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COUNTRY PROFILES


PROFILE

Country Facts

Area: 110,860 sq km (42,803 sq miles)
Population: 11.2 million (2010 estimate)
Capital City: Havana (population over 2 million)
People: Ethnically mixed population (white 65.1%; mixed race 24.8%; black 10.1% according to official 2002 census)
Language: Spanish
Religion: The State is secular in Cuba; the main religions are, Catholicism, Santería (an informal mixture of Christianity and African religions brought over by slaves), and Protestantism.
Currency: Cuban Peso (CUP) and Convertible Cuban Peso (CUC) (1 CUC = 25 Cuban Pesos) (1 CUC = US$0.96)
Major Political Parties: There is only one party - Cuban Communist Party or PCC (Raúl Castro Ruz, First Secretary; Jose Ramon Machado Ventura, Second Secretary)
Government: Cuba has a one party system. It is the only country in the western hemisphere with a communist government. For 49 years after the Cuban Revolution, Fidel Castro remained Head of State and formally First Secretary of the Communist Party. On February 24th 2008 Fidel Castro was succeeded by his brother Raúl Castro after announcing that he would not seek another term as President. At the 6th Party Congress in April 2011, Raúl Castro also became First Secretary of the Cuban Communist Party.
President of the Council of State and Council of Ministers: Raúl Castro Ruz
First Vice-President of the Council of State: José Ramón Machado Ventura
Foreign Minister: Bruno Eduardo Rodríguez Parrilla
Membership of international groups/organisations: Cuba's memberships include United Nations (UN), Non-Aligned Movement, ALBA (Bolivarian Alliance for the Peoples of Our America), CELAC (Community of Latin American and Caribbean States), IAEA, WHO, WTO, WO and others.

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ECONOMY

Basic Economic Facts

Nominal GDP: US$57.65 billion (2010 estimate)
Nominal GDP per head: US$5,128 (2010 estimate)
Inflation rate: 3.1% (2010 estimate)
Main industries: tourism, export of professional services (e.g. medical personnel) nickel, tobacco, sugar, agriculture and biotech. Please note that Cuba calculates its GDP to include "social services". These estimated figures are provided by the Economist Intelligence Unit, based on figures provided by the Cuban government, which are strongly contested by independent economists. Cuba calculates its GDP differently from every other country in the world, as it includes a market cost of services the government offers its citizens, calculated at an unknown international price.

Cuba stands out from the rest of Latin America and the Caribbean in having one of the world’s few remaining centrally-planned economies in which the state is the only important economic actor, controlling some 90% of the economy and employing around 85% of the total workforce. Almost all business interactions for exporters and investors are with state-run enterprises, and the government also regulates and supervises all trade and investment activities. Decentralisation of some economic decision-making and business activities over the last two decades has not led to real liberalisation of the economy. Shortages of basic foodstuffs and medicines, and poor public transport are all regular features of daily life for ordinary Cubans. The average salary is around US$20 per month and many Cubans rely on state handouts, remittances from abroad and black market activities.

Following the collapse of the Soviet Union, which crippled the Cuban economy with the loss of preferential trade (oil for sugar) and substantial aid, Cuba opened up its economy to foreign investment. A new tourist industry was developed and licenses for self-employment were issued creating a small private sector (e.g. restaurants and B&Bs) catering largely to foreign visitors. Significant investment was made in Cuba’s pioneering biotechnology and pharmaceuticals sector; and oil and gas, mining, manufacturing and other sectors were opened to foreign investment. These measures to open the economy led to a gradual economic recovery. They were partially reversed after the crisis abated. The April 2011 Communist Party Congress approved a package of over 300 measures, as a result of which Cuba is now set on a course of incremental steps towards a more market-oriented economy. The Cuban government continues to stress that state planning will be paramount, but President Raúl Castro has stated that this time there will be no going back in relation to the current economic reforms.

Cuba is a predominantly service-led economy. Its main export earnings come from tourism (with 2.5 million tourists in 2010 projected to rise to 2.75 million in 2011), nickel (Cuba has the 4th largest global reserves), biotechnology and pharmaceuticals (exported to more than 25 countries). Export of professional services, especially medical, has grown significantly in importance. Since 2000 Cuba’s close political ally Venezuela has been providing oil on highly concessionary terms. In 2010 Cuba and Venezuela signed a further 10 year agreement under which Venezuela will supply around 115,000 barrels of oil per day. In exchange, Cuba has sent thousands of healthcare professionals, teachers and advisers to work in Venezuela.

Cuba’s leading economic partners are Venezuela (whose exports to Cuba are greater than those of the whole of the EU), China, Spain and Canada. Despite the US embargo, an exemption for exports of food and some pharmaceuticals makes the US Cuba’s 5th largest trading partner. Cuba’s agricultural sector (accounting for less than 5% of GDP) is particularly inefficient, and as a result up to 80% of food is imported. Once a major sugar exporter, production levels have slumped to lower than a century ago. Cuba’s dependence on imported food and oil leaves it vulnerable to rising world prices, fluctuations in commodity prices (particularly nickel) and the knock-on effects of economic downturns on tourism. This is mitigated by financial support from Venezuela, but heavy dependence on one country (as on the USSR and the US in the past) leaves Cuba vulnerable to the possibility of future political and economic developments in Venezuela.

The Cuban government is now pursuing a policy of diversifying its economic partners. China and Brazil have become major investors and they and others also offer credit lines. Rising prosperity in China and Latin America is diversifying the tourism market from Canadians (some 900,000 a year), the UK (some 175,000-200,000 annually) and other European nationals. Since the Obama Administration lifted restrictions on travel to the island by Cuban Americans in 2011, there has been a rapid increase in numbers of visitors from the US (now totalling over 300,000). Cuba is the only country to have seen a rise in family remittances from the US (estimated at US$1bn a year by CEPAL), during a time of economic recession when remittances have generally fallen. Exchanging US dollars in Cuba attracts a 10% tax – to generate foreign exchange earnings. But the country’s trade imbalance (-$6.6bn in 2010) caused by poor export performance contributes to continuing shortages of foreign exchange.

In 2008/09 Cuba suffered a liquidity crisis caused by a combination of higher prices of oil and food imports, a collapse in revenue from key exports (particularly nickel) and the devastating impact of three major hurricanes which cost the country US$10 bn. This resulted in widespread defaults in payments to foreign creditors and suppliers, with priority given to essential imports (like food). Foreign companies’ bank accounts inside Cuba were frozen and they were required to obtain Central Bank approval to transfer money out of the country. In response to the crisis, the government sharply reduced imports, which fell by at least 30%.

Information on Cuba’s foreign exchange reserves is a state secret. But indications are that, following adjustment measures (including energy savings) the liquidity crisis has eased. No official figure was given for Cuba’s external debt in 2010 but it is estimated at US$19.7bn by the EIU, and projected to rise to $21bn in 2011. The President stated in December 2010 that significant progress had been made in debt renegotiations and the backlog of overdue payments to foreign companies would be cleared over the course of 2011.

Official figures for 2010 show growth of 2.1%, a 41.5% increase in exports of goods and services (mainly tourism and medical services), a rise in imports of only 3.9% and a budget deficit of 3.8% of GDP. The EIU estimated growth closer to 1.3% in 2010, and the 1.4% official inflation figure is contested by independent economists – given fuel prices alone increased by between 14-18%, with knock on effects on food prices. The 2011-15 Plan has not been made public beyond some headline figures for 2011: projected GDP growth of 3.1%, the budget deficit remaining at 3.8%; and 25.9% growth in investment - with priority to be given to projects yielding quick returns and export growth through import-substitution. Prospects for 2011-15 depend on the government’s success in implementing its programme of economic reforms and possible external shocks (eg commodity prices, political change in Venezuela, major hurricanes).

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HISTORY

BBC News Country Timeline: Cuba
(http://news.bbc.co.uk/2/hi/americas/1203355.stm)

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INTERNATIONAL RELATIONS

Relations with the UK

The UK and Cuba have full diplomatic relations, unbroken since they were established in 1902 following Cuba's independence. Bilateral ties stretch even further.

This long history of ties has allowed tourism, cultural links and educational exchanges between the two countries to flourish. The UK works closely with Cuba on areas such as climate change, child protection and counternarcotics, cooperating bilaterally and in multilateral organisations. The British Hydrographic Office and its Cuban counterpart collaborate on updating maritime information to keep international shipping safe.

In July 2011, the UK and Cuban governments signed a UK-Cuba Declaration on Bilateral Cooperation. The Declaration commits both countries to engage more closely on trade and investment, biotechnology, climate change, low carbon development, countering drug trafficking and organised crime, human rights and disaster preparedness and response. Promoting improvements in human rights remains a top priority for UK policy in Cuba.

Relations with the EU

EU policy towards Cuba is based on the EU Common Position adopted on 2 December 1996. The objective of the Common Position is to encourage respect for human rights and fundamental freedoms, via intensified dialogue with the Cuban authorities and all sectors of Cuban society. Progress towards these objectives is the key to improved EU-Cuba relations. Following the crackdown on the opposition in March 2003 and the imprisonment of 75 peaceful political activists, the EU introduced a series of measures to underline our support for human rights. These measures included inviting the peaceful opposition to Embassy events and limiting ministerial visits. As a response, the Cuban Government 'froze' contact with EU embassies in the summer of 2003. In early 2005, the EU agreed to temporarily suspend these measures, while the Cuban Government also ended its 'freeze' on contact with EU Embassies. EU Ministers lifted the measures definitively in June 2008 and established a political dialogue and a development cooperation programme.

The start of a process in July 2010, involving the Cuban Roman Catholic Church and Spain, which led to the release by March 2011 of all the remaining prisoners of conscience from the group of 75, further improved EU-Cuba relations. In October 2010 EU Member States mandated the High Representative for EU Foreign Policy and Security Affairs Catherine Ashton to review EU policy towards Cuba. This review of EU-Cuba relations has not yet concluded

EU Council Conclusions on the EU Common Position on Cuba (http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/gena/108471.pdf)

Cuba's wider international relationships

Cuba is an influential member of the UN, G77, Non-Aligned Movement and ALBA (an alliance that includes Venezuela, Cuba, Bolivia, Ecuador, Nicaragua, Antigua & Barbuda, Dominica, Grenada, Saint Vincent and the Grenadines).

Cuba has diversified and strengthened its external relations with the BRICS, other emerging markets and countries across the developing world. It has particularly close political and growing trade and investment links with Venezuela, China and Vietnam. A warming of trade and political relations with Brazil under President Lula has not been reversed under President Rousseff. Other major commercial partners include Canada and Spain. Cuba enjoys positive relationships with the vast majority of Latin American states and, through its external medical assistance programmes, with many developing countries.

Cuba’s relationship with the US remains problematic. Despite measures taken by the Obama Administration to reduce some restrictions on travel and remittances and previous freeing up of food and medicines exports, the US maintains its embargo. This was first implemented after the 1959 Cuban Revolution in response to nationalisations of US companies, and heavily restricts trade, travel and financial contacts between the two countries. Measures include extra-territorial sanctions through the 1996 Cuban Liberty and Democratic Solidarity Act (popularly known as the Helms-Burton Act) which can affect foreign companies with business links with Cuba. The designation of Cuba as a state sponsor of terrorism by the US State Department has also affected companies with a presence in the Cuban market making bank transfers (see “Risks” in the Trade and Investment section for further details). The US and Cuba operate Interests Sections in Havana and Washington respectively but they do not have full diplomatic relations. The UK and EU, along with almost all of the international community, have consistently supported the annual UN General Assembly Resolution calling for the removal of the US embargo.

Cultural Relations

Since 1998, the British Council in Cuba has been creating opportunities for cultural exchange and professional development in education, English language teaching, building links between Cuban and UK Scientists, and promoting the arts. A British Council office is co-located with the British Embassy in Havana. For more information, please see: British Council, Cuba (http://www.britishcouncil.org/cuba/index.htm)

Visits

There have been extensive exchanges of parliamentarians, business delegations, trades unionists, academics and officials in fields including trade, investment, health, justice, science, agriculture, finance, culture and sport. A selection of recent visits includes:
-- 2011: John Ashton, Foreign Secretary’s Special Representative for Climate Change
-- 2011: Inter-parliamentary Union group of UK parliamentarians
-- 2011: Lord Hutton and David Jessop, Caribbean Initiative
-- 2010: John Ashton, Foreign Secretary’s Special Representative for Climate Change
-- 2010: HMS Manchester, Royal Navy
-- 2009: Andrew Cahn, CEO, UK Trade and Investment
-- 2009: Royal Ballet
-- 2008: Wave Ruler, Royal Fleet Auxiliary

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GEOGRAPHY

Cuba is an archipelago, with the main island the largest in the Caribbean, located between the Caribbean Sea and the North Atlantic Ocean.

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TRADE AND INVESTMENT

Trade and Investment with the UK

UK Trade & Investment Country Profile: Cuba (http://www.ukti.gov.uk/export/countries/americas/caribbean/cuba.html)

Cuba is a unique and challenging market in which to do business, but there are opportunities for UK companies to win new business on the island.

The government’s economic reform plans to boost exports, reduce dependence on imports and modernise infrastructure will necessitate significant new foreign investment. New opportunities exist for foreign investors in priority economic sectors including tourism infrastructure, renewable energy and agriculture. Cuba has impressive biotech & pharmaceuticals R&D and there are long-standing links between Cuban research institutes and UK universities. Cuba is also keen to develop new capabilities, such as in nanotechnology. Plans to modernise transport infrastructure (particularly ports and railways) should create other openings. With oil and gas reserves which the government estimates at 20,000 million barrels according to the Cuban government (although only an estimated 9,300 million according to the US), Cuba hopes one day to become self-sufficient in energy production. Spanish, Venezuelan, Russian, Vietnamese, Norwegian, and Malaysian companies are currently involved in a joint oil exploration venture with the Cuban government. Deep sea drilling is due to start in 2011, and the growth of the industry is creating opportunities for providers of services and training, and machinery/high-tech equipment exporters.

Investment decisions by the Cuban government are generally driven by four main factors: a focus on their priority sectors, the amount of capital offered by the foreign company, potential to increase exports, and access to technology.

UK exports to Cuba in 2010 were just under £15m [68% up on 2009]. But official UK statistics do not take account of trade through intermediaries in third countries such as Spain. UK imports from Cuba consist mainly of cigars, rum, raw sugar, and honey, and totalled just over £6m in 2010. Spain, Italy, Germany and the Netherlands all do more bilateral trade with Cuba than the UK. Plans to develop new wholesale markets to supply the expanding small private business sector should create opportunities for exporters.

Under the economic reforms proposed, state-run businesses will be granted more autonomy to make day to day decisions, including on imports and the reinvestment of profits - albeit still under government-imposed guidelines. Overseas businesses cannot at present hire Cuban staff other than through a Cuban state employment agency, but greater autonomy in the future might enable joint venture companies to hire staff directly. Bankrupt or loss-making state enterprises will be liquidated rather than subsidised, and the government might use new rules to end existing under-performing joint ventures. The President has stressed the need to make senior appointments in the state sector on the basis of merit rather than membership of the Party, which may have a positive effect on efficiency.

It is not clear when or how the reforms will be implemented: the document approved by the Congress in April 2011 provides little detail of the timetable for necessary legislative changes, and what will be the government’s priorities given its resource constraints.

Risks

All investment decisions are referred to the highest levels of government, meaning decision-making is painfully slow and presenting a major hurdle to doing business in Cuba. Raúl Castro has emphasised the need to push decision-making down to a lower level, which may help to speed up the process in the future. However, there is unlikely to be significant change in the short-term.

Getting paid can be a further issue, although delays are more common than non-payment. The government has a made a commitment to “increase the country’s credibility in its international economic relations through strict compliance with contractual obligations”.

Delays by Cuba’s Central Bank in processing overseas bank transfers from accounts in Cuba presents a further problem for some foreign companies, although joint venture partners tend to be affected more than exporters. Serious liquidity problems caused this to be a particular problem in 2009. The situation has improved since then but inherent risks remain from fluctuations in the cost of food imports, the possibility of the loss of subsidised oil from Venezuela in the future making it necessary for Cuba to buy oil at market prices, and potential damage from major hurricanes.

Cuba’s lack of access to medium and long-term finance through international financial institutions means that only short term finance at premium rates may be available to fund imports. It is standard practice for Cuban state enterprises to expect to buy on credit terms of 1-2 years. The UKTI team in Havana can advise on possible options for exporters on a case by case basis. They can be contacted on +53 7 214 2200 or by email. (embrit@ceniai.inf.cu)

US extra-territorial sanctions are applied by the US Government against companies in third countries that do business in the US if they breach the US economic embargo against Cuba. The Cuba sanctions programme is contained in the Cuba Assets Control regulations (CACR), issued in by the US Office of Foreign Asset Control (OFAC) in 1963 under the authority of the Trading with the Enemy Act, and more recent legislation. This includes the 1992 Cuba Democracy Act and 1996 Cuban Liberty and Democracy Act (popularly known as ‘Helms Burton’ after its sponsors).

Some UK companies, SMEs in particular, have encountered problems with payments to or from Cuba being blocked by banks. This may be due to the fact that UK banks use the US clearing system, which is operated by US companies that comply with US legislation imposing trading sanctions against Cuba (the Helms-Burton Act). EU legislation and the UK Protection of Trading Interests Act 1980 make it illegal for UK-based companies to comply with US extraterritorial legislation such as the Helms-Burton Act. But the risk of US penalties can create uncertainty and businesses, especially banks, sometimes find themselves caught between conflicting legal requirements. We recommend that companies interested in doing business with Cuba take legal advice, particularly if they also have US interests. Companies should make international transactions involving Cuba in euros or pounds sterling. If UK companies are already experiencing problems (e.g. with bank transfers), they are advised to notify the Department for Business, Innovation and Skills (#) , and the European Commission as soon as possible.

Despite these challenges, however, several major UK companies with interests in the US are successfully doing business with Cuba.

Investment protection

The UK has a bilateral Investment Protection Agreement with Cuba which includes basic provisions for foreign investors, compensation in cases of expropriation and dispute settlement mechanisms. We advise companies to include arbitration clauses in their contracts.

Bribery & Corruption

Bribery is illegal and it is an offence for UK nationals and bodies incorporated under UK law, to bribe anywhere in the world. This includes so-called “facilitation payments”. [See UKTI’s bribery and corruption pages (http://www.ukti.gov.uk/pt_pt/export/howwehelp/overseasbusinessrisk/briberycorruption.html?null) for further information.]

In 2010 Cuba was ranked 69th out of 180 countries in Transparency International’s Corruption Perception Index (CPI). The government appointed Vice President Gladys Bejerano in 2009 to the new post of Comptroller General to oversee a crackdown on corruption and tighten auditing of state enterprises. There have been some recent high-profile cases of ministers and senior officials being brought to trial and given lengthy prison sentences for corruption. Some cases have involved foreign businessmen who have been given long custodial sentences, including in absentia. In some cases companies have had their licence to trade revoked; there is conjecture that some of these might have been paying ‘commissions’ - to all intents and purposes bribery. Low-level corruption in the form of theft from state institutions and companies, including from hotels, restaurants, retail outlets and factories, is pervasive and popularly condoned as a ‘survival strategy’ given chronically low wages in the state sector. The Cuban authorities monitor the movements of foreign business visitors and those working in diplomatic missions.

UK Development Corporation

The British Embassy in Havana runs a bilateral programme which provides an opportunity for local communities and organisations within Cuba to access funding for small-scale community-based development projects, which have a strong focus on energy security, environment and sustainable development, community problems and local capacity-building.
Projects in Cuba financed through the bilateral programme have included projects focusing on renewable energy, sustainable agriculture, and empowerment of women.

EU Development Assistance

The European Commission and Cuba agreed to resume development co-operation in October 2008. EU Development Assistance for 2008-2010 was €55.6m, split across disaster preparedness, food security, the environment and culture/education. The EU’s indicative budget for Cuba for 2011-2013 is €20m, which will be targeted at food security, the environment/ climate change adaptation, and expertise exchange and training.

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POLITICS

Cuba is a centrally-planned one party state run by the Communist government and Party. President Raúl Castro formally took over from his older brother Fidel Castro as head of state and government in February 2008 and as First Secretary of the Party in April 2011. Fidel, who led the 1959 Revolution and held the presidency for nearly five decades, has withdrawn from public politics.

Raúl Castro is president of the Council of State and Council of Ministers, which wield executive and administrative authority respectively. The National Assembly (Asamblea Nacional del Poder Popular) is the supreme organ of the state. It meets twice a year to ratify government decrees and decree-laws. Its 609 deputies are elected for five years by direct vote at the Municipal Assemblies. The most recent elections took place in April 2010.

Cuba was ranked 51st out of 181 countries in the 2011 UN Human Development Index. The population is highly educated. Life expectancy and child mortality rates are on a par with developed countries. Long life expectancy (80 years for women, 76 for men), low birth rates and outward migration (particularly to the US - with some 25,000 visas issued a year, plus an estimated 10,000 illegal economic migrants) is resulting in a rapidly ageing population. This presents challenges for the government, for example in financing universal access to health care, education and state benefits in the context of negligible tax revenue and a struggling economy.

The April 2011 Communist Party Congress agreed a package of economic reforms designed to boost productivity and promote economic efficiency. Unsustainable public expenditure will be reduced through large-scale public sector job cuts and a parallel expansion in self-employment and small private businesses. Heavily subsidised food rations are being phased out, along with subsidies on utilities. People both want and fear change. Many are keen for better economic opportunities, higher wages and implementation of newly promised rights to buy and sell property, and cars (manufactured after 1959) and travel abroad.
Popular discontent with low wages, which average US$20 a month, rising food prices and planned job cuts affecting over 1 million public sector jobs, or 20% of all employees, could lead to growing social and political tensions. But the state authorities continue to exercise firm control. Public protest and demonstrations are not tolerated, freedom of expression and access to information are severely restricted. Cuba’s internet connectivity and access to social media are among the lowest in the Americas. The International Telecommunications Union estimates (2010) that only 14% of the population have access to the internet. In most cases this is restricted to the state intranet with no access to foreign websites

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HUMAN RIGHTS

There have been some welcome positive developments in the human rights situation in Cuba in recent years. These have included the release of all remaining prisoners of conscience from the group of 75 sentenced in the 2003 ‘Black Spring’, the announcement in December 2011 of the release for “humanitarian reasons” of around 2900 prisoners, the decision in December 2010 to commute the sentences of the last remaining prisoners facing the death penalty (extending a de facto moratorium) and the introduction of new economic reforms and freedoms. Other important advances have included the government’s response to concerns raised during the public consultation on the reforms, increased press openness to criticism of economic policy, relaxations on internet censorship, and a crack-down on high-level corruption. The government has also maintained its positive record on education, health and cultural rights, and efforts to tackle racial, sexual and gender discrimination.

Despite these real and positive steps, we continue to have significant human rights concerns, particularly in relation to civil and political rights, press freedom and judicial independence. Cuba remains a one-party state and although the government recently took steps to introduce term limits and separate the state from the Communist Party, there is little sign of genuine political or electoral opening. The lack of meaningful judicial independence is also particularly worrying. There is no separation of powers in Cuba, and opponents of the regime are unlikely to have access to independent legal advice or receive a fair trial. Short-term detentions are frequently used to silence dissent, prevent anti-government protests and intimidate activists. Around 4000 cases were reported in 2011, a sharp increase on the previous year when there were around 2000 cases. And although there have been some indications of increased press freedom and airing of divergent views on the reforms, the state maintains a near monopoly on the media and does not tolerate any critical coverage of the political or human rights situation.

Through our Embassy in Havana, as well as in London, we continue to raise our human rights concerns with the Cuban government, while recognising progress where due, bilaterally and through the EU.

For more information please see the Cuba section of the latest Foreign and Commonwealth Office Annual Human Rights Report. (http://www.fco.gov.uk/en/global-issues/human-rights/around-the-world/human-rights-report/) For updates and the latest developments, please click here. (http://fcohrdreport.readandcomment.com/human-rights-in-countries-of-concern/cuba/)

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Last Updated: February 2012

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