An Information Service of the
Cuba Transition Project
Institute for Cuban and Cuban-American Studies
University of Miami

 
Issue 155
January 10, 2012

 

 

 

Vanessa Lopez*

 

Venezuelan Assistance to Cuba

    

     Cuba entered into the Special Period, infamous for significant food shortages and constant blackouts, in 1991 with the disintegration of the Soviet Union and consequent lack of Soviet subsidies. Saving Cuba as its new benefactor was Venezuela’s Hugo Chavez, who has sacrificed his country’s needs to financially support a bankrupt Cuba. Chavez has supported the Castro brothers for various reasons, most notably: 1) Chavez is indebted to Fidel Castro for helping him after the 2002 anti-Chavez coup attempt; 2) Chavez shares with the Cuban revolution an ideological hatred for the United States; and 3) Cuba’s security apparatus has been invaluable to Chavez by helping him solidify his position of power and offering him personal protection.

      The gross amount of financial assistance flowing from Venezuela to Cuba has been difficult to fully quantify as a result of the secrecy surrounding the affairs of both countries, but looking at a number of indicators, one can estimate that Venezuela’s largesse approaches roughly $10 billion a year for Cuba over the past few years. Without this financial support, the poor state of Cuba’s economy would likely rival the levels of distress experienced during the mid-1990s.

      Venezuela sends Cuba approximately 115,000 barrels of petroleum a day – a figure worth about $3.5 billion per year. (1) It has been reported that this is provided at a 40% discount, and Cuba pays the rest through a subsidized loan provided by Venezuela. It is also estimated that Cuba’s medical personnel operating in Venezuela through the Barrio Adentro program earn Cuba roughly $5.86 billion a year. (2) Between both these sources of aid, Venezuela contributes roughly $9.3 billion to Cuba’s economy, yearly.

      Venezuela’s generosity does not end there. A recent Bandes (Venezuela’s Bank of Economic and Social Development) report, obtained by El Nuevo Herald and provided to ICCAS, documents even more financial assistance to Cuba from January 2007 through May 2010. This report indicates that Venezuela provided 100 Cuban companies (involved in Venezuela’s “twin enterprises” program) with nearly $1 billion worth of solidarity credits. Additionally, $47 million worth of financing was provided for a telecommunications project between the countries. A line of credit worth at least $100 million was approved for Cuba’s railway sector and a $45.5 million credit line was opened for the expansion of two Cuban airports. This report does not include the $500 million Venezuelan investment in the Cienfuegos oil refinery and it is unclear if it includes the $70+ million investment in a Venezuelan-Cuban fiber optic cable. Given the trajectory of the relationship between both countries, other such investment projects are likely in the future.

      Venezuela also approved a loan – which Cuba is refusing to pay – worth $150 million to help Cuba recover from hurricanes Ike and Gustav. This loan was made pursuant to Hugo Chavez’s instruction in October of 2008, and in July of 2009, Cuba indicated that it was told the loan was a grant and would not be making payments on the $150 million.

      Ultimately, between January 2007 and May 2010, Bandes approved $1.5 billion worth of aid. The report indicates that 83% of these funds went directly to Cuba (excluding projects that benefit the Caribbean in general), providing Cuba with at least $1.25 billion over the 3 year period. This is in addition to the regularized assistance of oil provided by Venezuela and the monetary payments made for Cuba’s medical personnel stationed in Venezuela.

      Totaling the regularized assistance and the assistance provided through Bandes, between 2007 and 2010, Venezuela subsidized Cuba with a sum just shy of $10 billion per year – an astonishing figure considering Venezuela’s own domestic problems. General Raul Castro, cognizant of Cuba’s increasing dependence on Venezuela, is fostering relationships with other ideologically sympathetic world leaders, hoping for other sources of support should Venezuela no longer be willing to so generously support Cuba’s ailing economy.

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Notes

(1) “If Hugo Goes.” The Economist. 7 July 2011. http://www.economist.com/node/18928494

(2) Delgado, Antonio Maria. “Chávez paga a Castro más de $200,000 por medico al año.” El Nuevo Herald. 6 Aug 2011.

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*Vanessa Lopez is a Research Associate at the Institute for Cuban and Cuban-American Studies, University of Miami.

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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.