Maduro’s death in Venezuela would drag Cuba into an economic crisis, experts state – Bradenton HeraldFebruary 14, 2019 | 2 | demise , Maduro
Two weeks after Juan Guaidó declared himself interim president of Venezuela, the Cuban federal government has provided no sign of lessening its assistance for the Nicolás Maduro program. Havana’s bet on Maduro is dangerous because numerous other countries are progressively supporting Guaidó, but it has a good reason for sticking with him: If his program collapses, the island could plunge into a new recession, top Cuban financial experts informed el Nuevo Herald.
” If Maduro falls, I do not know how they can get out of that,” stated Carmelo Mesa Lago, the leading specialist on the Cuban economy. Mesa Lago believes the Cuban federal government is currently decorating its financial figures to hide a continuous crisis, which the loss of Venezuelan aids might just make things worse.
” The crisis in the ’90 s was much even worse because there was more reliance on the Soviet Union, however the blow will be remarkable,” he included. Cuba plunged into a withering crisis after the falling apart Soviet Union stopped its enormous aids to the island.
If Venezuelan aids are halted, the specialists state the island might all of a sudden lose 10 to 12 percent of its GDP, basing their price quotes on currently dubious main Cuban figures
Venezuela was Cuba’s largest trade partner in 2017, the last year for which figures are offered. Bilateral trade struck more than $2.2 billion throughout the year, nearly 12 percent of the island’s GDP.
” If Venezuela absolutely collapses, the influence on Cuba would be clearly substantial because the majority of the fuels that Cuba gets come from there. However more crucial are the conditions under which it is received, at costs different from the world market,” stated Omar Everleny Pérez, former teacher at the University of Havana’s Center for the Study of the Cuban Economy.
Under an arrangement signed by the late leaders Fidel Castro and Hugo Chávez, Cuba receives Venezuelan oil at subsidized rates and pays with medical services and medications. The Chávez government likewise spent $1.2 billion upgrading a refinery in the city of Cienfuegos so it might process Venezuelan oil and re-export a few of the products.
At the peak of the plan, Cuba received 100,000 barrels of crude per day. But that figure dropped by more than half over the last few years because Venezuelan oil production dropped under Maduro.
From 2012 to 2017, Cuban imports from Venezuela– largely unrefined– visited $4.5 billion, while exports– mainly medical services– fell by $1.5 billion, according to Cuban financial expert Pavel Vidal, a professor at the Universidad Javeriana in Colombia.
Those drops show that a possible shock from an end to Venezuelan support would not be as harsh as the blow the Cuban economy took when the Soviet Union collapsed. Castro decreed an emergency situation known as the Unique Period at the time, as the Cuban economy shrank by 35 percent. However unlike the 1990 s, the Cuban economy now gets more foreign financial investments along with earnings from tourist and remittances from Cubans abroad. Majority a million individuals now operate in the personal sector.
The effect would be significant however, the experts agree.
” The dependence [on Venezuela] has actually been decreasing, although it stays high and leaves Cuba in a vulnerable circumstance,” Vidal stated.
In the short-term, Cuba would need to buy unrefined oil at market value or seek favorable arrangements with countries like Russia, Algeria or Mexico.
Russia sent Cuba nearly 200,000 lots of crude and diesel in 2017, but experts believe that was paid for by Venezuela’s state-owned oil company, known as PDVSA. Russian officials have made it clear they desire a safe and secure source of financing for future shipments.
Everleny said Cuba might find a new oil provider in Mexico’s new leftist President Andrés Manuel López Obrador.
” The outlook is complicated, and there are few alternatives if Venezuela is hit with a significant political crisis,” stated Everleny. “Cuba could study what Mexico might use it, based upon what Cuba might use Mexico, due to the fact that the nation is seriously short on tough currency and its only alternative is to earn incomes through Cuban exports.”
Neither Russia nor Mexico appear prepared to offer the enormous aids that Venezuela when supplied.
The economists spoke with likewise cautioned that the methods used so far by the Cuban government to make up for the reduction in Venezuelan subsidies– cutting imports and betting on the development of tourism and the personal sector– will not suffice if Venezuela unexpectedly stops all its subsidies.
The economic sector shrank last year due to tight new guidelines, the island did not reach its 5 million-tourist goal, and tourism profits fell, particularly from U.S. visitors who now get here primarily on cruise ships. At year’s end, the Cuban federal government also lost the income from medical workers operating in Brazil.
What’s more, sugar prices are low, food production is stagnant, and there are tensions with the U.S. federal government, which has threatened to include sanctions on Havana for its continuing support of Maduro.
Before the Venezuelan political crisis exploded in January, when Guaidó declared himself interim president, the Cuban federal government was already talking about the requirement for austerity on the island. Cuban ruler Miguel Díaz-Canel told the National Assembly late in 2015 that the island needed to make better use of its domestic resources and act “without rules” to grow “all forms of income.” He also required increased foreign investments, however did not describe how that might be achieved.
Mesa Lago alerted that the loss of Venezuelan assistance might also impact Cuba’s foreign financial obligation payments, renegotiated by previous ruler Raúl Castro with the Paris Club and Russia. Imports would likewise fall due to the fact that of the scarcity of tough currency, which would lead to a drop in domestic production as well as consumption. The shortages of food and medicines, already rampant, would become even sharper, he added.
” The economy has actually suffered for many years from the stagnation/recession of the GDP. Exports do not grow, and there’s currently a history of a lot of financial obligations and defaults. The deficit spending is currently at a record level, and imports have already been cut to the minimum,” stated Vidal. “What’s more worrying is that some families still depend upon federal government wages and pensions that can not stand up to another reduction, even if it’s less than in the 1990 s,” he included.
” It would be a scenario tough to manage, financially and socially.”
Follow Nora Gámez Torres on Twitter: @ngameztorres