If Hugo Chavez Goes, So Does Cuba...

If you thought that Cubans were worried about Fidel Castro falling ill, don’t overlook the heartache stemming from the recent news that Hugo Chavez has cancer. For many years now, Cuba and Venezuela have enjoyed a close and rewarding relationship. Chavez regularly ships around 115,000 barrels of oil to Castro at discounted prices which sums to about $3.5 billion of subsidy a year (note that Cuba returns the favor by stationing 40,000+ doctors, intelligence and security experts and others workers in Venezuela). To be sure, Venezuelan aid has been the biggest factor in aiding the communist island in its recovery from the slump it endured following the demise of its previous sponsor, the Soviet Union, in 1991. Older aged Cubans remember the hard times during that period and, if Venezuelan aid ceases like it did with the Soviet Union in 1991, could they expect a similar downturn to follow?

If Hugo Chavez’s opponents take over power in Venezuela, it’s completely reasonable to expect a dramatic haircut to the annual aid sent to Cuba. Opponents have long criticized the cozy relationship between Chavez and Castro and would be keen to use that money domestically. The Venezuelan economy shrank by 2% in 2010 - compare that to Brazil which grew by almost 8%. Venezuela suffers from one of the highest inflation rates in the world, a contracting economy and one of the worst crimes rates. All of this despite having more oil than any other nation in the world…The bottom line is that there is absolutely no reason that Venezuela couldn’t find a better use for the $3.5 billion per year than sending to Cuba. If (or rather, when) this aid to Cuba ceases, the economic effect could be detrimental to the island. Of course, Raul Castro (Fidel’s younger brother and now President) has been doing his best to mitigate any potential fallout by soliciting investment from China, curbing food imports, enacting key domestic reforms and aggressively pursuing deep-water oil exploration. All of these might help lessen the blow from the downfall of the Venezuelan-Cuban relationship, but might not be enough in the long-run.