WikiLeaks Bombshell: Cuba To Be Bankrupt in 2-3 Years

The warnings were all there.  Just sixteen months ago we learned that Cuba was running out of one of the most important and basic family commodities. The Communist dictatorship, in the grip of a serious economic crisis, was running short of toilet paper and couldn't get sufficient supplies until the end of the year. Now via the latest WikiLeaks release we are learning that Cuba's economic situation has really sunk into the sewer,, and predictions are that they will be insolvent in 2-3 years.

In a cable written in February we learned that during a breakfast hosted by a U.S. diplomat for economic and commercial counselors from China, Spain, Canada, Brazil, Italy, France and Japan were all concerned about the economic future of the Castro-led state: 

The global financial crisis and the inability to service foreign debt will make the dire situation in Cuba even worse in 2010, according to EU diplomats. Brazil was a bit more optimistic noting that Cuba can still withstand more economic hardship. All diplomats agreed that Cuba could survive this year without substantial policy changes, but the financial situation could become fatal within 2-3 years. Italy said GOC contacts had suggested Cuba would become insolvent as early as 2011.

The diplomats suggest that they are already having problems collecting receivables from Cuba, especially China who is quickly becoming the world's banker.

Payment problems continue for all countries. Despite once again restructuring all of its official debt in 2009, Japan has yet to see any payments. Even China admitted to having problems getting paid on time and complained about Cuban requests to extend credit terms from one to four years. When France and Canada responded with “welcome to the club”, China suggested Canada help secure payment from a Cuban joint venture that includes Canadian firm Sherritt International which is now reportedly receiving its share of profits.

 Apparently Cuba's reaction to their economic issues is to centralize industry even further, and they are relying on the military to run the economy.  The problem is the Cuban military is not very creative:

According to the French, the Cuban leadership believes it can transfer the successes of military state companies that control a good part of the tourism industry to the rest of the economy. Many of our contacts agreed that the military is generally better regarded in Cuba than the political institutions, and reportedly intervened directly in the operation of flour mills earlier this year after bread had disappeared from markets. The Italians noted that the Agriculture Ministry is in the hands of the general most faithful to Raul Castro in Ulises Rosales del Toro. The French argued that the military is seizing all core economic activities of the state. The Cuban economy is increasingly run by military engineers that are capable of running the day-to-day business activities, but do not have the vision to enact reforms or lead the country out of the economic mess of centralized state planning.

Cuba is in bad need of drastic economic reform but the leadership may not have the political will to make them:

Despite how badly Cuba needs them, significant economic reforms are unlikely in 2010, especially with the continued delay of a policy-revising Communist Party Congress. The GOC’s direction and leadership remains muddled and unclear, in great measure because its leaders are paralyzed by fear that reforms will loosen the tight grip on power that they have held for over 50 years.

 Over the past few decades most of the communist nations have learned that their economic system just doesn't work. Of those China has been the most successful because, despite their very oppressive regime,  the introduction of limited oasis' of capitalism has significantly improved their economy.

On the other hand, countries such as North Korea and Cuba who have seen the least movement away from a totally planned economy, oversee a near-ruinous economic state.