Cuba Perks Up as Venezuelan Foils Embargo

August 4, 2006
Cuba Perks Up as Venezuelan Foils Embargo
By JUAN FORERO

BOGOTÁ, Colombia, Aug. 3 — As Raúl Castro takes up the task of leading
Cuba in place of his brother Fidel, there is, surprisingly, one less
thing he may have to worry about: the state of Cuba's economy.

The credit goes, in large part, to the economic lifeline thrown to Cuba
by the Venezuelan president, Hugo Chávez, who is using his country's
tremendous oil reserves to prop up the Castro government and counter
Bush administration policy in Latin America.

To the exasperation of American officials, long determined to force a
change of government by choking off the Cuban economy with an embargo,
Venezuela's patronage may take some pressure off Raúl Castro at what is
otherwise a time of great uncertainty.

The Cuban government released no new information on Thursday on the
health of Fidel Castro, 79, who is recuperating from a still-unexplained
abdominal surgery. Raúl Castro, 75, who was named provisional leader on
Monday by his brother, has yet to make an appearance.

In his first public comment on Fidel Castro's illness, President Bush
issued a statement on Thursday saying, "I urge the Cuban people to work
for democratic change on the island."

"We will support you in your effort to build a transitional government
in Cuba committed to democracy, and we will take note of those, in the
current Cuban regime, who obstruct your desire for a free Cuba," Mr.
Bush added.

The government made it clear Thursday that it intended to continue to
rule the country, and reprinted in the party-run newspaper Granma a
speech by Raúl Castro saying the party would carry on ruling no matter
what happened to Fidel Castro. A report issued last month for President
Bush said, "The current regime in Havana is working with like-minded
governments, particularly Venezuela, to build a network of political and
financial support designed to forestall any external pressure to
change." It was issued by the Commission for Assistance to a Free Cuba,
which is chaired by Secretary of State Condoleezza Rice.

Wayne Smith, a former American diplomat in Havana, said that in recent
years the Bush administration has shifted policy from openly working to
undermine Fidel Castro's government to trying to ensure that he is not
replaced by his brother Raúl or another Communist figure.

"Getting in the way is Chávez and Venezuela, giving assistance to Cuba —
and not only giving assistance but forming an alliance with Cuba," said
Mr. Smith, who is a senior fellow at the Center for International Policy
in Washington. "It just drives the Bush people crazy."

One of the world's last Communist countries, Cuba's economy is far from
healthy, but it is also a world away from the one left destitute and
marooned when Cuba's long-time benefactor, the Soviet Union, collapsed,
beginning in about 1989.

Compared with the grim early 1990's, when imports — the vast majority
from Eastern Europe — plunged nearly 75 percent in three years, Cuba's
economy has shown important signs of renewal in recent years.

At the Farmers Market on 19th Street in Havana on Thursday, stalls were
brimming with super-sized avocados and mangoes. String beans were almost
a foot long. Rolls came out warm from the oven. Vendors offered lobster
and shrimp caught fresh that morning. And the place was bustling with
paying customers.

For vendors, the money is so good that some abandoned government posts
to sell produce. "I used to make about $5 a month," said José Antonio
Milanés Vasco, once employed in a state food warehouse. "Now I make $3 a
day. My life has been totally transformed."

Philip Peters, an expert on the Cuban economy at the Virginia-based
Lexington Institute, said that such experiments with open-market reforms
have helped lift the island's economy. Such farmers markets, Mr. Peters
noted, were supported by Raúl Castro in the early 1990's, when the
government first allowed farmers to sell their surplus crops after the
state found itself unable to pay farm subsidies.

Today, Mr. Peters said, there are 300 such markets across the country.
And while the state continues to provide families with monthly
allowances of rice, beans, cooking oil, milk and other basic items, the
so-called "free markets," have turned some farmers into venture
capitalists and revitalized the agricultural sector.

"Clearly Cuba has moved far beyond the crisis that affected it in the
1990's," Mr. Peters said. "Back then, the question was whether the
economy would survive. That is not a question anymore."

Instead, the question for any government after Fidel Castro,
particularly for one headed by his brother Raúl, is whether those
economic openings will widen.

While the political realm would in all likelihood remain tightly
controlled under Raúl Castro, he has in recent years sent signals that
Cuba could dabble with the kind of economic reforms that have been
embraced by other authoritarian governments, like those in China and
Vietnam.

Though he is the head of the army and state security apparatus, he has
also run the island's tourism industries, which were one of Cuba's first
experiments with allowing controlled pockets of economic liberalization.
Today they generate about $2 billion a year in foreign earnings.

The government says economic growth topped 10 percent last year. The
figure is doubtful to many economists, but even the C.I.A. put growth at
8 percent in 2005.

Cuban resources, like nickel, are selling at record highs, and the
island may in the future benefit from plans to turn sugar cane into ethanol.

Havana has also signed important economic deals with countries like
China, Canada and Spain, whose companies are interested in everything
from selling transportation equipment and machinery to investing in
tourism and oil exploration.

But no country has been more important to Cuba than Venezuela.

Mr. Chávez, who often meets with Mr. Castro and speaks of the elder
president as Latin America's most important statesman, has provided Cuba
with 100,000 barrels of oil a day at a cut rate.

Venezuela provides credits, pays for more than 20,000 Cuban doctors who
offer services to the poor in Venezuela and bankrolls programs like
Mission Miracle, whereby tens of thousands of Latin Americans are flown
to Havana for eye surgeries that raise hundreds of million of dollars
annually for the Cuban state.

"Without a doubt, Cuba was able to come back and it's because of
Venezuela's help, not just the oil accord but many other types of
assistance," said José Toro Hardy, an oil economist in Caracas, Venezuela.

The Cuba Transition Project, a University of Miami team of researchers
who study Cuba's economy, say Venezuela has provided more than $2
billion in financing, most of it in crude oil and refined petroleum
products.

Indeed, the Venezuelan oil accounts for half Cuba's total consumption —
a windfall for a nation that, until recently, was mostly surviving on
tourism dollars.

Venezuela has also become a major buyer of otherwise uncompetitive Cuban
goods, like aging parts from old sugar mills and battered medical
equipment. Exports from the island to Venezuela rose from just $25
million in 2002 to $300 million by 2004.

All together, Caracas and Havana have signed dozens, perhaps hundreds,
of economic accords, the most important being a recent trade pact with
Bolivia's president, Evo Morales, that is aimed at countering
Washington's efforts to create a hemispheric trade agreement.

Among the most important of the Chávez government's projects in Cuba is
the restoration of the Cienfuegos oil refinery on the island, a plan
that could cost Venezuela hundreds of millions of dollars. The
Venezuelans are talking not just of reactivating the long-dormant
facility, but also of upgrading it to refine the heavy, tar-like
Venezuelan oil.

Raúl Castro, as his brother's chosen successor, would benefit greatly
from continued Venezuelan largess, which could give him the comfort to
experiment with other parts of the economy.

"The Cuban government has made statements lately that if Raúl is in
power, one of his main concerns is going to be dealing with the basic
needs of the Cuban population," said Eric Driggs, a researcher at the
Institute for Cuban and Cuban-American Studies at University of Miami.
"If that means giving some measure of a better life or putting more food
on the table, I think he'll take it."

Mr. Driggs and others, like Mauricio A. Font, a Cuban-born expert on the
Castro government at the City University of New York, caution that while
the Venezuelan aid is vital to propping up the economy, it does little
to help Cuba be self-sufficient.

The importance of tourism is everywhere in Cuba, from its elegant hotels
to the costly renovation of Havana's historic center, which have
attracted tourists like Mieke Zee, a nurse from the Netherlands, and her
husband, Jeroen.

She said they had been to Africa several times. "Poverty does not seem
so bad here," she said. "I mean, I have been to countries where children
do not have enough to eat. Here children eat, they go to school and they
have health care."

An employee of The New York Times who could not be named for security
reasons contributed reporting from Havana for this article.

http://www.nytimes.com/2006/08/04/world/americas/04cuba.html?_r=1&ref=americas&oref=slogin