Cuba plans tentatively for life after a socialist Venezuela

Cuba plans tentatively for life after a socialist Venezuela

Raúl Castro is standing firm beside his embattled ally Nicolás Maduro,

but painful memories of the Soviet collapse remain

Guardian Weekly, Tuesday 27 May 2014 13.09 BST



Raúl Castro, centre, continues to support Nicolás Maduro, but Cuba needs

a plan B in case Venezuela changes political direction. Photograph: Sven

Creutzmann/Mambo Photo/Getty

Cuba's leaders may have been taken aback by the recent surge in

opposition to Nicolás Maduro's government in Venezuela. But the Cuban

public, torn between amazement and delight, has watched the political

crisis unfold in Caracas on the Venezuelan Telesur channel,

traditionally loyal to the regime. The Cuban press, on the other hand,

says as little as possible about the unrest. With good reason, for the

downfall of Venezuela's socialist government would be a disaster for

Cuba's communist regime which has ruled the island for the past 55 years.



Over and above the political fallout that would be caused by the

overthrow of a friendly government, the Cuban economy is heavily

dependent on Venezuelan oil. (Caracas supplies about 80,000 barrels a

day, though deliveries fell by 20% to 30% last year.) The terms for this

supply are particularly advantageous, most of it being "paid" by the

provision of thousands of Cuban medical aid workers, mainly doctors and

nurses. Trade with Venezuela accounts for almost 20% of Cuba's gross

domestic product.



Cuban dissidents have followed the protests in Venezuela closely on

social networks. Events suggest things might finally start changing at

home, so they send frequent messages of support to their Venezuelan

fellows. "Anything might happen," says the independent lawyer Wilfredo

Vallin Almeida.



The possibility that the Venezuelan regime founded by Hugo Chávez might

collapse is a nasty reminder for Cuban leaders of what happened when the

Soviet Union fell apart in 1991. The disappearance of the eastern bloc,

on which Cuba was largely dependent, was a near-fatal blow. "GDP

suddenly dropped by a third," says Joaquín Infante Ugarte, deputy head

of Cuba's National Association of Economists and Accountants. The 1990s

were a very difficult time, with the local economy almost completely

failing to produce necessities, particularly food.



Cuba's president, Raúl Castro, is determined to prevent a similar

occurrence and is doing all he can to support Maduro. But he is also

trying to work out a plan B in case Caracas changes direction.



Cuba has already made considerable progress rebuilding wider diplomatic

ties. In January Havana hosted a meeting of the Community of Latin

American and Caribbean States (Celac), showing that although the

American embargo is still in force, Cuba has restored normal relations

with the rest of the continent. Normalising trade is more challenging.

The prime objective of the Castro government is to attract more overseas

investors to boost the economy. "We need at least $2.5bn a year to

develop," Ugarte claims. Setting aside the problem of energy, Cuba

spends about $2bn a year importing food. Yet part of the island lies fallow.





The dual currency system of Cuban pesos (left hand) and their

convertible equivalent, pegged to the dollar, poses problems for foreign

companies looking to invest in the country. Photograph: Yamil Lage/Getty

Foreign companies wishing to invest face many difficulties. The first

problem is that there are still two separate currencies, operating in

parallel. The wages of ordinary Cubans are paid in pesos, which can be

used to buy basic necessities. The convertible peso, or CUC, is worth

roughly 25 pesos and pegged to the US dollar. It is used for purchasing

imported goods but also any necessities not covered by subsidies. The

government has announced plans to scrap the CUC, without giving any

details or explaining how this would be achieved, a source of concern

for much of the population, which fears inflation. "Monetary

reunification is essential," says Cesário Melantonio Neto, the Brazilian

ambassador to Cuba. "If things stay the way they are, it will dissuade

firms from moving to Cuba."



This warning carries quite a lot of weight in view of the amount Brazil

has invested in Cuba. The Brazilian firm Odebrecht is building the

Mariel deep-water port, slated to become a key hub for Caribbean trade

when work enlarging the Panama canal is complete. Brazil's president

Dilma Rousseff officially opened the first part of the project in

January, closely followed by her predecessor, Luiz Inácio Lula da Silva,

who visited Havana in February.



Brazil is counting on the port "to enable its companies to develop into

the Caribbean and Central America", Neto explains. It is also

encouraging its business leaders to invest in the special economic zone

being built around the port. "If we weren't optimistic about

modernisation of the Cuban business model, we wouldn't have become

involved to this extent. We reckon it's worth it," the ambassador adds.

"They are now really determined to modernise," says Fabien Buhler, CEO

of Devexport, a French company that has been trading in Cuba for years

and represents several other firms here.



Part of the "actualisation" process, as the regime puts it, is a recent

law on foreign investments. Long awaited by foreign business, it seeks

to reduce the constraints on potential investors. All sectors will be

open to foreign capital, apart from the military, healthcare and

education. Overseas companies will pay less tax and the administration

has promised to be more responsive. But they will still not be able to

choose their workforce, which will go on being supplied by the state.



This article appeared in Guardian Weekly, which incorporates material

from Le Monde



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