Chavez's health a concern to Cuban economy, too

[July 07, 2011]  HAVANA (AP) -- Venezuelan President Hugo Chavez's battle with cancer has high stakes not only for his country but for Cuba, which relies on its South American ally for billions of dollars in preferential trade.

If Chavez had to leave power, some Cubans even fear a possible return of conditions they endured during the 1990s when the disappearance of subsidies from the Soviet Union brought severe shortages of energy, food and medicine.

"The outcome (of Chavez's health) will be critical for the Cuban government and its revolution," said Paul Webster Hare, a lecturer in international relations at Boston University who was British ambassador to Cuba in 2001-04 and deputy head of mission in Venezuela in 1994-97. "If, for whatever reason, Chavez is unable to continue as president and unable to stand again in 2012, then this is close to a worst-nightmare scenario for the Cuban government."

Cuba insists it has learned the dangers of depending on others' largesse, saying its international business dealings today are exchanges of goods and services rather than simply accepting handouts. Some experts don't think the trade links would disappear overnight anyway, and feel a Chavez departure wouldn't be a deadly blow to the island.

"People have been saying that Cuba will collapse for a long time," said Michael McCarthy, a Venezuela watcher at Johns Hopkins University. "Cuba will not collapse. They've been through tougher periods."

Ties between Cuba and oil-rich Venezuela have been increasingly close since Chavez took office in 1999. Long a friend and ideological ally of Fidel Castro, he has helped Cuba weather Washington's decades-old embargo designed to isolate the communist government in Havana.

Venezuela provides more than 100,000 barrels of oil a day to Cuba on beneficial terms, fueling new power plants that provide a far more reliable electricity supply than during periods of frequent blackouts in the 1990s.

For its part, Cuba sends brigades of doctors to give free medical care to the poor in Venezuela, and it provides teachers and technical advisers.

The two countries have teamed up to rehabilitate and modernize the Cuban port of Cienfuegos, where they jointly administer a refinery. Officials project its capacity will rise from 65,000 to 150,000 barrels of oil a day.

"The annual Venezuelan input to the Cuban economy is at least $5 billion, meaning it is probably close to half of all hard-currency earnings of the Cuban economy," Hare said. "By most normal measures, Cuba is an economic satellite of Venezuela."

By comparison, Soviet subsidies before they ended in 1991 reached an estimated $4 billion to $5 billion a year, not adjusted for inflation.

A February 2010 diplomatic cable from the U.S. Interests Section in Cuba, released by WikiLeaks, also noted the potential for tough times in Cuba: Quoting an unidentified French diplomat, it said any instability in Venezuela would be a source of "serious concern" in Havana.

Since that cable was written, Cuba has begun implementing a package of economic openings that President Raul Castro, who frequently emphasizes self reliance, is betting on to awake the island from financial malaise and make it self-sustaining.

"The Cubans are marching ahead with a program of economic reform regardless of what happens with Chavez," McCarthy said.

With those reforms still in their early stages, however, the Venezuelan relationship is still indispensable for Cuba's economy.

Caracas is even helping Cuba end its dubious status as the only nation in the Western Hemisphere not connected by fiber optics, helping string a $70 million undersea cable that arrived earlier this year. Expected to come online as early as this month, the link will be capable of handling about 80 million simultaneous phone calls and is projected to increase Cuba's plodding satellite-based Internet capacity 3,000-fold.

The importance of the ties has ordinary Cubans worried.

"The exchanges between Cuba and Venezuela are very important, so I'm afraid we could return to the 'special period' of the 1990s when the U.S.S.R. disappeared," said Mirta Flores, a 50-year-old resident of Havana. "I don't even want to think about that because it makes me very upset to remember those times."

Back then store shelves often sat empty, food rations tightened, and buses and cars disappeared from the streets amid chronic fuel shortages. Electricity was sometimes on for just a few hours a day. People fried grapefruit-rind "steaks" as a meat substitute, drank sugar-water for breakfast, planted small gardens in patios and hitched rides from cyclists to get to work. Many lost weight or suffered from vitamin deficiencies.

Memories of the "special period" explain why Chavez sent jitters across Cuba when he announced that he had undergone surgery June 20 to remove a cancerous tumor from his pelvic region.

Officials say the operation was a success, and Chavez expresses optimism that continuing treatment will allow him to make a full recovery. But details on his prognosis and even the type of cancer haven't been released, leaving his political future under a cloud of doubts.

"Now we Cubans have to be worried because I would say we are utterly dependent on Chavez," said Rafaela Rojas, a 55-year-old office worker.

"And it's not just Cuba, but other countries as well, and the poor in Venezuela," she added, referring to the ALBA trade pact between Venezuela and other nations in Latin America and the Caribbean.

Chavez has even provided discounted heating fuel to poor communities in the United States.

"If something happens to Chavez, I don't think there's anyone else like him," Rojas said.

Raul Castro's incipient economic loosening could lead to greater economic self-reliance, as could untapped offshore oil reserves that are drawing interest from companies in Spain, China, Russia and other nations. It remains to be seen whether letting Cubans buy and sell homes and cars and run small businesses and co-ops will boost the economy, and any oil bonanza will take years to ramp up.

Yet the socialist system instituted by Fidel Castro has survived time and again against challenges like a CIA-backed invasion and assassination plots, the U.S. embargo, near collapse during the "special period" and Castro's retirement five years ago.

In November, marking the 10th anniversary of the Cuban-Venezuelan oil pact, Chavez and Raul Castro renewed the agreement for another 10 years. And last month, just days before Chavez's surgery, Caracas and Havana signed agreements covering 100 different joint projects with an estimated value of $1.3 billion.

Even if cancer forces Chavez from office, it seems unlikely those economic ties would unravel quickly.

"I still expect there to be continuity in the oil policy for some time," said McCarthy at Johns Hopkins. "This has been in place for 11 years now. Even an opposition government (in Venezuela) will have to move carefully and slowly to reverse these things that have been in place for a long time."

[Associated Press; By PETER ORSI]

Associated Press writers Anne-Marie Garcia in Havana and Lisa J. Adams in Mexico City contributed to this report.

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