On Cuba's New Relationship with the US

| Dec. 21, 2014 | Caracas, Venezuela

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Venezuela and Cuba have long been close. “We have two presidents: Fidel Castro and Hugo Chávez,” declared Cuba’s Vice President Carlos Lage in a visit to Caracas just under a decade ago. A couple of years later, in Havana, Chávez added, “At heart, we are just one government.”

It is little coincidence then that talks between the United States and Cuba began just after the death the former Venezuelan president who had bankrolled Cuba’s Revolution.

Venezuela no longer has the spare cash to fund the island’s beleaguered economy. The Castros likely realized this as Chávez’s presidency was coming to an end. They would not have been keen for a return of memories of the euphemistically-titled Special Period of the nineties, after the collapse of the Soviet Union.

"We had nothing, no food and no money,” one elderly man told me on Havana’s Malecón not long ago.

The economy contracted 35 percent between 1989 and 1993, and oil imports decreased 90 percent. Cuba was in desperate need of money.

Chávez, then a nascent politician, saw Castro as a political mentor. He would be an ally against the elites and imperialists who he blamed for the world’s ills.

Chávez also oversaw some of the world’s largest oil reserves. Venezuela currently sends almost 100,000 barrels per day of oil to the island as well as aid thought to be worth in total between €4 billion and €12 billion a year, or some 15% of Cuba’s GDP.

However, Venezuela’s economy is in tatters, struggling now with the fall in the price of oil. Oil sales make up 96% of Venezuela’s foreign income. The country’s local currency on the black market has fallen 35% in the last month; annual inflation is at more than 60% and there is serious talk of default on Wall Street.

Many economists are talking of a “perfect storm” brewing for Maduro, whose approval ratings are in the mid-twenties.

The lack of guaranteed support from Caracas would have made Cuban President Raúl Castro “much more eager to negotiate and given the U.S. leverage,” said Ted Henken, President of the Association for the Study of the Cuban Economy.

As Havana cosies up to Washington, Venezuelan authorities are left increasingly isolated. While Cuba and Venezuela held onto leftist principles, other countries in the region have in recent years taken more pragmatic policy decisions.

“Obama has pulled the rug out from under Maduro,” said Christopher Sabatini, Senior Director of Policy at the Council of the Americas. “It’s going to be a lot easier for other U.S. allies in the region to swing away from Venezuela.”

In the last couple of weeks, in response to sanctions by Washington on top Venezuelan officials for alleged human rights abuses, Maduro has rallied against the U.S.

"It shows a lack of respect!” boomed the moustachioed president to a few thousand supporters in Caracas on Monday. “They can shove their US visas.” On Wednesday, Maduro praised Obama’s “gesture” towards Cuba.

"How sad it is to have a government who 72 hours ago launched an anti-imperialist diatribe against Obama and now describes him as ‘courageous,’” Jesús Torrealba, head of Venezuela’s opposition coalition, told me this week.

Cuba learned its lessons from the Special Period and in recent years began to diversity. On the ground, rules have been loosened on private restaurants, guesthouses and the buying and selling of property; Cubans are even allowed internet access. On a more global scale, international investors have begun tocome in.

Cuba was likely well aware that would not be enough in the long run. There are a mixture of elements that have come together to allow this historic moment: from Obama and Cuban President Raúl Castro themselves to mediators in the Vatican and Canada.

Yet, the unwitting spur for the restoration of relations between the U.S. and Cuba may be Hugo Chávez himself and his successors' inability to manage Venezuela’s economy.

For World Report, this is Girish Gupta in Caracas, Venezuela.