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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01049A002400040001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 9, 2016
• Document Release Date: April 9, 2001
• Sequence Number: 1
• Publication Date: February 1, 1962
• Content Type: FORM

Analyst: P S/ CU
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CIA/RR EP 62-7
February 19i
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CUBAN FOREIGN EXCHANGE INCOME
1957-62
CIA/RR EP 62-7
February 1962
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
Office of Research and Reports
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CONTENTS
Page
I. Level and Sources of Foreign Exchange Earnings . . . . . 1
II. Geographic Pattern of Foreign Exchange Earnings . . . . . 3
III. Shifts in the Character of Foreign Exchange Earnings 4
IV. Prospects for Exchange Income in 1962 . . . . . . . . 6
1. Convertible Exchange . . . . . . . . . . . . . . . . 6
2. Inconvertible Exchange . . . . . . . . . . . . . . . 6
Appendix
Cuban Foreign Exchange Income, by Selected Country of
Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Cuban Foreign Exchange Income, by Source . . . . . . . . 1
2. Cuban Foreign Exchange Income, by Geographic Origin . . . 3
3. Cuban Foreign Exchange Income in 1960 and Convertible
Exchange and Clearing Agreement Components in 1961 . . . 4
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CUBAN FOREIGN EXCHANGE INCOME*
1957-62
Since the advent of the Castro regime in January 1959, Cuba has
experienced a major change in the -level, the source, the geographic
distribution., and the character of its foreign exchange income. The
evolution of Cuban foreign exchange receipts for the period from 1957
through 1961 is summarized in Tables 1, 2,** and 3.***
I. Level and Sources of Foreign Exchange Earnings
The changes that have occurred in the level of total exchange income
are shown in Table 1, which further depicts these changes in terms of the
major sources of income. The steady decline in the level of foreign
Cuban Foreign Exchange Income, by Source
Category
1957
1958
19559
1960
1
6
9
1
Exports
855
765
680
620
600
Sugar
655
590
)+90
500
500
Tobacco
50
Minerals
50
55
50
~+o
Mi
ll
50
35
35
25
25
sce
aneous
100
90
100
50
35
Tourism
L
60
55
40
10
Negl.
ong-term capital (net)
35
10
-)+0
Negl.
10
Total
80
830
680
630
610
a. Because data are rounded to the nearest $5 million, components may
not add to the totals shown.
b. Data for 1961 are estimates based on the latest available informa-
tion.
* The estimates and conclusions in this publication represent the
best judgment of this Office as of 1 February 1962.
Table 2 follows on p. 3.
Table 3 follows on p. 4.
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Million Current US $
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exchange receipts that is apparent from Table 1* stems from two general
factors. The first factor was the deterioration of the world sugar mar-
ket during the last years of the Batista regime and the first year of the
revolutionary government, and the second factor is found in the policies
and character of the Castro government.
Prices of sugar on the world market reached very high levels during
the first half of 1957 but began to decline after the middle of the year.
The decline continued through the first half of 1959, and Cuban foreign
exchange income from exports of sugar fell correspondingly throughout
the same period. Following 1959, Cuban exchange earnings from exports
of sugar were stabilized largely as the result of large sales made to
the Sino-Soviet Bloc. Expanded exports to the Bloc in 1960 and 1961,
together with the premium price paid by the Bloc for its purchases in
1961, have combined to maintain the value of sugar sales in spite of
the loss of the US market. Although the premium price paid by the Bloc
is less than that formerly paid by US importers, the Bloc now imports
about 60 percent more sugar than the US previously took. The total
value of sugar exported to the Bloc is about $400 million annually, or
approximately 20 percent more than the former receipts from the US.
In spite of the stabilization of exchange income from sugar exports,
Cuban total foreign exchange receipts continued to fall in 1960 and
1961. Policies of the Castro government that destroyed the tourist
s. capital
trade and isolated Cuba from its traditional sources of foreign p
were in large measure responsible for this outcome. As Table 1 indicates,
the loss of the tourist trade was more significant than the termination
of net capital imports, even though gross capital imports have been an
important source of exchange for Cuba in the past. In the period 1955-58,
gross capital imports averaged about $100 million. Amortization, in-
terest, and dividend payments also have been heavy, however, so that
net capital inflow averaged only about $25 million during the same period.
Cuba also experienced a loss of exchange income from its minor ex-
ports during 1960 and 1961. It seems clear that Cuban policy was re-
sponsible for the decline, although details on this component of Cuban
trade are not yet available. This group, which is aggregated as "Mis-
cellaneous" exports in Table 1, consists of a number of commodities such
as fruits, vegetables, fish, coffee, cocoa, fibers, hides and leather,
and residual fuel oil. About half of the decline in the exports of this
group was accounted for by the reduction in trade with the US.
* p. 1, above.
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II. Geographic Pattern of Foreign Exchange Earnings
The geographic distribution of Cuban foreign exchange receipts is
shown in Table 2. In this table, all receipts from tourism and capital
imports have been assigned to the US under the heading "Other receipts."
Undoubtedly some tourist income and foreign capital came from Canada
and Western Europe, but because the bulk was accounted for by the US,
it was felt that all such receipts could be grouped together without
significant distortion.
Table 2
Cuban Foreign Exchange Income, by Geographic Origin J
Million Current US
Area
1957
1958
1959
1960
1961 a
us
590
580
48o
340
35
Export receipts
490
510
475
330
35
Other receipts
100
70
5
10
0
Canada
10
15
10
5
10
Western Europe c/
175
120
90
80
40
Asia a
65
60
35
25
45
Middle East
10
5
5
15
10
Africa
20
15
15
15
10
Latin America
25
20
30
10
10
Total Free World
895
815
665
490
160
Total Sino-Soviet Bloc c/
45
15
15
150
450
950
830
680
640
61o
a. Because data are rounded to the nearest 5 million, components
may not add to the totals shown.
b. Data for 1961 are estimates based on the latest available in-
formation.
c. For a breakdown by country, see the Appendix.
The shift in the geographic distribution of foreign exchange income
that occurred following 1959 resulted primarily from the diversion of
sugar exports from traditional markets to the Sino-Soviet Bloc. Other
Cuban exports have continued to move to their normal markets with very
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little diversion to Bloc countries. One important exception to this
pattern is the minerals group. Since the end of 1960, all Cuban exports
of nickel, copper, manganese, and chrome have been shipped to the Bloc.
In June 1961 the Ministry of Foreign Trade of Czechoslovakia announced
that the Bloc would purchase all Cuban mineral exports for the next 20
years.
III. Shifts in the Character of Foreign Exchange Earnings
The shift in direction taken by exports under the Castro government
has sharply altered the character of Cuban foreign exchange receipts,
as shown in Table 3. Before 1960, almost all exchange income was con-
vertible currency.
Cuban Foreign Exchange Income in 1960
and Convertible Exchange and Clearing Agreement Components
in 1961 a/
Million Current US $
1960
1961 b/
Convertible
Clearing
Convertible
Clearing
Category
Exchange
Agreement
Total
Exchange
Agreement
Total
Exports
505
115
620
150
445
595
Sugar
400
100
500
90
410
500
Tobacco
45
5
50
35
5
40
Minerals
25
Negl.
25
0
25
25
Other
40
10
50
25
5
30
Total
515
115
630
150
455
605
a. Because data are rounded to the nearest $5 million, components may
not add to the totals shown.
b. Data for 1961 are estimates based on the latest available information.
During the first 7 months of 1960, however, Cuba signed a series of
long-term trade agreements with the Sino-Soviet Bloc that placed most of
its trade with those countries on a barter basis. With the signing of
these agreements and the expansion of exports to the Bloc during 1960,
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Cuban exports became increasingly oriented toward inconvertible currency
areas. Furthermore, there is considerable evidence that Cuban sugar
sales to a number of countries of the Free World* during 1961 were exe-
cuted with various Bloc countries acting as middlemen. Hungary probably
was the most active Bloc country in this trade, but Czechoslovakia and
East Germany also were involved.
Although these exports were shipped directly from Cuba to the final
importer, it seems likely that payment was made through a Cuban clearing
account with the Bloc country concerned rather than with the hard cur-
rency that Cuba normally earns for exports to the Free World. Although
individual transactions of this type were relatively small, their total
for all of 1961 could have amounted to as much as $15 million. Finally,
Cuba has directly negotiated barter transactions with Morocco, the UAR,
and Chile, thus committing still more of its former hard currency ex-
ports to bilateral trading arrangements. Altogether, about $4+5 million,
or almost 30 percent, of Cuban exports to the Free World earned incon-
vertible rather than hard currency during 1961.
Although most Cuban trade with the Bloc is conducted by means of
bilateral clearing arrangements, Cuba does receive some convertible
exchange for its sugar exports to the Bloc. The trade agreements
signed with the USSR in February 1960 and with Communist China in July
1960 provide for limited hard currency payments for sugar purchases.
As the Bloc gradually has increased the amount of support that it is
willing to extend to the Cuban economy, these agreements subsequently
have been revised. Both the amount of sugar to be purchased and the
price to be paid for it have increased substantially. Evidently the
convertible exchange provision of the Soviet-Cuban agreement also has
been expanded in favor of Cuba, although the details of the present
arrangement are not known. In any event there is firm evidence that
the USSR paid a minimum of $30 million in convertible exchange to Cuba
during 1961 and that Communist China paid at least $2 million. It is
probable that the actual figure is higher for both nations, particularly
for the USSR, and that total payments in 1961 may well have been nearer
$50 million.**
Cuba receives some convertible currency from the Bloc, but it also
has made some hard currency payments to the Bloc. During 1961, Cuba
made such payments to Communist China, Czechoslovakia, and perhaps
other Bloc countries. Payments totaling at least $1.7 million were
* Morocco, Ceylon, Greece, Pakistan, Iraq, Finland, and possibly
Iran and Switzerland.
** The estimate of convertible currency earnings for 1961 presented in
Table 3, p. L1, above, was based on a minimum estimate of $35 million in
hard currency payments by the Bloc.
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made to Communist China for credit to a special freight account. These
transfers possibly were made to cover Chinese chartering of western
vessels for the Cuban trade. Cuba also made payments to Czechoslovakia
during 1961 amounting to a minimum of $10 million. Most of this amount,
and possibly all of it, evidently was made to the Chief Technical Direc-
torate, the Czechoslovak arms exporting organization, and appears to
represent Cuban payments for Czechoslovak military equipment. On the
basis of these known transactions, the total Cuban hard currency payments
to the Bloc for 1961 probably amounted to at least $15 million.
IV. Prospects for Exchange Income in 1962
1. Convertible Exchange
Prospects for improving Cuban convertible exchange receipts dur-
ing 1962 are doubtful at best. There is little chance that hard currency
income can be increased significantly and a good chance that it will be
reduced substantially. The outcome for 1962 hinges largely on the course
of developments in the sugar market. Between 1953 and the end of 1961
the price of sugar on the world market was supported by the major export-
ing and importing countries through the International Sugar Agreement.
Negotiations for the establishment of export quotas for 1962 under the
agreement broke down in December of 1961, when Cuba demanded quota in-
creases that were unacceptable to other members of the Agreement. Con-
sequently, the world sugar market faces 1962 without formal regulation
and with widespread fear of a price war.
Since the suspension of the quota system at the end of 1961,
prices of sugar have fallen by more than 10 percent. By the second
half of January 1962, world prices had declined to the lowest point in
20 years and were about 25 percent below the average for 1961. Cuba
has announced that it will maintain its exports in 1962 at about the
1961 level. If other exporters exercise the same restraint, there may
be hope that prices of sugar can be stabilized. It is probable, however,
that competition for sales will increase as the year progresses and that
further price declines are in prospect. Cuban exchange earnings from
other exports probably will be much the same in 1962 as in the previous
year.
2. Inconvertible Exchange
Cuba does not face the same uncertainty in its sugar trade with
the Sino-Soviet Bloc as it does in the Free World market. The Bloc has
promised to import 4.86 million tons of sugar annually through 1965 at
a guaranteed price of 4 cents per pound. Unless this commitment is
increased, Cuban exchange earnings from sugar exports to the Bloc will
be about the same in 1962 as they were the year before.
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It also is probable that Cuba will not increase its tobacco
and miscellaneous exports to the Bloc during 1962. Such an increase
would be at the expense of exports to hard currency markets, and, in
view of the dim prospects in that area, it is doubtful that Cuba would
be willing to make the sacrifice. On the other hand, exports of min-
erals to the Bloc can be expected to increase during 1962. Cuba has
the potential to expand its exports of nickel considerably. Production
problems resulting from shortages of spare parts and raw materials and
marketing problems connected with the nature of the nickel concentrate
produced at Moa Bay all indicate, however, that the actual increase in
exports of nickel will be quite small relative to total Cuban exports.
An increase of $15 million in total mineral exports for 1962 probably
would be the maximum that can be expected.
Cuba will increase its drawings on Bloc economic credits during
1962. How large these drawings will be is impossible to predict at this
point, but Cuban inconvertible exchange income will be increased somewhat
because of them.
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APPENDIX
CUBAN FOREIGN EXCHANGE INCOME
BY SELECTED COUNTRY OF ORIGIN J
Western Europe J
United Kingdom
45
35
10
20
15
West Germany
35
10
15
10
5
France
10
10
10
10
Negl.
Belgium
10
5
5
5
Negl.
Netherlands
20
15
20
10
5
Italy
5
Negl.
Negl.
Negl.
Negl.
Spain
15
20
5
10
5
Switzerland
10
5
5
5
Negl.
All others
25
20
20
10
10
Total
175
120
90
80
40
Asia J
Japan
55
45
30
15
30
Ceylon
Negl.
5
Negl.
Negl.
10
All others
10
10
5
10
5
65
60
35
65
65
J
USSR
45
15
15
100
295
Communist China
Negl.
Negl.
Negl.
35
95
Poland
Negl.
Negl.
Negl.
10
25
Czechoslovakia
Negl.
Negl.
Negl.
Negl.
25
East Germany
Negl.
Negl.
Negl.
5
5
All others
Negl.
Negl.
Negl.
Negl.
5
Total
45
15
15
150
450
a. Data are rounded to the nearest $5 million.
b. Data for 1961 are estimates based on the latest available informa-
tion.
c. Data for Western Europe and Asia represent exports only. Some long-
term capital and tourist income probably was received from these areas,
but it was relatively minor.
d. Totals for the USSR and Czechoslovakia in 1961 each include an esti-
mate of $5 million for drawings on economic credits. All other figures
for the Bloc represent exports only.
Million Current US $
Area 1957 1958 1959 1960 1961 J
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