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Analysis: Cuba, and — a failing triangle?
By Domingo Amuchastegui

China and Venezuela are Cuba’s most important trading partners,
representing 12.5% and 40% of Cuba’s foreign trade, respectively. In
recent times, a growing number of observers have been suggesting that
these two countries might, for a host of different reasons, cut down
their economic ties with Cuba. There is also speculation about an
increasingly conflictive relationship between China and Venezuela that
could eventually affect Cuba.

When Chinese President Xi Jinping visited three Latin American and
Caribbean countries in September 2013, some observers jumped to the
conclusion that because Xi did not visit Cuba and Venezuela, there was a
decline in relations between China and these two countries.

Playing dominos, again
What these observers overlook is that Cuba is the Latin American country
most frequently visited by Chinese leaders since the mid 1990s, and
Cuban leaders are frequently visiting China. By every standard, there’s
an incredible level of political exchanges between the superpower and a
small island that can offer little in terms of economic potential. Why
then did Xi not visit Cuba and Venezuela last year? Because the final
stop of his tour was to meet President Barack Obama — a decision
indicating diplomatic finesse.

The death of President Hugo Chávez and the current political unrest in
Venezuela have given rise to predictions about the possibility that ties
between Venezuela and Cuba might suddenly disappear. This line of
thought follows the pattern of the former USSR and Eastern Bloc, kind of
a neo-domino theory, according to which Cuba will collapse as a result
of Venezuela’s collapse.

Unrest in Venezuela, together with mismanagement of Venezuela’s ,
have led other experts to argue that China might be reconsidering
Venezuela. China would be well-advised, according to these experts, to
think carefully before sinking more loans into the Venezuelan
economy.and renegotiate certain deals, even if the chavistas manage to
hold on to power. Cuba would obviously suffer significant collateral
damage, should China follow such a pattern. This same line of thinking
has led experts to another conclusion. As Chinese academic Pin Zuo has
suggested, Cuba’s perception of Venezuela as an “unstable asset” will
lead Cuba to put more emphasis on cooperation with China.

Looking at the Facts
No doubt, adjustments and readjustments of bilateral ties between these
three countries have taken place over the past decade.

1. China has its own policies and priorities, considered contradictory
by some. But they are consistent with their goals. In general, they
follow a pattern focused on trade, lending, and, only in third place,
direct . It’s the pattern for Cuba, which means that areas for
direct investment continue to be perceived by the Chinese as very
limited in scope.

In 2004, it seemed that investment would become a top priority, as China
was discussing plans worth more than $5 billion in nickel and a refinery
with Cuba. None of these projects have been implemented, and no official
explanation has been given. It seems that the Chinese do not perceive
these projects as attractive enough in terms of potential and scale.
Undeniably, there is a gray area of conflict between the two countries
on this issue.

Even so, since then China has made important investments in on-shore and
off-shore oil drilling. In telecommunications, IT, automobiles and home
appliances, Chinese companies play a decisive role. Chinese companies
have also established biotechnology and pharmaceutical joint ventures
with Cuba in China. In railroad, port and merchant fleet modernization,
major cooperation projects have continued, Finally, China is a major
trade partner, partly thanks to long-term soft loans, as well as grants
and donations.

Nevertheless, Cuba remains a minor trade partner, ranking 10th in
China’s relations with Latin America.

Mauro García Triana, a former Cuban ambassador in , and
China, made an interesting observation in 2007. “The Chinese are very
clear about one thing: They are not going to be benefactors for Cuba
like the Soviets were,” García said. “I was once told in no uncertain
terms by a Chinese diplomat that ‘Our relations with Cuba have to be
mutually beneficial, or they will not work.’ “ A European expert put it
this way last year: “The China-Cuba relationship is not based on
socialist solidarity but on business.”

Chinese academic Pin Zuo perceives Chinese interests beyond business, in
the political and military realm. Indeed, over the last 15 years,
political collaboration between the two has increased as never before,
along with discreet military cooperation.

Even so, none of these dimensions should be exaggerated. As academic Pin
Zuo states, “China’s foreign policy towards Cuba will follow a path of
moderate friendship” and, it should be added, limited economic scale,
unless Beijing decides in the future to move into significant direct
investment in Cuba.

How China responds to Cuban top officials’ prodding to invest in the
Mariel Zone will be a clear indicator of China’s short-term policies.
Foreign Trade and Investment Minister Rodrigo Malmierca has insisted
that Chinese companies producing in China for the Americas could
perfectly settle and operate from Mariel. Although he doesn’t say so, he
seems to suggest the Special Zone would be a great maquiladora location
for Chinese exports to Latin America and, eventually, North America.
Cuban officials have indicated that Chinese companies have so far been
very receptive.

“The Chinese government supports competent Chinese enterprises in
seeking new initiatives for cooperation and investments in Cuba,”
now-President Xi said when visiting Cuba in 2011. Even more encouraging
is the fact that trade between the two countries has risen from a mere
$314 million in 1999 to $2.7 billion by 2012. Nothing indicates a
decline of any sort.

2. As to Cuba-Venezuela relations, independent of political unrest or
economic shortcomings, several big projects signed over the years with
Chávez continue to wait for the resources and political will from
Caracas to be implemented. Neither the expansion of the Cienfuegos
petrochemical hub, nor the ferronickel plant in Holguín, nor the new
refinery in Matanzas have materialized. No new projects have been
announced. Not a word has been said publicly to explain this pattern.

Most people in Havana will point at Venezuela’s economic setbacks in
recent years and their need to prioritize urgent domestic projects to
explain the shortcomings.

In contrast, Cuban-American experts at the Association for the Study of
the Cuban Economy (ASCE) are gambling on an imminent collapse of the
Venezuelan government, prompting “a deep contraction of the Cuban economy.”

So is Venezuela’s collapse imminent? A greatly divided opposition, a
decline of violent rioting, the absence of significant fractures within
chavismo, a huge amount of wealth to support the government’s options,
and its call for a national dialogue, do not support the downfall
scenario. Continuity in Caracas, in turn, will bypass the predicted
apocalypse for Cuba, though additional strain may affect the Cuban economy.

And China is, in no way, backing off Venezuela. For them, it’s business
as usual. In 1997, when Chávez was in , China was an important
buyer of Venezuelan oil. Last September, China signed a $28 billion oil
deal with Maduro’s government. So far, there is no evidence of a Chinese
withdrawal, with or without chavistas in power.

Finally, no one should think of the Cuban leadership as being unaware of
the lessons from Eastern Europe and the former Soviet Union. If faced
with a worst-case scenario concerning Venezuela, Cuba’s situation is
different today.

a. The degree of dependency on the Soviet Union was much higher,
representing 28.2% of Cuba’s GDP; Venezuela represents 18.3%, according
to a recent analysis from Cuban economist Pavel Vidal Alejandro. These
figures contradict those of ASCE economists who

assert that today Venezuela provides a larger share of Cuba’s GDP than
the former USSR.

b. The Cuban economy is more resilient and diversified than in
1989-1993. Oil and gas production meets 50% of domestic demand, there’s
a growing and a fully recovered nickel industry, and a
significant reform process is in place, growing the private sector.
Cuba’s finances are in much better shape. And the opening of the Mariel
Zone symbolizes a new approach to foreign capital.

c. Cuba has diversified external relations as never before. The European
Union is the biggest foreign investor, the second biggest trading
partner, one-third of Cuba’s tourists come from the , and a
normalization process is in the making. Russia and China have much
broader relations with Cuba than in the 1990s. Brazil has risen to
become a key partner. And Mexico seems to be ready to compete with
Brazil in Cuba.

Being dismissive of these new circumstances makes it impossible to
understand current Cuban developments.

Former Cuban intelligence officer Domingo Amuchastegui has lived in
Miami since 1994. He writes regularly for CubaNews and Cuba Standard on
the Communist Party, Cuba’s internal politics, economic reform, and
South Florida’s Cuban community.

Source: Analysis: Cuba, Venezuela and China — a failing triangle? « Cuba
Standard, your best source for Cuban business news –
http://www.cubastandard.com/2014/03/13/analysis-cuba-venezuela-and-china-%E2%80%94-a-failing-triangle/

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