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03/04/13 - Los Angeles Times - Cuba and other Venezuela beneficiaries worry about life after Chavez

They know that the next leader of the oil-rich country may be less keen on
throwing them economic lifelines.

By Richard Fausset and Chris Kraul, Los Angeles Times

March 3, 2013, 11:55 p.m.

CARACAS, Venezuela - In communist Cuba, people remember how painful it was
to lose the patronage of the former Soviet Union, their longtime sugar
daddy. They certainly don't want to lose another one.

But that's the fear now gripping the island, as Cubans ponder the fate of
Hugo Chavez, Venezuela's left-wing president, who recently underwent cancer
surgery in Havana. Now back in a hospital in Venezuela, Chavez is reported
to be undergoing a new and "difficult" round of chemotherapy, his condition
a closely guarded secret. Many Cubans are concerned that the death of
Chavez could result in oil-rich Venezuela getting a new leader who is less
enthralled by the idea of socialist solidarity, and less keen on propping
up the chronically underperforming Cuban economy.

Chavez, 58, was too sick to attend his swearing-in ceremony in early
January in Caracas, creating a constitutional crisis that was resolved, to
some extent, when Venezuela's Supreme Court ruled that his attendance
wasn't necessary for him to begin serving his fourth presidential term. If
Chavez dies, the Venezuelan Constitution mandates that a special election
be held to choose his replacement.

Havana residents, meanwhile, say local gossip tends to mingle questions
about Chavez's health with concern about the future of the energy lifeline
Chavez has thrown them, consisting of about 100,000 barrels of heavily
subsidized Venezuelan oil a day. That's about two-thirds of Cuba's daily
oil consumption.

"Undoubtedly, anyone you talk to here knows that Cuba depends on Venezuela
economically, and that a change would be very traumatic," Hector Palacios,
69, a Havana-based sociologist, said in a telephone interview.

Cuban gadfly blogger Yoani Sanchez, writing in the Spanish newspaper El
Pais, recently recalled part of a conversation she overheard between two
women in the capital:

"If something happens to Chavez," one of them said, "we are going to fall
into a second 'Special Period.'"

The Special Period was what Cuba's communist leadership called the era of
severe austerity imposed in the early 1990s after the breakup of the Soviet
bloc, one of the most trying times in modern Cuban history.

For decades, the Soviet Union and its allies bought Cuban sugar at inflated
prices and, much like Venezuela today, supplied the island with large
quantities of cheap oil. When the Soviet Union ended, so did the
arrangement, and the Cuban economy approached the brink of collapse. Fuel
shortages forced farmers to turn to draft animals to plow their fields.
Food shortages were so severe that house cats ended up on dinner tables.

But then a new socialist ally emerged from Cuba's own backyard. Chavez, an
acolyte of Cuban leader Fidel Castro, was elected in 1998. By 2000,
Venezuela, which boasts the hemisphere's largest petroleum reserves, had
stepped in to provide cheap oil. The Cubans are free to sell any oil they
don't use on the open market to generate badly needed dollars. The total
value of Venezuelan aid to Cuba could amount to $6 billion a year.

Following his vision of a more economically integrated Latin America
independent of U.S. influence, Chavez has extended his largesse to other
Caribbean and Central American countries under the so-called Petrocaribe
program, which allows nations to buy oil from Venezuela on extremely
generous terms.

The purchasing countries typically pay 5% to 50% of market value for the
oil and pay off the remainder over a period of up to 25 years, with goods
and services sometimes accepted as payment in lieu of cash.

As a result, Cubans aren't the only ones worried these days. Officials in
the Dominican Republic, Nicaragua and Jamaica have expressed concern that a
post-Chavez Venezuela would not have the political will to continue the
costly program. Its leaders will face a domestic fiscal deficit of nearly
20% caused in part by Chavez's popular anti-poverty programs.

Though poverty has declined under Chavez, the country has suffered in other
ways, with a 20% inflation rate and food shortages stemming from federally
mandated price controls. And while Chavez was being treated in Havana, his
designated political heir, Vice President Nicolas Maduro, ordered a 46%
devaluation of the bolivar, the Venezuelan currency, which will probably
send inflation soaring even higher.

Still, there is a good chance Chavez's socialist program would survive
without him. He remains popular in Venezuela, and experts say that Maduro -
a former bus driver and labor leader sympathetic to Havana - would have the
best chance of succeeding Chavez as president if elections are called
before the impact of the currency devaluation is deeply felt.

The anti-Chavez faction may again be represented by Henrique Capriles,
Chavez's opponent in last year's presidential contest who has said he
opposes giving away Venezuelan oil as "gifts."

The good news for Cuba is that, regardless of who the next president is, it
won't be easy to quickly unravel the relationship between the two
countries. Cuba pays for its oil, in part, by supplying Venezuela with
about 60,000 workers. About half of them are the doctors, nurses and
technicians who staff the 10,000 clinics in a medical outreach program that
is a popular showpiece of Chavez's welfare state.

The two countries' cooperation also includes numerous joint commercial
ventures and more than 150 binational accords signed since 2000. The
National Assembly, moreover, has a pro-Chavez majority, and elections for
deputies aren't scheduled until September 2015.

After the Special Period, the Cuban government realized it needed to
diversify to avoid an over-reliance on one key ally. Today, Spain is
heavily invested in the Cuban tourist business, Canada in its nickel
industry. China, Vietnam and Brazil also have significant investments on
the island.

All of that could soften the blow if Venezuela ever broke up with Cuba. But
some say Cuba remains dangerously reliant on Venezuela, which is far and
away its largest trading partner.

Still, Cuban officials are trying to gain some economic autonomy. Last
year, exploratory drilling rigs made three attempts to find viable offshore
oil wells in Cuban waters. One effort was headed by PDVSA, the Venezuelan
state oil company; one by a Spanish, Norwegian and Indian consortium; and a
third by a Malaysian-Russian team.

All three attempts failed, even though the U.S. Geological Survey estimates
there could be nearly 5 billion barrels of recoverable crude off Cuba's
northwestern coast.

It's safe to assume the drilling will continue.

richard.fausset@latimes.com

Times staff writer Fausset reported from Mexico City and special
correspondent Kraul from Caracas. Special correspondents Mery Mogollon in
Caracas and Cecilia Sanchez of The Times' Mexico City bureau contributed to
this report.