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Maduro's demise in Venezuela would drag Cuba into an economic crisis, experts say

Nora Gamez Torres, El Nuevo Herald on

Published in Business News

Two weeks after Juan Guaido declared himself interim president of Venezuela, the Cuban government has shown no sign of diminishing its support for the Nicolas Maduro regime. Havana's bet on Maduro is risky because many other countries are increasingly supporting Guaido, but it has a good reason for sticking with him: If his regime collapses, the island could fall into a new economic crisis, economists said.

"If Maduro falls, I don't know how they can get out of that," said Carmelo Mesa Lago, the leading expert on the Cuban economy. Mesa Lago believes the Cuban government is already embellishing its economic figures to hide a crisis, and that the loss of Venezuelan subsidies could only make things worse.

"The crisis in the '90s was much worse because there was more dependency on the Soviet Union, but the blow will be tremendous," Mesa Lago said. Cuba endured a withering financial crisis after the crumbling Soviet Union stopped its subsidies to the island.

If Venezuelan subsides stop, the experts said the island might suddenly lose 10 to 12 percent of its gross domestic product. But they based their estimates on dubious official Cuban figures.

Venezuela was Cuba's largest trade partner in 2017, the last year for which figures are available. Bilateral trade hit more than $2.2 billion during the year, nearly 12 percent of the island's GDP.

"If Venezuela totally collapses, the impact on Cuba would be clearly significant because the majority of the fuels that Cuba receives come from there. But more important are the conditions under which it is received, at prices different from the world market," said Omar Everleny Perez, former professor at the University of Havana's Center for the Study of the Cuban Economy.

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Under an agreement signed by Fidel Castro and Hugo Chavez, Cuba gets Venezuelan oil at subsidized prices and pays with medical services and medicines. The Chavez government also spent $1.2 billion updating a refinery in the city of Cienfuegos so it could process Venezuelan.

At the peak of the arrangement, Cuba received 100,000 barrels of oil per day. But that figure dropped by more than half in recent years because Venezuelan oil production plummeted under Maduro.

From 2012 to 2017, Cuban imports from Venezuela -- largely crude -- dropped by $4.5 billion while exports -- mostly medical services -- fell by $1.5 billion, said Cuban economist Pavel Vidal, a professor at the Universidad Javeriana in Colombia.

Those drops indicate that a shock from an end to Venezuelan assistance would not be as harsh as the blow the Cuban economy took when the Soviet Union collapsed. Castro decreed an emergency known as the Special Period at the time, as the Cuban economy shrank by 35 percent. But unlike the 1990s, the Cuban economy now receives more foreign investments and revenue from tourism and remittances from Cubans abroad. More than half a million people work in the private sector.

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