With help from oil and friends

Cuba's economy

With help from oil and friends
Jan 13th 2005 | HAVANA
From The Economist print edition
Castro blunts Bush's offensive

OFFICIALLY, 2005 has been dubbed “the Year of the Bolivarian Alternative” by Cuba's communist government. No matter that Simón Bolívar was in fact a capitalist landowner; the liberator of much of South America from Spanish colonialism happens to be the hero of Venezuela's president, Hugo Chávez. And in the twilight of Fidel Castro's rule, Mr Chávez has become his main foreign supporter. Partly because of that support, the island's economy is enjoying a modest uptick—despite George Bush's efforts to strangle Cuban communism by tightening America's trade embargo.
Last month, Mr Chávez and Mr Castro signed a new version of their co-operation agreement, promoting a “Bolivarian alternative” to the American-backed Free-Trade Area of the Americas, a moribund plan for a 34-country hemispheric trade pact from which Cuba was excluded. They agreed to abolish tariffs on each other's imports, and allow their state companies to operate freely in either country. But the core of their relationship remains a swap of Venezuelan oil, and money for infrastructure, for Cuban political support for Mr Chávez. For several years, Mr Chávez has sold Cuba oil on preferential terms—at least 53,000 barrels per day (b/d) last year, or around a quarter of the island's total consumption. Meanwhile, some 15,000 Cuban doctors and nurses and a similar number of teachers, sports trainers and other advisers are working in Venezuela. Under the new agreement Venezuela will pay for these (the amount is secret).
When he addressed an end-of-year meeting of Cuba's National Assembly—one of his first public appearances since breaking his knee and arm in a fall—Mr Castro had other victories to report. China has offered cheap loans for an electronics plant and to refurbish crumbling hospitals. It has also shown interest in Cuba's nickel deposits. Two Canadian companies, Pebercan and Sherritt International, have found a small new oilfield off the north-west coast, estimated to contain 100m barrels. The oil is heavy, and must be mixed with lighter imported crude for refining. But officials hope for more discoveries—Spain's Repsol is exploring in deep water in the Gulf of Mexico. Since Mr Castro began giving licences to foreign oil companies in the early 1990s, production has quadrupled to 75,000 b/d.
Cuban officials are happy, too, that this month the European Union called off an 18-month dispute, the so-called “cocktail war”. This began when Mr Castro's government jailed 75 members of the small democratic opposition. EU countries responded by inviting dissidents to national-day receptions. That prompted the government to freeze contacts with EU embassies. Spain's new Socialist government abandoned the common policy in October—and following Cuba's release of 14 of the prisoners last year, the rest of the EU has now followed suit.
Booming tourism has helped Cuba to recover from the collapse of the Soviet Union a decade ago. The past few months have been difficult, with hurricanes, a drought, power cuts and new curbs on visits by Cuban-Americans ordered by Mr Bush. Even so, the Economist Intelligence Unit, our sister company, puts last year's growth at 3% (5% says the government). Thanks mainly to Venezuela, China and oil, the growth rate may now edge up. Mr Castro's response to slightly better times has been to roll back many of the timid market reforms he decreed in the mid-1990s. So don't expect 2006 to be called the Year of Deng Xiaoping.

http://economist.com/World/la/displayStory.cfm?story_id=3564897