Venezuela petro-allies nervous over Chavez's death

Posted on Wednesday, 03.06.13

Venezuela petro-allies nervous over Chavez's death
By PETER ORSI
Associated Press

HAVANA -- Cubans remember the so-called Special Period of the 1990s,
when the Soviet Union's sudden collapse plunged the island into years of
economic depression, with cars and buses disappearing from the streets
for lack of fuel and rolling blackouts leaving the capital in darkness.

Now Cubans fear a return of hard times following the death of Venezuelan
President Hugo Chavez, whose billions of dollars of oil largesse helps
the island's economy function. Some Havana residents were even talking
about hoarding candles on Wednesday.

Francis Gomez, a 22-year-old tourism student from the city of Pinar del
Rio, said she was "scared and worried."

"Ever since Chavez became ill, my parents have been saying, 'Please,
God, don't let there be another Special Period," she said.

While Chavez's party remains in power in Venezuela, and his political
allies have said they won't change the program, at least not in the
short term, a victory by the opposition in a presidential election
expected in the coming weeks could change the game entirely. Opposition
leader Henrique Capriles has said he would reevaluate the program if
elected.

Cubans are not alone in having worries following Tuesday's death of
Chavez, who used Venezuela's oil wealth to aid allies through a
part-ideological, part-humanitarian program that gives out petroleum at
preferential terms.

More than a dozen other countries in Latin America and the Caribbean,
many of them economic minnows, have benefited to the tune of billions of
dollars from the Petrocaribe pact that was created in 2005 with the goal
of unifying the regional oil industry under Venezuelan leadership and
countering U.S. influence.

Cuba alone receives about 92,000 barrels of Venezuelan oil a day to meet
half its consumption needs, worth around $3.2 billion a year, according
to an estimate by University of Texas energy analyst Jorge Pinon.

Havana pays about half the bill through a barter exchange in which tens
of thousands of doctors, teachers and other advisers provide services in
Venezuela. The rest goes into 25-year credits with 1 percent interest.

"There's no cash exchange. They don't have to write a check. That's the
importance of this agreement," Pinon said. "It represents $3.2 billion
of free cash flow to the Cuban economy."

"If a new Venezuelan government turns that into a true commercial
agreement where in 30 days you pay 100 percent in cash for what you owe,
it would be a substantial economic impact to both Cuba and to
Petrocaribe countries, no question about that," Pinon said.

Nicaragua, perhaps the second-most dependent on Venezuelan oil after
Cuba, gets nearly all its 12 million barrels a year from Caracas, worth
about $1.2 billion, said Nestor Avendano, an economist and president of
the consulting firm Consultores Para el Desarrollo.

President Daniel Ortega, a staunch Chavez ally, pays about half up-front
and finances the rest over 23 years at 2 percent annual interest.

La Prensa, Nicaragua's leading newspaper, noted in an editorial that
Ortega has been trying to shore up economic reserves in recent months
and raised taxes in January, apparently in anticipation of a reduction
in Venezuelan aid.

The Dominican Republic gets just over 40 percent of its oil through
Petrocaribe, and saves roughly $400 million a year from the arrangement.
Struggling Jamaica, where debt is a whopping 140 percent of gross
domestic product, gets roughly two-thirds of its crude through Petrocaribe.

Across the Caribbean, it's the same story one island nation after another.

"Petrocaribe saved several Caribbean economies from certain collapse,"
said Anthony Bryan, a senior associate at the Center for Strategic and
International Studies in Washington and an expert on U.S.-Caribbean
relations.

Nicolas Maduro, Chavez's handpicked successor and a firm ideological
ally of Cuba, is seen by analysts as more likely to win the election to
replace Chavez. But in the absence of Chavez, who kept his political
base in line through pure politics of personality, Maduro might come
under pressure as he tries to control factions that don't always agree.

"I think that there's going to be a potential drop in Venezuelan
willingness to sell oil (at preferential terms) because Maduro is going
to be facing his own internal schisms," said Gregory Weeks, a political
scientist specializing in Latin America at the University of North
Carolina at Charlotte. "I think he's going to have to be paying more
attention to directing resources to his own constituencies at home,
rather than abroad."

Weeks added that Maduro would likely try to maintain the Cuba subsidy as
much as possible for symbolic reasons, and many analysts say the island
is less dependent on Venezuela than it was on the Soviets.

But Venezuela's economy has problems that Chavez's successor will have
to deal with. Inflation is 22 percent, dollars for imports are scarce
amid currency control and residents complain about sporadic shortages of
basic goods.

"Once Venezuela's budget deficit really begins to bite in a way that can
no longer be ignored, then the government will have to make some tough
decisions in term of spending," said Eric Farnsworth, an energy
specialist with the Council of the Americas. "And one of the quickest
ways to cut in any country is foreign aid."

For some Petrocaribe beneficiaries that might simply mean tightening
belts. For others it could mean rising discontent or even potential
unrest as popular social programs wither.

Nicaragua's Ortega, for example, has used the extra cash to put roofs on
homes and finance health care and education in a country where 80
percent of the people live on less than $2 a day. Economist Rene
Vallecillo said the country could see a 1 percentage-point drop in GDP
growth if Venezuelan aid disappeared.

Haiti has used millions in Venezuelan aid to pay for fuel, renovate
power stations and build low-income housing in the earthquake-torn nation.

Jamaica has used the 22,000 barrels of Venezuelan oil it got every day
in 2011 to produce 95 percent of its electricity.

"If it's 95 percent of your power generation, that has broader
implications in terms of your social well-being," Farnsworth said.
"They're really going to hurt. ... This has been a lifeline."

---

Associated Press writers Anne-Marie Garcia in Havana; Luis Andres Henao
in Santiago, Chile; David McFadden in Kingston, Jamaica; Luis Manuel
Galeano in Managua, Nicaragua; Ezequiel Abiu Lopez in Santo Domingo, the
Dominican Republic; and Trenton Daniel in Port-au-Prince, Haiti
contributed to this report.

http://www.miamiherald.com/2013/03/06/v-fullstory/3270790/venezuela-petro-allies-nervous.html