Chavez’s beneficiaries gird for lost aid

Feb 25, 2012, 10:45 PM

Associated Press

LIMA, Peru (AP) – Millions who have never set foot in Venezuela have a stake in the physical and political survival of Hugo Chavez as the once-indefatigable leftist strongman submits to surgery in Cuba for removal of a tumor he says is likely malignant.

Those most tied to Chavez’s fate live in Nicaragua and Cuba, which have received billions of dollars in gifts, long-term loans and cut-rate oil from Venezuela. Both countries have taken limited steps to soften the blow if Venezuelan aid were to end.

Other nations as diverse as Bolivia and the Dominican Republic have also benefited.

Many have good reason to gird for an end to the aid as the leftist president undergoes another surgery in the same pelvic region where he had a baseball-sized tumor removed in June.

Chavez has insisted that his economic ties with Cuba and other allied nations in his leftist bloc make good financial sense beyond revolutionary solidarity. But critics say Chavez has more often been intent on trying to buy loyalty and counter U.S. influence.

Chavez’s challenger in October elections, Gov. Henrique Capriles, would end Venezuela’s “asymmetrical” economic favoritism and ideological-based foreign aid, said Carlos Romero, a foreign policy adviser to the candidate.

Venezuela would continue to provide subsidized oil to “the poorest countries, such as Haiti, but there will not be subsidies for countries like Cuba or faraway nations like Syria,” he said.

Polls have shown Capriles within striking distance of Chavez, and political analysts say his chances of unseating Chavez are apt to improve if the 57-year-old president’s condition worsens.

“I’m scared,” said Pedro Iglesias, a 72-year-old retiree living in gritty central Havana. “I don’t want to think of what could happen here if something bad happens to Chavez. It would be terrible for us.”

The communist Caribbean island nation depends on Venezuela for two-thirds of its oil, analysts say, and cash flow from Venezuela for services such as doctors and sports trainers amounts to some $5 billion a year. That accounted for about 15 percent of Cuba’s economy in 2008, the last year the island nation published figures.

Without the aid, Cuba might need to severely tighten food rationing and suffer through lengthy power outages as it did two decades ago during the “Special Period” after the dissolution of its previous patron, the Soviet Union.

Cuban officials have refused to comment on how they would adjust to an end in Venezuelan assistance.

But Cuban leader Raul Castro has been pushing modest free-market reforms and just opened the island’s waters to oil exploration. The Spanish oil company Repsol YPF began exploratory drilling last month but it would take at least three years to produce commercially viable crude if the drilling proves successful.

Michael Shifter, president of the Washington-based Inter-American Dialogue think tank, said Cuba’s reforms “are in part an effort to anticipate a possible reduction or cutoff.”

Oil analyst Jorge Pinon of the University of Texas said Cuban leaders have shown they’ve learned from the loss of Soviet oil in the early 1990s.

“The Cuban government is very well aware of the risks that their economy faces with the loss of Venezuela,” Pinon said.

“Cuba’s government is in Chavez’s pocket,” tweeted famously gutsy Cuban blogger Yoani Sanchez on Friday as Venezuela’s president flew to the island. “There’s speculation here of a possible second Special Period if Chavez’s health worsens.”

Pinon said it would be “catastrophic” for Cuba if it were forced to pay market prices for oil because the island would have to cut back on food imports. Cuba imports about 70 percent of its food.

Nicaragua, for its part, has been inviting outside investment in such sectors as gold mining. But its non-Venezuelan economic support currently comes almost exclusively from multilateral lenders such as the Inter-American Development Bank.

The Central American country receives all but a small portion of its oil subsidized from Venezuela as part of an estimated $600 million in annual transfers from Chavez’s government. That allows President Daniel Ortega’s government to subsidize electricity bills and transport.

“Pulling the plug on this assistance could throw Nicaragua or Cuba into deep recessions,” said analyst Adam Isacson of the think tank the Washington Office on Latin America.

Less clear is what an end to Chavez’s rule would mean for more faraway allies. Iran has largely benefited from his rhetoric.

Chavez has publicly defended Syria, though without confirming shipments of oil to President Bashar Assad’s government as he uses the army to try and crush a popular uprising.

A tanker operated by Venezuela’s state-owned oil company PDVSA, the Negra Hipolita, has made two calls in the Syrian port of Baniyas since early December, most recently from Feb. 16-20, said Marie Bates, an analyst with Lloyd’s List Intelligence in London.

Oil analyst Pinon estimated the tanker likely unloaded 700,000 barrels of oil, worth less than $10 million but precious for a government that U.S. officials have called “a family-run mafia.”

Romero said Capriles would reconsider military purchases from Russia, from which Chavez has bought more than $4 billion in arms since 2005. Capriles would also focus on “rescuing relations with the United States,” Romero said.

On top of that, a Capriles government would look carefully at credits and investment from China, though honoring any international agreements already made, his advisers say. China has agreed to provide Venezuela more than $32 billion in loans over the coming decade to be paid back with oil.

Chavez’s government has given $82 billion in grants and subsidizes to more than 40 nations from 2005-2011, says Julio Borges, an opposition lawmaker who says he keeps a running tally based on the public record. Cuba has been far and away the No. 1 beneficiary with $28.5 billion in aid followed by Nicaragua with $9.7 billion and Argentina with $9.2 billion by Borges’ count.

In the Nicaraguan capital, the generosity is widely appreciated.

“The government uses that money to help us with homes, metal roofing sheets, roads, health and education,” said Miguel Lobo, who sells cell phone accessories in Managua’s streets. It also helps keep bus fares at the equivalent of 10 cents in a nation where four in five people live on less than $2 a day.

Venezuela sends cash directly to Nicaragua’s government through companies set up in partnership with the Bolivarian Alliance, or ALBA, of eight leftist nations that includes Argentina, Bolivia, Cuba and Ecuador, created at Chavez’s urging in 2004.

The aid has empowered Ortega to create “a kind of parallel budget,” said Jose Luis Medal, an economist with the Universidad Americana de Nicaragua.

Eurasia Group analyst Heather Berkman put it more bluntly: “Venezuela has been providing Ortega with a sizable slush fund.”

Nicaraguan economist Adolfo Acevedo says it’s not known “what part of those resources are put into play during elections, but it clearly exceeds whatever sum (Ortega’s) political adversaries can marshal.”

A bigger risk for Nicaragua and other nations in the region is Capriles’ pledge to re-evaluate the 18-nation Petrocaribe oil alliance, which Chavez has used as a foil against U.S. influence.

The 6-year-old pact, which includes Nicaragua and Haiti, lets members pay a sharply reduced cost for the Venezuelan oil they receive and finance the rest at low interest over 25 years.

By Borges’ tally, Petrocaribe has cost Venezuelans $3.2 billion since its founding.

Analysts said Petrocaribe member the Dominican Republic in particular isn’t prepared for the possible loss of some $300 million to $400 million annually it saves from the arrangement, with the money now helping prop up the country’s troubled state-run energy company.

The Caribbean nation recently rejected extending $500 million worth of International Monetary Fund assistance because the loan would have required the country raise electricity rates by 18 percent after similar increases in 2009 and 2010.

Its pledge to remake foreign policy notwithstanding, the opposition says one Chavez legacy is likely to endure.

About 37,000 doctors, nurses and paramedics brought to Venezuela from Cuba would likely stay in the country under agreements that net the island nation cash while providing sorely needed health care to some of Venezuela’s poorest. Chavez will depend on that same Cuban health system as he undergoes surgery in the next few days.

“In principle,” said the Capriles adviser, Romero, “those programs will continue.”

___

Associated Press writers Paul Haven in Havana, Peter Orsi and Vivian Sequera in Caracas, Venezuela, Filadelfo Aleman in Managua, Nicaragua and Ezequiel Lopez in Santo Domingo, Dominican Republic contributed to this report.

___

Frank Bajak is chief of Andean News for The Associated Press.

He can reached on Twitter: http:/twitter.com/fbajak

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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Chavez’s beneficiaries gird for lost aid