Death of Chavez could force Cuba to speed reform

Death of Chavez could force Cuba to speed reform

AFP

By Francisco Jara | AFP – 23 hours ago



Cuba could be forced to speed its economic reforms following the death

of its main benefactor, Venezuela's Hugo Chavez, whose oil-backed

largesse has kept the country afloat for years.



Venezuela's leftist leader, who died on Tuesday, gave generously to Cuba

over the years, supplying Havana with billions of dollars' worth of

low-cost oil from its vast reserves and paying royally for medical services.



Chavez came to Cuba's rescue at a point when the communist-run island

was in deep crisis after economic support that Havana had received as a

client state of the now-defunct Soviet Union dried up a

decade-and-a-half ago.



Moscow had been the financial mainstay of the island since Fidel Castro

came to power in 1959.



Now, after a decade-and-a-half of support from Caracas, Havana once

again finds itself economically vulnerable, political observers said.



"The death of Chavez highlights the shortcomings of the Castros'

policies -- not diversifying the Cuban economy, not allowing more Cubans

themselves to generate wealth and make the country genuinely

independent," Paul Webster Hare, Britain's former ambassador to Havana

told AFP.



Webster Hare, who now teaches in the United States at Boston University,

said Cuba seemed to believe the cozy arrangement could go on indefinitely.



"No other country in the world has bet as extravagantly on the fortunes

of another leader as have the Castros on Chavez," he said.



Havana imports 100,000 barrels of oil a day from Venezuela, which

supplies oil to Cuba on very favorable terms. Cuba for its part, sends

some 40,000 trained medical personnel to Venezuela.



The sale of medical and other services, mostly to Venezuela, was the

main source of foreign exchange for Cuba, reaping some $6 billion

dollars a year.



Other major sources of hard currency are remittances from relatives

living overseas, which brings in about $2.5 billion; tourism, ($2.0

billion) and nickel exports, ($1.1 billion).



Cuba has been mum about how it could be hurt if its favorable trade

arrangement with Caracas were suddenly to disappear, although not every

analyst believes that it will.



"I don't think that if there is a change of government in Caracas, that

it will abruptly sever the economic relations that Cuba has with

Venezuela," said Omar Everleny Perez, director of the Center for the

Study of the Cuban Economy at the University of Havana.



He added that Venezuela has come to rely on the doctors sent by Cuba to

help sustain its social welfare system and therefore has a strong

interest in continuing the arrangement.



But a dissident opposition economist, Oscar Espinosa Chepe, said the

fallout would be "terrible" on the island if Venezuela's oil shipments

were to end.



That is the case today even more than when aid from the Soviet Union

stopped, he said, because "Cuba's infrastructure now is in worse shape

than it was back then."



During that crisis two decades ago, Cuba abruptly lost 85 percent of its

foreign trade. Industrial production lurched to a standstill because of

a shortage of fuel and raw materials.



To address the crisis, then-president Fidel Castro imposed austerity in

the form of a so-called "special period" during which he sharply

restricted consumption of many goods and drastically rationed energy.



Although the "special period" has not officially ended, the economy

began to recover gradually from 1997 as the country bolstered its

tourism industry.



The real shot in the arm to Cuba's economy, however, came after Chavez

ascended to power in 1999, and began to financially prop up its ally.



It is far from certain that Caracas will continue to provide the aid,

which is enormously expensive to a nation which has its own economic

problems, including one of Latin America's highest rates of inflation.



"Without Chavez, the possibility of expanding the trade of Cuban

services in exchange for oil is reduced," political analyst Arturo

Lopez-Levy, of the University of Denver in Colorado, told AFP.



In recent years President Raul Castro has undertaken a series of reforms

that has nudged Cuba a bit closer towards a free market system, but the

government still controls more than 90 percent of the economy.



Espinosa Chepe said Havana will have to go a lot further -- and faster

-- in its reform program, including by welcoming greater outside investment.



"Havana will have to speed up the reforms," he said. "It will have

exercise maximum flexibility in its rules and provide security to

outside investors, because the country has no capital resources to invest."



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