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HavanaJournal.com: Cuba Business

Cuba economy hinges on Hugo Chavez recall vote on August 15

Posted August 05, 2004 by publisher in Cuba Business.
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BY RICHARD BRAND | .(JavaScript must be enabled to view this email address)

Just as Venezuelan President Hugo Chávez’ political future is riding on an upcoming recall vote, so is the fate of his closest ally, Cuban President Fidel Castro.

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PARTNERS: Hugo ChÍvez, left, and Fidel Castro, shown in 2003, have been united in many of their policies - as well as their anti-American rhetoric. AFP-GETTY IMAGES

The two presidents, united in their anti-American rhetoric and to differing degrees in their leftist policies, have developed a strategically critical relationship since Chávez was elected in 1998.

Petroleum-rich Venezuela provides economically strapped Cuba with tons of oil, and Havana owes Caracas an estimated $800 million. Cuba, in turn, has sent Venezuela thousands of doctors, teachers, sports trainers and a suspected horde of intelligence and political advisors. 

It is an alliance so close that some analysts say each leader has become nearly dependent on the other for survival. And it is an alliance that some members of the opposition promise will end if the Aug. 15 recall vote succeeds.

‘‘Our main goal is to stop being a Cuban colony,’’ said opposition Congressman Julio Borges.

Acknowledging the popularity of some the social programs in which Cubans participate, such as the so-called ‘‘missions’’ that provide basic healthcare and literacy training in Venezuela’s slums, Borges said ‘‘true social programs’’ would be protected while ‘‘political and ideological’’ ones would be cut if Chávez loses.

Still, the prospect of a reversal of Venezuela’s friendly policies toward Cuba should give Castro reason to worry.

FINANCIAL TIES

During Chávez’s tenure, Venezuela has become Cuba’s top trading partner, a ranking based on the flow of an estimated $1 billion of subsidized petroleum to the island every year.

While Venezuela has agreements with several Caribbean basin nations to provide oil at cut-rate prices, only Cuba is permitted to resell that oil on the open market, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, a New York-based group that monitors trade with the communist island.

Kavulich estimated that Havana owes Venezuela more than $800 million for those oil shipments—a stunning debt that Cuba would find difficult to pay back if Chávez is ousted.

MAJOR LOSS LOOMS

An end to the oil shipments, combined with recent U.S. restrictions on travel and remittances to Cuba, could put the Cuban economy and Castro’s government against the ropes.

‘‘Clearly it is in the Cuban government’s commercial and economic interests to have Chávez remain the president of Venezuela,’’ said Kavulich, who compares a possible Chávez loss to the end of Soviet subsidies to Havana in 1992.

The loss of Moscow’s subsidies, estimated at $4 billion to $5 billion a year in the 1980s, created an economic crisis that forced Castro to adopt some free-market policies, open his doors to tourism and legalize the use of U.S. dollars in the early 1990s.

‘‘Venezuela has clearly replaced the USSR in terms of the commercial and economic element,’’ says Kavulich. “Without Venezuela, Cuba would not be able to maintain its current commercial, economic, and political systems. There would have to be some changes.’‘

The deep friendship between the two leaders was underscored by Chávez’s recent decision to dispatch his brother Adán to Havana as Venezuela’s ambassador.

While Chávez has said that Cuban-style communism would not work in Venezuela, he has nevertheless famously exclaimed that the two nations are “swimming together towards the same sea of happiness.’‘

Chávez also has pursued a series of other Cuba-style political initiatives, such as land redistribution and the creation of ‘‘Bolivarian Circles,’’ pro-government groups of civilians, some of them neighborhood-based, some of them said to be armed.

COLD-WAR ENEMIES

Venezuela was not always so tight with Havana. In fact, during the Cold War, Venezuela was a staunch U.S. ally that regularly cracked down on communists and was attacked by Cuban-backed guerrillas.

But pro-Chávez lawmaker Willian Lara says Cuba’s close relationship with Venezuela would survive any change in government—though he predicted Chávez will win the referendum.

‘‘While there always existed an anticommunism in Venezuela, now many see that relations with Cuba have been good for the Venezuelan people,’’ Lara said. “A new government, hypothetically, might try to marginalize Cuba, but that would be an effort against the popular will.’‘

Venezuela’s opposition needs at least 3.7 million votes—the number received by Chávez in the 2000 election—to remove the president. Some recent opinion polls have the opposition winning, while others say Chávez will prevail.

That a vote in Venezuela could have profound consequences for Cuba, an island without elections, is an irony not lost on some opposition leaders.

‘‘The recall will be a victory against authoritarianism in Venezuela and simultaneously a defeat against the dictatorship in Cuba,’’ said Carlos Tablante, an opposition congressman from Venezuela’s Socialist Movement.

Member Comments

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On August 07, 2004, Ralph wrote:

YES IT IS AN IRONY,but the fact of the matter is the result
of the venezuelan polls is pivotal issue for the faltering
cuban economy.However,to GOD Thanks,cuban offshores has a
crude oil system,with high qualities of reserves,that means,
in few years to come,Cuba could be used this treachure and
that will be the mainstay of a prosperous and steady cuban
economy,I wish that came sooner than later,because my fellows
really deserve to live better,but as at now,the agreemente with
chavez government is vital,Cuba don’t receive that for free,Cuba
sends doctors,sport trainers,etc, and pay for the crude under
preferential tarifs,but that is a venezuelan practice with—
others caribbean countries,not just Cuba.-