Soaring oil and food prices hit Cuban recovery

Wed Jun 11, 2008 3:32pm EDT

By Marc Frank

HAVANA (Reuters) - Soaring fuel and food import costs have hurt Cuba's state-run economy, even as President Raul Castro works to meet a pledge to improve citizens' lives, a senior government official said. Cuban Vice President Carlos Lage broke the news in a weekend speech to municipal government leaders, carried by the Juventud Rebelde newspaper on Sunday. Hard work and greater efficiency could dampen the impact of international trends that Cuba could not escape, Lage said, charging that "the blind laws of the market have converted the world economy into a casino."

"Due to the economic impact of rising fuel and food prices, and practically everything we import ... some of the main investment projects have been reduced and further reductions will be necessary," he said, providing no details.

Communist Cuba imports about 50 percent of its minimum fuel and food requirements.

The Caribbean island has gradually emerged in recent years from an economic crisis in the 1990s that followed the demise of former-benefactor the Soviet Union. An integration agreement with oil-rich Venezuela, soft credits from China and high nickel prices have produced significant growth and investment, eliminating blackouts, improving public transportation, the availability of consumer goods and increasing investment in social services and housing.

Raul Castro took over from his ailing older brother Fidel in February, saying his government would improve living conditions on the island. Efforts to increase food production and the lifting of some restrictions on daily life have fueled expectations among a population that has endured hardship since the Soviet collapse. "The country spent $1.47 billion last year to import 3.423 million tonnes of food and to import the same amount this year at current prices will cost $2.554 billion, a billion dollars more," Lage said. "The 158,000 barrels of oil per day that we consumed last year cost $8.7 million per day and this year costs 32 percent more, or $11.6 million per day," he said.

Domestic gasoline and food prices have remained relatively unchanged in Cuba this year due to state-control of the economy and prices, forcing the government to spend more on subsidies. At the same time recent prices for its most important export, nickel, have fallen from the highs of a few years ago.

(Editing by Tom Brown and Bill Trott)