25TH HAVANA INTERNATIONAL TRADE FAIR

C O N F I D E N T I A L SECTION 01 OF 03 HAVANA 001070

SIPDIS

SIPDIS

DEPT FOR WHA/CCA

E.O. 12958: DECL: 11/16/2017
TAGS: ECON PGOV PINR PREL CU
SUBJECT: 25TH HAVANA INTERNATIONAL TRADE FAIR

REF: A. 2006 HAVANA 23494


B. 2006 HAVANA 23506

Classified By: COM: Michael E. Parmly: For reasons 1.4 b/d


1. (C) SUMMARY: The 25th Havana International Trade Fair
(FIHAV-07) was held November 5-10 in Havana. This cable
contrasts changes and new developments since last year. U.S.
sales to Cuba have stagnated since last year and have dim
prospects of improving. The Spanish government's policy of
engagement with the GOC may have spurred renewed interest
from Spanish businessmen. Increased Brazilian presence at
the fair may parallel its government's new engagement efforts
in Cuba. The absence of GDP growth projections at FIHAV-07
most likely means that official GDP growth for 2007 will be
lower than last year's 12.5%. End Summary.



2. (U) The 25th Havana International Trade Fair (FIHAV-07)
was held November 5-10 at ExpoCuba on the outskirts of the
capital. Reftels provide a detailed description of last
year's Fair (FIHAV-06) and of Cuba's trade partners
showcased. Similar to last year, Cuban Vice President Carlos
Lage inaugurated the event, this time accompanied by
Panamanian counterpart Samuel Lewis.

U.S. - Cuba Trade
--------------


3. (SBU) According to local (official) press, there were
"213 representatives from 100 U.S. companies." Although
there are approximately 70 U.S. companies listed on the
official FIHAV-07 guide, we saw less than 25 exhibit booths
run by American companies or officials representing various
U.S. state commercial delegations and port authorities. It
is true, however, that some U.S. businessmen present at the
fair represent multiple companies and their interests in
Cuba. (Comment: While this would make the claim of 100 U.S.
companies at least possible, it remains highly unlikely.
With regard to the claim of there being 213 U.S. company
representatives, perhaps on paper. We saw less than 50. End
Comment.)


4. (SBU) A separate claim in the local press was that
attendance by U.S. companies decreased by 30% since last
year. Anecdotal accounts by U.S. company representatives at
the fair confirm our impressions that there was roughly the
same number of U.S. companies as last year. The general
sense was that 2006 was a flat year for U.S. sales to Cuba
and that this year, as well as the first quarter of 2008, are
also expected to end in stagnation. These shaky prospects
may help explain why some U.S. delegations were more jittery
than usual regarding contact with USINT. For instance,
Econoff made repeated attempts to meet with Nebraska Governor
Dave Heineman's delegation -- prior to and during his visit
to Cuba -- only to receive polite deferrals in return. On
November 5, his delegation signed agreements for the purchase
of 25,000 tons of wheat, valued at USD 11 million, by
Alimport (the state company in charge of importing food).
Pedro Alvarez, head of Alimport, admitted in an interview
that purchases from the U.S. were down at this year's fair.
Predictably, he placed all blame on the U.S. embargo.

Trade Partners
--------------


5. (SBU) According to local press, there were approximately
1,425 companies at FIHAV-07, representing 53 countries. 428
of those firms are supposed to be Cuban, but many of them,
particularly the most profitable, are actually joint ventures
-- such as the rum Havana Club, prominently displayed at the
"Cuba" pavilion. Cuba's main trade partners continue to be:
Venezuela, China, Canada, Brazil, Spain, Italy, and Germany.
All had major pavilions at FIHAV-07.


6. (SBU) Spain, the country with the largest representation
at FIHAV-07, reportedly increased participation by 30% since
last year. However, at a reception for Spanish businessmen
at the Spanish Ambassador's residence, Spanish Commercial
Attach Jose Luis Lancho told Econoff that this year there
were 40% more Spanish companies than last year. (Comment:

HAVANA 00001070 002 OF 003


Either figure clearly reflects the Spanish business
community's renewed interest in Cuba, most likely in light of
the Spanish government's policy of engagement with the GOC
and the potential it brings for increased trade credits for
Spanish companies. End Comment.)


7. (U) Canada, with 60 companies, had the second largest
representation at the fair. The GOC announced that the two
countries signed agreements for the purchase of 150,000 tons
of wheat and 3,500 tons of powdered milk. As expected,
Venezuela had a large representation at the fair, although
not as large as last year.


8. (C) Brazil is, after Venezuela and Canada, Cuba's largest
hemispheric trade partner. At the end of the week, Brazil
was named "best FIHAV-07 pavilion," for what was a much
larger and sleeker presentation than last year. Brazilian
Minister of Development, Industry and Trade Miguel Jorge,
formally inaugurated the pavilion, highlighted the bilateral
relationship with Cuba and thanked the GOC for sending to the
Amazon 40 Cuban technical experts of various specialties.
Sectors where both countries collaborate jointly include:
Food production, biotechnology, light industry, health and
petrochemicals. (Comment: Increased presence at the fair
parallels new Brazilian engagement efforts in Cuba.
Petrobras is reportedly interested in taking part in oil
exploration in Cuba while the GOC recently announced that
President Inacio Lula da Silva will visit the island. End
Comment.)


9. (SBU) Other countries worth noting included: Turkey,
Panama and Iran. Turkey's presence at the fair grew
exponentially since last year, going from 5 to 21 companies
and occupying its own pavilion. Similarly, the Panamanian
delegation grew into its own pavilion this year and was led
by Panamanian Vice President Samuel Lewis. Meanwhile, Iran
maintained the same size presence as 2006, occupying only a
portion of a pavilion and advertising the same areas:
Transportation systems (trucks, buses, and rail cars) and
agricultural machinery.


Highlighting Trade "Success"
--------------



10. (U) Foreign Trade Minister Raul de la Nuez Ramirez made
a speech at FIHAV-07 in which he gave a brief status report
of Cuban trade. Last year, De la Nuez used the event to
portray to the world an illusion of strong economic
performance. During FIHAV-06, he announced GDP would grow by
more than 10% by the end of the year (Note: The GOC
subsequently announced 12.5% in December. End Note.). This
year he said that, as of September, Cuba's trade in goods for
the year totaled USD 10.8 billion, 12% more than during the
same period in 2006, with a 44% increase in exports, and
greater "geographic balance" in its transactions. But unlike
last year, De la Nuez did not make any projections on GDP
growth.

Comments:
--------------


11. (C) The absence of GDP growth projections at FIHAV-07
most likely mean that official GDP growth for 2007 will be
lower than 12.5%. Cuban economists predicted as much at
September's LASA conference in Montreal, saying that the
"social GDP" valuation formula had its most dramatic effect
during the first few years it was used (since 2004) and has
mostly been absorbed. In other words, quantifying such
services as free education or medical services, within Cuba
or to Venezuela, have an impact on the figures but only on
the first year in which they are included. After that they
are absorbed into what becomes the new baseline for growth
during follow-on years. This means that even though actual
GDP growth in Cuba is always lower than the GOC claims, this
year -- especially after extensive damage from Tropical Storm
Noel -- even the rate claimed by the GOC could be lower.


12. (C) Greater "geographic balance" probably refers to
trade growth during the past year with most trade partners,

HAVANA 00001070 003 OF 003


except the U.S. At the IberoAmerican Conference in Chile
last week, Vice President Lage reportedly asked President
Lula for higher quantities of food imports. While this is
likely a sign of how desperate the situation in Oriente
provinces could be, following the devastation left by T.S.
Noel, it could also be an indicator that whenever Cuba needs
to import more food, the country will increasingly go
elsewhere -- while imports from the U.S. continue to
stagnate.


13. (C) The increase in exports can mostly be attributed to
nickel's record prices during the past year, in addition to
moderate increases in exports of pharmaceuticals, medical
equipment, and tobacco. Reducing the rate of growth of
imports is significant as it could reflect some effects of
the GOC's import-substitution policy as well as Raul Castro's
call from last December, and again last July, to lower the
country's growing dependence on imports. Nonetheless, Cuba
will still end the year with a trade deficit of goods in the
neighborhood of USD 6 billion. It must be noted that De la
Nuez only spoke about trade in goods. The GOC famously makes
up the trade gap with its surplus in services -- exaggerated
valuations of mainly medical services to Venezuela and other
countries. This year, the GOC finally may have run out of
sectors to overvalue in calculating its GDP growth.

PARMLY