What Chávez's Death Means for Cuba, Venezuela and the U.S.

Chavez leaves a complicated economic situation for many.

March 06, 2013, 3:24 PM

March 6, 2013— -- Upon hearing news of the death of Hugo Chávez, scores of Venezuelans gathered in cautious celebration in Doral, a South Florida community with the highest concentration of Venezuelans outside Venezuela. They are hoping that Chávez's passing will bring about change in their homeland.

Others in the region were not as happy.

See Also: Fixing the U.S.-Venezuela Relationship Won't Be Easy

Sure Chávez was politically influential in Latin America, but in many ways his economic influence was even greater — especially with friendly countries like Cuba, Nicaragua, Ecuador, Argentina, Bolivia and a score of Caribbean nations that benefited from Venezuela's oil-discount program, PetroCaribe.

In the name of "economic solidarity," Chávez was extremely generous with these friends, offering oil at discounted rates and with flexible lending conditions. Nicaragua, for example, was known to pay for Venezuelan oil with shipments of beef, sugar, coffee, milk and even 19,000 pairs of pants.

According to figures from the state-owned oil company PDVSA, in 2011 Venezuela sent 243,500 barrels of oil a day (or around 8 percent of its production) to 16 countries across Latin America.

Yet the absence of Chávez and the potential drawdown of economic support would have the biggest impact on Cuba. That country receives more than 100,000 barrels of discounted oil per day and billions of dollars each year in exchange for Cuban medical personnel, technology experts, political consultants and other "professionals."

That's because Chávez had a special relationship with Cuba and the Castros. His relationships with other presidents were also often very personal. That approach may be difficult to sustain in his absence. Even if Nicolas Maduro, Chávez's chosen replacement, wins the upcoming election, he will be more susceptible to domestic pressure to reduce Venezuela's foreign aid, given all the economic challenges at home.

The Cubans have bad memories of the ending of Soviet patronage in the 1990s and are right to be worried about what the death of Chávez may bring.

Where will Cuba turn this time if Venezuelan aid dries up? Maybe the United States. That doesn't mean the U.S. government, however. Rather, Cuba would likely turn to the nearly two million Cubans living in this country. They are already sending around $2 billion a year back to the island in remittances. Already, Raul Castro seems to have been preparing to make the Cuban economy a little bit more flexible and open to investment, and the Obama administration has made it easier for Cubans in the U.S. to send money back home.

Which brings us to Venezuela's financial situation. The truth is the economic state there has been uncertain and chaotic ever since Chavez got sick, and that is unlikely to change in the short term. There is supposed to be a new election, and it appears that Maduro will win. But he will face a tough economic situation. Plus, he lacks the charisma of Chávez and may not be able to maintain popularity if things get tougher.

Already, oil represents around 96 percent of exports, meaning that Venezuela must import almost everything else. The recent devaluation of the Bolivar Fuerte has provided some cash for the government, but it has raised the prices of imported goods high and has not solved the problem of food shortages. Then there's inflation, which has been around 20 percent for more than a decade.

The economy can get by if oil prices stay around current levels, but no one really knows how much the government has remaining in the bank.

So in the end, where does this leave the United States? The death of Chávez marks the beginning of the end to harsh anti-U.S. leadership in Latin America. You have the Castros, but they don't have many years left. There is Cristina Fernandez de Kirchner in Argentina, Rafael Correa in Ecuador and Daniel Ortega Nicaragua, but none has the global or regional clout that Chávez had.

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