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    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

    Source: Cuba plans tentatively for life after a socialist Venezuela |
    World news | Guardian Weekly –
    http://www.theguardian.com/world/2014/may/27/cuba-venezuela-castro-maduro-socialist-economics-reform