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

http://www.theguardian.com/world/2014/may/27/cuba-venezuela-castro-maduro-socialist-economics-reform