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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