevertheless, we have shut down the money printing machine. Besides that, and still on the same issue since I would not like to mix the two issues, the printer has been shut down, and what we are now doing is accumulating funds in order to revalue the peso.

"Considering the conditions we are now facing, free exchange is impossible, Mario. We do not have a Brazilian real or an Argentine peso, that could be pegged at par with the U.S. dollar.

"We do not even have a Mexican peso like you do, even though it has devalued somewhat. We do not even have that. At least you can still exchange your pesos for U.S. dollars.

"Our pesos cannot be exchanged for U.S. dollars, although we have already established a convertible peso, which is something different. This does not mean that the peso is now convertible, but just that before we would issue certificates with an equivalent value in currency. Now, in order to begin to establish a national currency with a specific currency value, we decided to introduce the convertible peso so that we can give change back to the tourists.

"The convertible peso can be exchanged for dollars, which is not the case with the everyday peso. In order to transform the everyday peso into a convertible currency, we would need a portion of the financial assistance the Americans are talking about extending to the Mexicans. Figure it out for yourself. You are perfectly aware of the situation because of the problems you are confronting.

"At any rate, how are we going to transform our pesos into convertibles in such a way that an individual who has 1 million pesos can say: I have such and such an amount of convertible currency, be it dollars, German marks, pounds sterling, or Spanish pesetas. It's all the same to us since we have no preference for any single currency. At any rate, if custom and tradition call for linking a currency to the U.S. dollar, then a convertible peso will be equivalent to a U.S. dollar. If you are going to motivate workers in a specific export sector, all that has to be done is to give them a bonus in convertible pesos with which they can go to the convertible currency store and buy something."

[Vazquez] How did the issue of Cubans now being allowed to hold and exchange U.S. dollars work out?

[Castro] "Mario, maybe for patriotic reasons, or possibly because of a complex we had about a specific situation, the possession and sale of convertible currency was penalized at one time.

"This convertible currency issue gave cause for conflict. Some people would still get it because they received it as tips.

"When the tourism sector opened up, people began to get U.S. dollars from tourists as tips and gifts. There were also other people holding U.S. dollars that they got from their relatives abroad.

"Even though those dollars were not in circulation, they still were banned. These people, one way or another, probably illegally, would go shopping in those stores specifically reserved for tourists and diplomats. The fact is that there were people here with dollars, U.S. dollars."

[Vazquez] Who were these people?

[Castro] "These people were cause for many concerns. Sometimes, they were artists who were able to sell one of their paintings. Other times they were composers or musicians who were allowed to receive funds from abroad. Different kinds of people would have dollars, but the main source could be traced to family transfers and tips.

"In fact, the U.S. dollar has been circulating since before we decided to legalize it. There were so many people who one way or another could do something with it. These dollars would go to farmers. Someone would buy a pig from a farmer, and he would be paid in dollars. Some items were also being paid for in dollars.

"Then, what did we decide to do? We came to the conclusion that the best thing to do would be depenalize the U.S. dollar. We got rid of some legislation and granted people the right to buy in stores restricted for tourists, as well as other exclusive stores, and to pay in dollars.

"We arrived at the prudent decision of depenalizing the holding of convertible currency, and this is what we did.

"Now it is the United States that does not want the Cuban people to have convertible currency and dollars. They take measures and do all sorts of things, despite the fact that their own laws authorize the sending of specific amounts of dollars. That is a different problem.

"I think we have gotten rid of many difficulties by depenalizing the dollar.

"Now, little by little, we have to introduce our own convertible currency, that is, the convertible peso. The day could come on which the convertible peso, not the regular currency, might be circulating exclusively.

"But in Cuba it was a tradition. The dollar circulates freely. Before the revolution, often both the peso and the dollar circulated because they were valued at par. In those days, all that data about inflation in Latin America was unknown. Those were other times.

"That's how the decision to depenalize was made. I believe it was one of the many measures taken because of the situation we are facing."

[Vazquez] Is Cuba afraid of losing a partner like Mexico due to the current financial crisis?

[Castro] "Actually, we are not afraid of losing a partner like Mexico, or better yet, an economic, commercial partner in these operations. Mexico is not so much a financial partner as a commercial, economic partner.

"Actually we are not concerned about Mexico. Of course, we are concerned that the problems that could arise in Mexico could affect the increasing development of economic ties between Cuba and Mexico.

"That is, we wish Mexico economic success. In the measure that Mexico prospers, moves forward, and has resources, the possibilities of commercial associations and commercial relation with Mexico will increase."

[Vazquez] Cuba has begun to compete for tourism in the Caribbean Basin. What percentage of the tourist demand in the Caribbean is being captured by the Cuban tourist industry?

[Castro] "I do not have the facts, Mario. I could not give you an answer. We try to cooperate with each other. Probably our percentage does not yet reach 10 percent because the Caribbean area of Mexico, the Mexican Atlantic coast, all that, is included.

"There are a lot of tourist cruises on the Caribbean which leave many cans, bottles, and other such things in the countries that they visit. But they do not leave much money because they live aboard ship and do most of their spending on board. We still do not have tourism from cruise liners.

"Our tourist potential is much greater. It is possible that we will attract a greater share of the tourist industry in the near future. But that is not important. What is important is that all countries in the Caribbean advance because there is no better region for tourism that the Caribbean. Ten percent of 10 million is not the same as 10 percent of 40 million.

"We believe that our potential will become reality and that in the future we will receive millions of tourists each year."

(To be continued)