Posted on Saturday, 07.02.11
Cuba would hurt if Chávez is replaced
Venezuela helping Castro government with an estimated $3.5 billion this
By Juan O. Tamayo
Cuba would plunge swiftly into chaos if Venezuela's ailing President
Hugo Chávez is replaced by someone less willing to subsidize Havana to
the tune of $3.5 billion this year, analysts said Friday.
Havana already is divided between older leaders determined to maintain a
friendly regime in Caracas at all costs, they added, and others who view
Chávez' subsidies as disincentives to the profound economic reforms that
Cuba desperately needs.
Chávez, who has been Cuba's top ally and benefactor for nearly a decade
and considers Fidel Castro as his top political mentor, announced from a
Havana hospital Thursday that he has cancer, sparking immediate
speculation about his and Venezuela's political future.
A charismatic populist, he has no clear successor as head of the "21st
Century socialism" also embraced in Bolivia and Nicaragua — and plenty
of opponents ready to challenge his 12-year grip on power in
presidential elections scheduled for next year.
His subsidies to Cuba have never been popular in Venezuela, which today
faces one of the hemisphere's highest inflation and lowest growth rates.
One of the first acts of a military coup that briefly ousted him in 2002
was to halt all oil shipments to Havana.
Cuba would be crippled if the oil subsidies — $2.2 billion in 2009 and
estimated at $3.5 billion today because of higher prices — are suddenly
halted, said Jorge Piñón, an oil expert with the Cuban Research
Institute at Florida International University.
"There would be an immediate collapse of the Cuban economy if a future
Venezuelan government adopts a policy that it will no longer subsidize
the sale of oil to Cuba," Piñón noted.
Venezuela sends Cuba an average of 115,000 barrels of oil per day, the
oil expert added, most of it for Cuban consumption but 25,000 barrels
for processing in a refinery in Cienfuegos owned as a joint venture by
the two countries.
Venezuelan oil accounted for 30 percent of Cuban imports in 2009, when
Cuba's debt to Caracas was estimated at $4 billion. The South American
country was Havana's top commercial partner that year, with bilateral
trade valued at $3.1 billion, compared to $1.7 billion for trade with China.
Cuba will soon begin an apparently promising search for oil off its
northwestern shore, Piñón added, but even if crude is found in
profitable quantities it will take three to five years to begin
Caracas marks Havana's oil bill "paid" through the vastly overvalued
assistance it receives from the estimated 60,000 Cubans in Venezuela,
including 40,000 medical personnel as well as teachers, sports coaches
and military and intelligence advisors.
Havana economist Marta Santos noted last year that the Cuban government
raised gasoline prices by 18 percent just hours after Chávez had failed
to win a two-thirds majority in congressional elections.
Pedro Burelli, a Venezuela analyst in Washington who regularly
criticizes Chávez, said he has received information that there's already
"pressures" among Cuban officials over how to react to possible changes
in Venezuela's leadership.
Havana's older "historic" leaders favor propping up socialism in Caracas
at all costs, he said, to guarantee the continuation of subsidies for
Havana and as a possible safe haven should the island's own communist
system begin to falter.
Younger officials argue it's time to snip the Venezuelan lifeline,
Burelli added, embrace deeper and swifter domestic reforms toward a
market economy and diversify trade and investments, specially with
China, Brazil, Russia and Iran.
"They believe that the modernization of the Cuban economy was delayed
because of the Venezuelan subsidies, and they don't want to waste any
more time," he added.
Undoubtedly, they also want to avoid a repeat of the early 1990s, when
the collapse of the Soviet Union and the end of its massive subsidies to
Havana shrank the island's economy by 35 percent and sparked outbreaks
of malnutrition-related diseases.
Just last month, China announced that Venezuela's investment in the
Cienfuegos refinery would be backed up with part of a $12 billion line
of credit extended to Caracas by the Central Development Bank of China
and the China National Petroleum Corp.
"That's a wild card for Cuba, in case Venezuela defaults," said Piñón.
Cuba's trade with China grew by 34.4 percent during the first six months
of 2010, and Brazil is investing $800 million to modernize the port of
Mariel west of Havana. Brazilians also are reported ready to make mayor
investments in soy and ethanol.
"Raúl Castro has synchronized his watch with Hugo Chávez, but that
doesn't guarantee that the hands on the watch are going the same way,"
Santos wrote in a column detailing Cuba's growing economic relations
with the other countries.