Cuba’s Economic Ties with Venezuela Are Fraying

The Wall Street Journal reports that the economic ties between Cuba and Venezuela are fraying in the midst of the latter’s economic meltdown with triple-digit inflation and the country’s largest currency note (100 bolivars) worth just around 2 U.S. cents on the black market, not even enough to buy a piece of hard candy at a street kiosk.[1]

This development is a major cause of Cuba’s current economic troubles as discussed in another post this day.

The primary precipitating cause of the fraying ties between the two countries is Venezuela’s declining oil output and thus declining oil shipments to Cuba. Daily shipments of 115,000 barrels of subsidized Venezuelan oil in 2008, says the Journal, “have dropped to about 55,000 a day this year, forcing Cuba this November “to buy oil on the open market for the first time in 12 years.”

In the earlier prosperous years Venezuela restarted and expanded an oil refinery in Cienfuegos, Cuba, making it the city’s largest employer. “Now the refinery sits idle. The last Venezuelan oil tanker docked here in August, according to oil traders. The shutdown has already sharply raised the cost of living for many residents, who had relied on cheap gasoline smuggled out of the refinery to alleviate hardship.”

Venezuela’s economic crisis also has forced it to reduce its payments to Cuba for the latter’s doctors serving in the former, resulting in the return of thousands of the doctors to Cuba. At its peak, 65,000 Cuban medical staff worked in Venezuela, but at the end of this May there only were 38,300, which was 4,000 fewer than three years ago.

Cuba’s exports of services, mostly such medical missions to Venezuela and elsewhere, fell 15% to $470 million last year from 2013, according to government statistics.

In addition, “Cuba’s flagship airline, Cubana de Aviación, stopped regular flights to Caracas earlier this year. Charters from Caracas to Havana have scaled back too as demand slumped.”

On the surface the two countries continue to pledge solidarity with each other. After Fidel Castro died last month, Venezuela’s government declared three days of national mourning, and its President Nicolás Maduro and a large delegation of high officials spent several days in Cuba to pay respects. He sat to the right of Raúl Castro, Cuba’s president and the elder Mr. Castro’s successor, at the memorial ceremony in Havana, fighting back tears before his turn came to speak to the crowds. Maduro then told the crowd, “Raúl, count on Venezuela. We will carry on the path of victory, the path of Fidel.”

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[1] Kurmanaev, Cuba and Venezuela’s Ties of Solidarity Fray, W.S.J. (Dec. 13, 2016); Assoc. Press, Venezuela Unveils 6 New Bills Amid Galloping Inflation, N.Y. Times (Dec. 7, 2016).