VZCZCXRO6690
PP RUEHFL RUEHNP
DE RUEHRO #0152/01 0241048
ZNR UUUUU ZZH
P 241048Z JAN 07
FM AMEMBASSY ROME
TO RUEHUB/USINT HAVANA PRIORITY 0028
RUEHC/SECSTATE WASHDC PRIORITY 7005
INFO RUEHFL/AMCONSUL FLORENCE PRIORITY 2092
RUEHMIL/AMCONSUL MILAN PRIORITY 8252
RUEHNP/AMCONSUL NAPLES PRIORITY 2226

UNCLAS SECTION 01 OF 02 ROME 000152 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV CU IT
SUBJECT: ITALY'S TRADE AND INVESTMENT WITH CUBA 
 
REF: ROME 3298 
 
SUMMARY 
-------- 
 
¶1.  (U) Italy is Cuba's eighth-largest trading partner and 
consistently runs a large trade surplus with Cuba.  Italian 
exports to Cuba increased in 2006 after several years of 
decline, while imports remain limited.  Foreign direct 
investment, focused on the tourism and telecom sectors, has 
declined in recent years due to Cuban government 
interference.  There have been no new joint ventures or major 
business agreements in the past several years.  End summary. 
 
 
ITALY-CUBA TRADE 
---------------- 
 
Italy's Foreign Trade with Cuba (millions of euro) 
(Source: Italian State Statistical Agency (ISTAT)) 
 
         Exports     Imports     Balance 
2001     280.2       15.6        264.6 
2002     248.9       15.7        233.2 
2003     232.5       13.7        218.8 
2004     179.9       13.3        166.6 
2005     198.3        9.5        188.8 
2006*    209.1       12.3        196.8 
 
*Provisional figures for January-September 2006 
 
¶2.  (U) Italian exports to Cuba will continue to increase in 
¶2006.  Italy's main exports of machinery and transport 
equipment are on pace to rise 178 percent over 2005.  Other 
substantial increases are in railway vehicles, trailers, 
machine tools, minerals, petroleum products, and copper. 
 
CUBAN OFFICIAL DEBT WITH ITALY 
------------------------------ 
 
¶3.  (U) As of February 2005, SACE, the Italian export 
insurance agency, held roughly USD 300 million of official 
debt from Cuba.  These amounts represent short-term 
trade-related credits for which the GOC has defaulted and 
Sace, as the insurer, now holds.  For this reason, SACE has 
stopped insuring trade credits for exports to Cuba.  Lorenza 
Chiampo, SACE's official responsible for risk countries, 
confirmed that payment problems meant "our insurance policy 
towards Cuba is at an end." 
 
ITALIAN INVESTMENT IN CUBA 
-------------------------- 
 
¶4.  (U) As of December 2006, Italy's 40 joint ventures in 
Cuba make Italy the third-largest foreign investor in Cuba, 
following Spain and Canada.  The number of joint ventures is 
down from the 2003 high of 51, a drop Italian MFA Office 
Director for Central America and the Caribbean Paolo Miraglia 
attributes to GOC efforts to recentralize and consolidate 
economic power. In a December 13 meeting with Econoff and 
Poloff (reftel), Miraglia also noted that there were no new 
agreements or joint ventures during the past year, and that 
Italian companies had abandoned a few smaller ventures. 
 
 
¶5.  (U) Italy's largest investment in Cuba is Telecom 
Italia's (TI) 27 percent stake in Cuban telecom parastatal 
Empresa de Telecomunicaciones de Cuba S.A. (ETECSA).  ETECSA 
is the monopoly provider of telephone, internet and wireless 
services in Cuba.  TI's interest in ETECSA is held through 
TI's Belgium-based subsidiary, STET International.  The GOC 
owns the remaining 73 percent of ETECSA.  TI's investment in 
ETECSA is valued at 300 million euro, making it the second 
largest foreign investment in Cuba.  Profit figures from 
ETECSA are unavailable, although TI declared a profit of 35 
million euro from ETECSA through September of 2006. 
 
¶6.  (U) Under an agreement with the GOC, TI can appoint 
ETECSA's Deputy Administrator and half of its Board of 
Directors, plus one, giving TI control of ETECSA's Board of 
Directors.  TI also provides ETECSA technical assistance.  TI 
receives USD 900,000 per year through 2006 for fixed line 
assistance, and 950,000 euro per year for mobile assistance 
through 2009.  The Cuban Minister for Information and 
Communications recently fired ETECSA's President on 
allegations of corruption and replaced him with a 
GOC-selected appointee, a good example of the GOC ability to 
interfere with business operations. 
 
TOURISM 
 
ROME 00000152  002 OF 002 
 
 
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¶7.  (U) Cuba is the leading Caribbean destination for Italian 
tourists.  The Italian hotel group Cascina entered into a USD 
22 million joint venture with Cubanacan, and has built two 
resorts in Santa Lucia and Varadero.  The Italian firm Seata 
International also entered into a joint venture with 
Cubanacan to form Vero S.A., which built several hotels in 
Cayo Coco Key and Varadero. 
 
COMMENT 
------- 
 
¶8.  (U) While Italy remains an important trading partner for 
Cuba, Italian trade remains relatively small, largely due to 
the difficult business environment and GOC interference. 
However, if a new era of economic liberalization were to 
emerge, Italian companies could begin to market Italian goods 
and services more aggressively, while investing more to 
capitalize on their Castro-era investments. 
SPOGLI