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The Cuba-Venezuela Alliance: the Beginning of the End?

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The Cuba-Venezuela Alliance: the Beginning of the End? Latin America Initiative Foreign Policy at BROOKINGS THE CUBA-VENEZUELA ALLIANCE: The Beginning of the End? 1 TED PICCONE AND HAROLD TRINKUNAS POLICY BRIEF, JUNE 2014 he turmoil of the last several months in Ven- and military advisors. In addition, Venezuela’s for- ezuela has raised again the prospect of a mer president Hugo Chávez professed deep admi- post-Chavista regime in Caracas and what ration for Fidel Castro and the Cuban revolution, Tthat may entail for its closest ally in the region, stating that Cuba was ‘the sea of happiness’ toward Cuba. This policy brief takes an updated view of the which Venezuela should navigate. The two leaders’ relationship in light of recent developments and bond was highlighted by Hugo Chávez’s decision concludes that both countries have much to gain to spend the final months of his life under Cuban from reducing their mutual dependence, which is medical supervision, conducting Venezuelan gov- based on a highly subsidized economic and political ernment business and holding cabinet meetings in relationship. A reduced Cuban presence in Venezue- Havana until his death in March 2013. la would give Venezuelans more control of their own democratic destiny. Likewise, a gradual reduction in While Cuba and Venezuela have become increas- Venezuelan assistance to Cuba would bolster the ingly interdependent since Hugo Chávez took case for further economic restructuring and diver- office in 1999, the relationship is asymmetrical. sification of its international partners. Washington Economically, Cuba is more dependent on Vene- should use its advantageous position as a growing zuela as their bilateral trade in goods and services energy producer to help loosen the ties that bind amounted to 20.8 percent of Cuba’s GDP in 2012 Cuba and other neighbors to Venezuela’s oil largesse. yet only 4 percent of Venezuela’s GDP.2 Politically, Venezuela is more dependent on Cuba, not only for BACKGROUND the doctors, teachers and other professionals who staff social missions that sustain the government’s In the past decade, Venezuela and Cuba have be- popularity, but also for the intelligence and military come close allies both economically and politically. advisors that train the Venezuelan security services Venezuela provides deeply subsidized oil supplies to and monitor dissent and conspiracies against Pres- Cuba in return for doctors, teachers, sports trainers ident Nicolás Maduro’s administration.3 1 We would like to thank Ashley Miller and Emily Miller for outstanding research support and editorial advice during the preparation of this policy brief. We would also like to thank Richard Feinberg for his comments on an earlier draft of this brief. Any errors and omissions are the responsi- bilities of the authors alone. All statistics are drawn from official sources where possible, including Oficina Nacional de Estadística e Información de Cuba, Banco Central de Venezuela, Ministerio del Poder Popular para la Energía y Petróleo, Instituto Nacional de Estadística de Venezuela, International Energy Agency, U.S. Energy Information Administration, and the World Bank. 2 Calculations for the bilateral trade in goods and services follows the methodology used in Pavel Vidal Alejandro, Proyecciones macroeconómicas de una Cuba sin Venezuela, Desde La Isla (Cuba Study Group, 2014), www.desdelaisla.org, using 2012 data measured in current prices. In this cal- culation, Cuban services sent to Venezuela are estimated at 73 percent of total services exported, excluding international tourism revenues, as per Carmelo Mesa Lago, Cuba en la era de Raúl Castro. Reformas económico-sociales y sus efectos, (Madrid: Editorial Colibrí, 2012), 135. 3 Carlos A. Romero, South-South Cooperation between Venezuela and Cuba, Special Report on South-South Cooperation, South-South Cooperation: A Challenge to the Aid System? (Reality of Aid Network, 2010), http://www.realityofaid.org/wp-content/uploads/2013/02/ROA-SSDC-Special-Re- portEnglish.pdf; Kevin Ginter, “Truth and Mirage: The Cuba-Venezuela Security and Intelligence Alliance,” International Journal of Intelligence and CounterIntelligence 26, no. 2 (2013): 215–40. Until 2013, the negative aspects of Cuban-Venezuelan Latin America, such as the Community of Lat- interdependence were not as salient in their bilateral in American and Caribbean States (CELAC), and relationship. Venezuela could afford the economic (even though it does not include Cuba) the Union cost of support to Cuba during a decade of rising oil of South American Nations (UNASUR). Together, prices, and the Cuban and Venezuelan governments this strategy has neutralized the Organization of were ideologically aligned under the leadership of American States and other inter-American insti- Hugo Chávez and Fidel Castro. The personal and tutions that once sustained a hemispheric agenda, political solidarity between the two leaders mitigated particularly in the area of human rights and democ- the vulnerabilities created by interdependence. racy. In the most dramatic example of this tension, most Latin American states are threatening to skip The economic and political crisis in Venezuela in the next Summit of the Americas in 2015 if Cuba is 2014, however, highlights the downsides of their not invited, despite its failure to meet the democ- close relationship for both countries. Venezuela ex- racy-related criteria for participation in the group. perienced inflation greater than 50 percent, shortag- es of nearly 30 percent of essential consumer goods This policy brief will first establish the degree of in retail outlets, and a fiscal deficit of 15 percent at Cuba and Venezuela’s mutual interdependence. It the end of 2013.4 Inflation and scarcity have wors- will then analyze the implications of close political ened during the first six months of 2014. Under and economic relations for each country and for these circumstances, the economic cost of Venezu- the United States. It will conclude with recommen- ela’s support for Cuba becomes an increasingly im- dations for U.S. policy toward Cuba and Venezuela. portant constraint on the Maduro administration. On the other hand, instability in Venezuela serves CUBA AND VENEZUELA: A as a reminder to the Cuban government of the risks RECENT HISTORY OF GROWING associated with interdependence. INTERDEPENDENCE The Cuba-Venezuela alliance has also had import- In a historical context, Cuba and Venezuela’s part- ant implications for inter-American relations. To- nership is a recent phenomenon. Relations between gether, the two countries have formed a coalition the two countries were poor for decades after the of states in the Western Hemisphere, the Alianza Cuban revolution due to Venezuela’s refusal to pro- Bolivariana para los Pueblos de Nuestra América vide economic support to Fidel Castro after 1959 (ALBA), which has consistently supported a re- and Cuba’s support for Venezuelan left-wing insur- gional agenda that excludes and demonizes North gents in the 1960s.6 Relations normalized in 1974, America. ALBA is highly influential in the Carib- but this was not followed by close political and bean and Central America largely due to Petroca- economic ties until after Hugo Chávez was elected ribe, a program by which Venezuela has extended president of Venezuela in 1998. the privileged oil relationship it started with Cuba to 16 other states.5 Cuba and Venezuela have also It was the personal relationship between Hugo been able to convince other states in the Americas Chávez and Fidel Castro that drove Cuban-Vene- to deemphasize the hemispheric agenda in favor zuelan interdependence, rather than any econom- of new multilateral forums focused exclusively on ic or trade-based affinity between the countries. 4 Harold Trinkunas, “Venezuela Breaks Down in Violence,” in Big Bets & Black Swans: A Presidential Briefing Book (Washington DC: Brookings Institution, 2014), 38–40, http://www.brookings.edu/~/media/programs/foreign%20policy/bbbs/bigbets_blackswans_2014.pdf. 5 Rachel Glickhouse, “Explainer: What is Petrocaribe?” Americas Society/Council of the Americas, May 20, 2013, http://www.as-coa.org/articles/ explainer-what-petrocaribe. 6 Harold A. Trinkunas, Crafting Civilian Control of the Military in Venezuela: A Comparative Perspective (Chapel Hill: University of North Carolina Press, 2005). THE CUBA-VENEZUELA ALLIANCE: THE BEGINNING OF THE END? LATIN AMERICA INITIATIVE, FOREIGN POLICY AT BROOKINGS 2 Hugo Chávez had been an admirer of the Cuban Petrocaribe.9 Combined crude and refined oil prod- revolution since he was a teenager. He developed uct exports climbed to 104,000 bpd in 2012.10 By a deep friendship with Fidel Castro after spending 2011 imports of crude oil from Venezuela made up time in Cuba after his release from a Venezuelan 61 percent of Cuba’s total oil supply.11 For Venezue- prison following a failed coup attempt in 1992. The la, shipments to Cuba represented only 5.1 percent Cuban-Venezuelan relationship was buttressed by of total crude oil exports in 2011,12 although this civilians from Venezuela’s left that Chávez brought proportion has been slowly increasing across time into his political movement and his government, a due to the steady decline in Venezuela’s production number of whom had been part of the pro-Cuban capacity resulting from a lack of investment in and insurgency of the 1960s.7 maintenance of its oil industry.13 Cuba and Venezuela’s interdependence has grown From Cuba, Venezuela receives professional services. rapidly during the past 15 years, and it extends By most accounts,
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