Brazil & Cuba Expand Economic Relations

Brazil & Cuba Expand Economic Relations
September 18, 2012
Fernando Ravsberg*

HAVANA TIMES — Jose Felicio has been the Brazilian ambassador to Cuba
for the past two years, during which time his responsibilities have
included the promotion of trade relations between the two countries.
Since Lula da Silva (2003-2011) was elected president, economic
exchanges and cooperation have progressed steadily.

Today Brazil is leading the largest engineering project in Cuba, the
construction of the Port of Mariel, which will be the principal facility
on the island. The two nations are also engaged in the creation of
special economic zone in which Brazilian companies will be able to
produce Cuban medicines for marketing in the South American country.

Ambassador Felicio agreed to discuss the expansion of relations between
Cuba and Brazil that has occurred in recent years:

JF: As you know, the previous government of Brazil was led by President
Lula, who is a great friend of Cuba and who had decided to support
certain projects implemented here, with the priority being the
construction of the port of Mariel. It is a joint project whereby the
Cuban government is covering 15 percent of the costs, which in total
should come to about $960 million.

I should add that Brazilian companies are already here. One of them is
Brascuba, a Brazilian/English multinational that is associated with a
Cuban enterprise in the production of cigarettes for the last 15 years.
There are also small businesses involved mainly in commerce and that are
also using official lines of credit offered by the Bank of Brazil for
the export of Brazilian goods.

There is institutional cooperation on a major agricultural project in
soybean and corn production, whereby we're providing technical
assistance and Brazilian experts. Brazil is a major producer of soybeans
in the world, so the idea is to reduce Cuba's dependence on imports,
quite a large volume that puts pressure on Cuba's current account balance.

Cooperation in the area of health is an area where there are excellent
prospects. Last year Cuba exported $91 million in goods to Brazil, with
a large part of that in laboratory products, public health supplies and
also in veterinary products.

There's already cooperation between laboratories. In Brazil there's a
great deal of interest in Cuban technology that we don't possess. There
will be the need to adapt production to a market of nearly 195 million
people who would need significant quantities.

We're working on associating Brazilian companies with companies of the
Cuban government — either here or in Brazil — with Cuban technology for
the Brazilian market and to assist in the effort of the Cuban government
to increase exports.

Would these be generic medicines?

JF: All kinds of medicines. There are generic ones but also others that
we don't have; like Heberprot-P, which has been a success here, so we're
already testing it in Brazil. There's interest in certifying Cuban
laboratories; we're having a public health monitoring delegation to come
here this month from Brazil. They will visit laboratories and assist
with the certification. In this way exporting can be made even easier –
even exporting to other destinations.

What other medications are you thinking of producing?

JF: There are many, like veterinary products and some vaccines we don't
produce. There's also important cooperation with products that combat
dengue.

Governments in northern Brazil are already importing malaria control
products from Cuba, and we're working with Cuban doctors and health care
specialists. We believe the outlook is very good.

In the first seven months of this year, from January to July, Cuba's
exports to Brazil increased 78.5 percent, mainly in medical products,
cement and nickel. Brazilian exports to Cuba increased by 4.8 percent,
which is very good because Brazilian exports increased a little while
increases from Cuba were much more.

That balances things a bit?

JF: It significantly reduces the difference. Last year Brazil exported
from $550 million in goods to here, while Cuba exported almost 100
million to us, meaning we created a $400 million difference. If we can
reduce that difference this year it will be great, because it will show
that Cuba has means to honor its financial commitments in the future.

I work as an ambassador not only for Brazilian exports. I'm also
interested in a certain balance being achieved when we look into the
future, as this is how healthy economies are made, in my opinion.

To supply of medicine to a country like Brazil, Cuba would have to make
a huge effort. Are you talking about creating medicine manufacturing
facilities here at Mariel?

JF: When President Rusef was in Cuba in January of this year, she had a
meeting with Brazilian businesspeople in the medical sector. She
emphasized support by the Brazilian government for entrepreneurs in that
sector who want to partner with Cubans for producing.

Brazil imports medicine because we ourselves don't have the same ability
to supply everything we need, and there are some technologies that we
simply don't have.

Would it be cheaper to cooperate?

JF: The Brazilian health system is a major buyer of medicine. We
purchase from Europe, from the United States, we buy them from India.
We're confident that here, thanks to proximity and the technical
capacity of Cuban laboratories, these could be quickly produced and
exported to Brazil.

Brazil's trade minister, Pimentel, was in Cuba two weeks ago, at which
time he visited the scientific hub and the Center for Genetic
Engineering, which left him highly impressed with the quality of the
professionals and the products.

On his return to Brazil he started working on this issue, which we will
continue to deepen. Next month we foresee a visit and trade meeting in
Brazil, where it's possible that a Cuban minister will attend to move
forward in the relationship in that field.

Cuba's interest in the port in Mariel is very clear. What's Brazil's
interest in developing the Mariel project?

JF: Well, the primary interest is in selling Brazilian engineering
services and equipment. It's not a donation; we're working with the
Cuban government to create a transportation infrastructure that seems to
be important for the country, according to assessments by Cubans.

Work underway at the port of Mariel, 50 miles west of Havana, will make
it the country's largest port terminal, the only one in Cuba capable of
receiving post-Panamanian vessels. Photo: Raquel Perez

The Cuban government has contracts with international companies involved
in port management, and all we're going to do is develop the port and
possibly continue working on the infrastructure in the Mariel special
development zone.

And this is where all the medicine factories could come in?

JF: Cuba has a labor force of the highest quality, one that can be
trained in various sectors very easily and at a salary level that's
lower than in our country. Therefore, this is a particular advantage
that exists in Cuba and one that businesses will certainly consider for
investing here.

An example of what I'm talking about is the construction of the port of
Mariel. People who came from Brazil and other countries talked about the
quality of the workforce, people with education. You can start teaching
someone how to operate a machine and the future employee will take the
manual home and read it, learn it, and in a very few weeks they're
trained. That isn't the case in other countries, not even mine.

But a lot will also depend on the controls that the Cuban government is
preparing at this time to regulate foreign investment; for example, the
tax benefits they might offer to companies setting up here.

The Cuban government has indicated that there will be changes in the
rules for foreign investment?

JF: They say they're working on this and — from experience — the way is
to offer advantages. They haven't said to us specifically what they're
going to do, but they have told its necessary, they are working on the
laws and regulations that should be ready before the completion of the port.

That might be around…?

JF: The port will be completed within a year and a half or so, by the
end of 2013. There's also infrastructure work, including the
construction of offices, buildings, warehouses, facilities to house
business, so it involves all that. We're also interested in taking
advantage of those people who are already trained in doing other things.

Engineering as well?

JF: They have already acquired considerable experience, they're
completing a high quality road, the port is being built with Brazilian
technology. There will surely be different types of construction
including buildings and offices, we're already thinking about the
future, in how to take advantage of this labor force that is already
trained and will be able to work on another project that's beneficial
for the Cuban government.

Is the agricultural project in Ciego de Avila Province aimed at
producing food or is it also directed towards fuel production?

JF: No, that project exists only for food; for soy yogurt production and
also for using soy and corn for animal feed.

Any plans for a biomass plant?

JF: There's another idea that's out there for producing electricity from
bagasse, which is already done in Cuba, but modernizing some plants. We
have experiences; our plants are efficient and perhaps Cuba can get a
loan from Brazil for the importing of Brazilian turbine boilers and
engines to produce electricity.

How much credit is Brazil already extending today to Cuba?

JF: I don't have an exact figure, but it's around one billion dollars,
with the port and with loans for purchases, maybe a little more.

One wonders why Brazil, being the power that it is, is interested in
Cuba. Is it because the past presidents of Brazil are friends of Cuba?
What's the reason?

JF: All the countries in the region are important to us. What we're
doing here isn't a donation. We're making loans and selling services and
equipment. What we're doing in Cuba, we're also doing in the Dominican
Republic and Panama.

There are many civilian construction projects being undertaken by
Brazilian construction companies in Venezuela, they're participating in
building the Caracas metro and Brazil is also participating in their
chemical industry.

We want to take advantage of the economic times in which we're living to
see if we can promote the entire region. It won't be possible for Brazil
to move forward if we don't take account of Bolivia, Paraguay, Guyana
and Suriname, poor neighboring countries, because what will happen is
that poverty will migrate.

So, were taking advantage of this moment for Brazil, taking advantage of
companies that have capital and bringing our services and equipment and
in return we're providing some development in those countries. In
addition to selling, we want to bring development to the country. If a
company sets up here in the Mariel zone — be it Brazilian, Spanish or
Italian — it will create jobs, it will increase the export capacity,
that's the idea.

Good relations with Cuba are part of Brazil's regional strategy?

JF: Brazil is a big country but it isn't a country powerful enough to
confront the most powerful ones. Together we're stronger. If we join
together, all of South and Central America and the Caribbean, we're
surely stronger against the major blocs.

This diversification is important because today Brazil is significantly
dependent on China, but it's still not as dependent as when we sold 60
percent of our production to one country – the USA. Today the United
States buys only 18 percent. Our trade with Argentina, Uruguay and even
with Africa and the Middle East has diversified.

What I'm saying applies to Argentina and to Venezuela itself, we
diversified and that's the idea. We're diversifying because in that way
that way dependence is reduced. If we were dependent on Europe right
now, for example, it would be a disaster.
—–
(*) See Fernando Ravsberg's blog.

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