CUBA FACTS

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CUBA FACTS

Issue 10 - April 2005

   
 

Cuba Facts is an ongoing series of succinct fact sheets on various topics, including, but not limited to, political structure, health, economy, education, nutrition, labor, business, foreign investment, and demographics, published and updated on a regular basis by the Cuba Transition Project staff.

HOW VENEZUELA SUBSIDIZES THE CASTRO REGIME

 

I. ENERGY (1)

Market Value of Subsidized Venezuelan Oil Imported by Cuba in 2004: US$940 million

Projected Market Value of Venezuelan Oil for Cuba in 2005: US$1.1 billion

 

II. TRADE (2)

Cuban Exports to Venezuela in 2004: US$295 million (est.)

 

III. SERVICES (3)

Payments to Cuba for Services of Cuban Personnel in Venezuela and Education/Training Programs for Venezuelans in Cuba, 2003-2004: US$288 million (est.)

 

IV. DEBT/FINANCING (4)

Deferred Payments on Unpaid Oil Imports from Venezuela, 2000-2004: US$1.932 billion

 

V. IMPACT ON THE CUBAN ECONOMY (5)

Subsidized Oil and Export of Goods & Services, 2004: + US$1.5 billion (est.)

Cuban Professionals and Skilled Workers Employed in Venezuela, 2004: 25,000

 

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Notes

1. The 2004 figure is based on an average of 78,000 bpd at US$33 per barrel. For 2005, the projection assumes 78,000 bpd at the current 2005 mean market price for Venezuelan crude (approximately US$38 per barrel as of mid-March). All figures are rounded to the nearest million. While the original accord signed in October 2000 stipulated a maximum of 53,000 bpd of Venezuelan oil for Cuba, in March 2004 Venezuela's state-owned petroleum company PDVSA increased its allotment for the island by an additional 25,000 bpd. The increase in exports to Cuba came on the heels of an unsuccessful strike at PDVSA against Hugo Chavez, alleging his administration's mismanagement of the country's oil wealth through schemes such as the bilateral accord with the Castro regime. Despite temporarily crippling oil production, Chavez emerged triumphant and took direct control of the firm by replacing thousands of professional staff and independent managers with his own loyalists and political appointees. The net benefit for Cuba has been an unrestricted flow of both crude oil and fuel products with indefinitely deferred payments. For an analysis of the Cuba-Venezuela cooperation accord in the context of a Castro-Chavez strategic alliance, see Cuba Transition Project, "Castro's Venezuelan Bonanza," Cuba Focus, Issue 54 (April 20, 2004), [http://ctp.iccas.miami.edu/FOCUS_Web/Issue54.htm]. On recent developments cf. Casto Ocando, "Apuntala a Castro crudo venezolano," El Nuevo Herald, 20 February 2005, [http://www.miami.com/mld/elnuevo/10945199.htm].

2. Figure is an estimate based on growth in exports during the first ten months of 2004 as reported by Cuba's state-run press. While Venezuela's oil trade with Cuba has received significant news media attention, the Chavez administration has quietly established other mechanisms to subsidize the Cuban economy. Chief among them is the creation of a captive market for otherwise uncompetitive Cuban goods (on services of Cuban personnel see Note 3 below). Consequently, Cuban exports to Venezuela grew from a modest US$25 million in 2002 to some US$300 million in 2004. With Cuban state-owned enterprises now selling a wide if odd array of products -- from dismantled sugar mills to cardiovascular diagnostic equipment -- to Caracas for the latter's domestic social programs, Venezuela became the island's third largest client in 2004. Cf. Marta Veloz, "Crecen las exportaciones cubanas en el 2004," Opciones (Cuba), 11 December 2004, [http://www.opciones.cubaweb.cu/leer.asp?idnuevo=947]. On the unusually extensive export offerings of Cuba's otherwise collapsed industrial sector, see Mauricio Vicent, "Cuba traslada a Venezuela fábricas y técnicos azucareros," Página/12 (Argentina), 13 July 2003; "Cuba Exports Medical Equipment to Venezuela," Prensa Latina (Cuba), Santiago de Cuba, 16 February 2005.

3. Figure has been calculated on the basis of an average of US$500 per month per employee (comprised of employment fees and salaries which are paid directly to the Cuban government) for the services of each Cuban professional working in Venezuela from 2003 through 2004. As neither the Cuban nor Venezuelan government has disclosed details on payments to Havana for the Cuban-staffed "Barrio Adentro" healthcare program, the US$500 average is based on the testimony of a defecting Cuban physician in Venezuela (cf. Note 23 in "Castro's Venezuelan Bonanza," [http://ctp.iccas.miami.edu/FOCUS_Web/Issue54.htm]). In 2003, approximately 10,000 Cuban physicians and other healthcare workers served in Venezuela at a minimum direct cost of US$50 million to the Venezuelan government. As of the end of 2004 the total number of Cuban professionals employed in Venezuela rose to 25,000 (at an estimated minimum direct cost of US$150 million for the year), including teachers and sports instructors. In addition to the "Barrio Adentro" program, Venezuela has also implemented numerous educational, work force training, technical assistance, and cultural accords with Cuba, all of which involve the hiring of Cuban consultants and/or the training of Venezuelans in the island, at a reported cost of US$88 million in 2003 alone. In 2004, Caracass and Venezuela dramatically expanded future cooperation with the signing of some 150 new accords. Cf. Francisco Olivares, "Cuba adentro," Caracas, El Universal, 17 August 2003, [http://buscador.eluniversal.com/2003/08/17/pol_art_17151AA.shtml]; "Cuba-Venezuela health program four years old," Havana, Granma Internacional, 21 January 2005, [http://granmai.cubaweb.com/ingles/2005/enero/vier21/05cubven.html].

4. Includes US$992 million in debts accumulated from the implementation of the accord in late 2000 through the end of 2003 and an estimated US$940 million in unpaid oil deliveries in 2004. The Cuban government now issues long-term IOUs to Venezuela's PDVSA, essentially deferring all payments for at least 15 years in violation of the original 2000 accord which stipulated that no more 25 percent of petroleum exports to Cuba would be financed (with payment due within 90 days on the remaining 75 percent). Cf. Cf. Marianna Parraga, "Cuba acumula deuda de $891 millones con Venezuela," Caracas, El Universal, 14 January 2004; Alexei Barrionuevo and Jose de Cordoba, "For Aging Castro, Chavez Emerges as a Vital Crutch," The Wall Street Journal, 2 February 2004; M. Parraga, "Cuba recibe despachos adicionales de petroleo," Caracas, El Universal, 22 February 2005.

5. While the actual overall impact of Venezuelan subsidies on the Cuban economy is likely much greater, especially as mounting evidence suggests that Cuba is reselling significant quantities of Venezuelan crude and/or refined products, the Castro regime reaped a minimum net gain of US$1.5 billion -- approximately US$1 billion in oil and US$500-600 million in trade/services -- in 2004 alone from its ever-expanding "cooperation accords" with the Chavez administration. Moreover, Venezuela now absorbs a large portion of Cuba's surplus or underemployed skilled labor force, particularly physicians and other healthcare professionals as well as educators, athletic instructors, and numerous "consultants" from various Cuban industries. Cf. "Cuba-Venezuela health program four years old," Havana, Granma Internacional, 21 January 2005, [http://granmai.cubaweb.com/ingles/2005/enero/vier21/05cubven.html]; Marc Frank and Richard Lapper, "Cuba's doctors give Chavez shot in the arm,"The Financial Times, 9 February 2005.

The CTP can be contacted at P.O. Box 248174, Coral Gables, Florida 33124-3010, Tel: 305-284-CUBA (2822), Fax: 305-284-4875, and by email at ctp.iccas@miami.edu. The CTP Website is accessible at http://ctp.iccas.miami.edu.

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