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    Key political risks to watch in Cuba – 09-2011

    Key political risks to watch in Cuba
    Mon Sep 5, 2011 1:01pm GMT
    By Jeff Franks

    HAVANA, Sept 5 (Reuters) – Cuba is moving slowly on its economic
    reforms, at least publicly, while keeping a wary eye on the of
    its top ally, Venezuelan President Hugo Chavez, and waiting anxiously
    for a Chinese-built drilling rig on its way to explore for oil in Cuban
    waters.

    ECONOMIC REFORM

    There has been little word of late about the progress of reforms that
    President hopes will assure the survival of Cuban communism,
    but he complained to the National Assembly about bureaucratic resistance
    holding back the changes. [ID:nN1E77M0XX]

    The reforms are aimed at improving productivity and prosperity by
    modestly liberalizing the island's Soviet-style economy. wants to
    reduce the role and cost of government and has vowed to slash over the
    next few years a million jobs from state payrolls in a process that has
    already begun.

    The government has opened up self-employment opportunities so that more
    Cubans can earn their living in the private sector. It says a third of
    Cuba's work force of 5.2 million will be "non-state" by 2015, up from 15
    percent in 2010.

    As of July, officials said 325,000 people were working in the
    self-employed sector, up from 150,000 in 2009. [ID:nN1E76TO2K]

    Cuban media has reported that in October many small service businesses
    run by the state will be leased to employees to run essentially as
    private businesses, in an extension of an experiment that began last
    year with barber shops and beauty salons.

    President Castro has said details of key reforms such as plans to
    liberalize the sale of homes and cars will be unveiled later in the
    year. Changes to give state-owned companies more autonomy have not yet
    been disclosed. [ID:nN09221946]

    He told the National Assembly plans were afoot to loosen up Cuba's
    restrictive travel and immigration rules, also to be revealed toward the
    end of the year. [ID:nN1E7701VN]

    Castro is trying to raise sagging agricultural output by handing out
    idle plots for planting and other measures. Nearly 150,000 people are
    cultivating previously unused land, with mixed results so far.
    [ID:nN1E7710FM]

    State media said the coffee harvest has begun in eastern Cuba, where 85
    percent of its coffee is produced. It is expected to be only slightly
    better than the 6,000 tonnes last year, one of the worst in the area's
    history. [ID:nN1E7810LS]

    What to watch:

    — The final version of reforms.

    — The progress and impact of government layoffs.

    — The numbers and performance of the newly self employed.

    — Agricultural production.

    FINANCIAL HEALTH

    Cuba's finances have slowly improved from a liquidity crisis that led to
    a default on payments and freezing of foreign business bank accounts.
    [ID:nN24211495]

    President Castro told the National Assembly the bank accounts issue
    would be resolved by year's end.

    The government has said tax payments from the self-employed have boosted
    revenues and that its top hard currency earners — and nickel
    exports — have improved this year.

    The island's deposits in international banks also have increased.

    Castro said Cuba's economy was expected to grow 2.9 percent this year,
    up from 2.1 percent in 2010, but warned that global economic problems
    could darken the picture.

    Long-awaited golf course developments, aimed at attracting wealthier
    tourists, remain on hold. [ID:nN04118234]

    The first Americans to visit Cuba under more flexible travel rules put
    in place by U.S. President Barack Obama have begun arriving. [ID:nN1E77F13C]

    What to watch:

    — Progress on liquidity crisis.

    — Effects of global economic problems.

    — The growth of American travel to Cuba

    OIL PLANS

    A Chinese-built rig owned by Italian offshore company Saipem and
    contracted by Spanish oil company Repsol YPF has set sail from
    Singapore, with arrival in Cuba expected by Nov. 1. Soon after it
    reaches Cuban waters, it will begin the first full-scale oil exploration
    in Cuba's part of the Gulf of Mexico. [ID:nN1E77P03U]

    Malaysia's Petronas, in partnership with Russia's Gazprom Neft, will use
    the rig after Repsol to drill in their offshore Cuban leases

    Federal lawmakers from Florida have introduced legislation trying to
    stop the drilling, saying exploration there poses environmental dangers.
    [ID:nN24203352] U.S. oil companies are forbidden by the long-standing
    U.S. trade against Cuba from operating in the communist nation.

    Cuba depends on imports from its oil-rich ally , but says it
    may have 20 billion barrels of oil offshore. The U.S. Geological Survey
    has estimated 5 billion barrels.

    has signed an agreement to play a major role in increasing Cuban
    oil production both onshore and offshore, although details were not
    disclosed. [ID:nN08140650] State-owned China National Petroleum Corp is
    said to be considering leasing exploration blocks in Cuban waters.
    [ID:nN1E76C1S6] China also committed to negotiations of contracts for a
    $6 billion expansion of Cuba's Cienfuegos refinery and a liquefied
    natural gas project. [ID:nN22266891]

    What to watch:

    — Arrival of drilling rig.

    — Results of Repsol's exploratory well.

    — Fate of U.S. legislation on Cuba drilling.

    — China's growing involvement in Cuban oil development.

    FOREIGN RELATIONS

    Cuba's biggest concern at the moment is the health of Chavez, who
    provides 114,000 barrels of oil a day and investment to Cuba but now is
    battling an undisclosed type of cancer. He has said he expects a full
    recovery, but if his illness were to damage his chances for re-election
    in 2012 or take a turn for the worse, Cuba would have to hope he is
    replaced by someone as devoted to the island.

    Chavez is very close to former leader , who is 85 and
    increasingly frail. Unconfirmed rumors emanating from Venezuela have
    portrayed him as gravely ill. Cuban officials have said nothing, but a
    pro-government sometimes used to get out the government's first
    reactions, has said he is fine.

    U.S.-Cuba relations, which thawed briefly under Obama, have been frozen
    by the imprisonment in Cuba of U.S. aid contractor Alan .
    [ID:nN24221723] He was sentenced to 15 years for providing to
    Cuban groups under a U.S. program promoting political change in Cuba
    [ID:nN12265306] and Cuba's highest court affirmed the sentence in
    August. [ID:nN1E77411A] (Additional reporting by Marc Frank; Editing by
    Kieran Murray)

    http://af.reuters.com/article/energyOilNews/idAFRISKCU20110905?sp=true