The death of Venezuelan President Hugo Chávez has given free rein to fears that Cuba will plunge into an economic abyss again if Caracas halts its subsidies, estimated at well above the massive aid that the Soviet Union once provided to Havana.
“The impact of a cutoff will be that the crisis we now have will turn into chaos, because the Cuban government has no other source of financing,” said Miriam Leiva, a Havana dissident and former Cuban diplomat.
Havana now gets two-thirds of its domestic oil consumption from Caracas — about 96,000 barrels per day — and pays part of the bill with the vastly overpriced labor of 35,000 Cuban medical personnel, teachers and others working in Venezuela.
The rest of the bill is chalked up as a debt, mostly to Venezuela’s PDVSA oil monopoly, which now stands at more than $8 billion, said Jorge Piñon, a Cuba–born oil expert at the University of Texas in Austin.
“If Cuba had to pay $96 to $98 per barrel, that would mean a gigantic negative impact on its cash register,” Piñon said.
A July report by the London-based Economist Intelligence Unit noted that an oil cutoff could plunge the island’s import-export balance into the red and lead to “the possible imposition of restrictions on energy consumption outside key industries.”
Venezuela also is now by far the island’s single-largest commercial partner, with bilateral trade officially pegged at $6 billion in 2010 — more than Cuba’s trade with the next five countries together — and likely one of its largest sources of hard currency.
Carmelo Mesa-Lago, an economist and professor emeritus at the University of Pittsburgh, has estimated that Venezuela in fact accounted for more than 20 percent of the country’s overall economic activity in 2010.
Cuban officials have not commented on a post-Chavez future, but highlighted his importance to the island when they interrupted TV programs Dec. 8 to announce that the president would return to Havana for another surgery of his battle with cancer.
Some analysts argue that a cut in Venezuelan aid might prove beneficial to Cuba in the long run by forcing ruler Raúl Castro to drastically broaden and speed up the reforms toward a market economy that he has been pushing since 2007.
Castro’s reforms so far have done little to resolve the massive problems in the economy, from bottom-of-the barrel industrial productivity and salaries to a stalled rural sector that forced Havana to import $1.6 billion worth of agricultural products in 2011.
“It’s imperative to have a truly deep opening that would allow Cubans to import and export, professionals to be productive and enterprising citizens to become the motor for the economy,” wrote Emilio Morales, head of the Havana consulting Group in Miami.
Havana also might not feel an aid cutoff as sharply as it felt the end of the Soviet subsidies because its good relations with China and Brazil could attract some additional support from them, according to the Economist Intelligence Unit report.
And Venezuela may only trim and not totally cut off its assistance because it benefits from the relationship through the Cuban doctors, who treat poor families that tend to vote for Chávez’s party, as well as security, military and other advisers.