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Venezuela’s Cuban Burden


It is well known that Venezuela and Cuba maintain close political, economic and military relations. Cuba’s dependence on Venezuela for its supply of fuel is well documented as is Venezuela’s use of Cuban professionals in its social programs and internal security apparatus. The economic transactions behind this relationship are sustained by Venezuela’s shipment of crude oil and some oil derivates to the island. In this note I show indicators of the importance of Venezuela’s oil business with Cuba in relation to its own economy and estimates of the grant or donation element of the relationship.


The decline in recent years in the volume of Venezuelan oil shipments to Cuba is driven by the collapse of oil production in the country. Between 2012 and 2018 Venezuela’s oil production halved to a bit over 500 million barrels a year. During that period shipments to Cuba declined 64% to 22 million barrels including crude oil for blending and re-export operations in the former joint venture in Cienfuegos (please see Table).

Oil exports to Cuba have represented between 5 % and 10 % of annual Venezuelan exports in the last seven years, peaking in 2015, and between 0.5 % and 1.6 % of GDP with the high point in 2012. Though oil exports to the island are down to 0.5 % of GDP in 2018, its value in relation to overall imports of Venezuela reached between 8 % and 14 % in the last seven years, a measure of the opportunity cost of these shipments inasmuch as they are provided to Cuba below market cost as shown in the section that follows. This means Venezuela could obtain higher imports for the same amount of shipments that it makes to Cuba. The grave distress of the Venezuelan economy is evident from summary statistics. Real GDP per capita in the six years to 2018 is down 49% and is projected to contract a further 25% in 2019 according to IMF estimates. Massive food and medicine shortages, power failures, fuel shortages and the largest migration outflows ever seen in this hemisphere provide a painful picture of the acute human and economic crisis. At the same time hyperinflation reached over 200 % per month in late 2018 crushing living standards and production.

From this picture it is clear that Venezuela is in no position to provide assistance to other countries in the form of subsidized exports or other forms of aid. The value of its overall exports fell by 65 % since 2012 as a consequence of oil output cutbacks and lower international prices. International reserves as last reported by the Central Bank of Venezuela were down to $8.8 billion at the end of 2018 and $8.5 billion on February 5, 2019 from nearly $30 billion in 2012.

GRANT ELEMENT OF VENEZUELAN EXPORTS TO CUBA Venezuela established an extensive program to provide subsidized oil to Cuba with an agreement in 2000 followed by a separate agreement, the Petrocaribe program for friendly governments in the Caribbean and Central America in 2003. The Cuba and Petrocaribe agreements are said to have similar terms. The program offered concessional terms for oil purchases with the grant or donation element increasing in direct proportion to international petroleum prices.

The special arrangement with Cuba took formal shape with the signature in October 2000 of an Energy Agreement between the two countries. Exact terms of the Energy Agreement are not public. The basis for comparison is external finance provided by Venezuela’s Petrocaribe scheme mentioned above for financing of oil imports to participating Caribbean and Latin American countries. The grant component of Venezuelan oil finance is set by the Petrocaribe terms of 60 % due in 90 days and 40 % over 25 years at 1 % interest. At a discount rate of 5 % the grant element of long-term Venezuelan financing is 39 % and 16 % for the entire oil purchase. This means Venezuela provides a 16 % discount on oil purchases by favored countries.

In spite of these arrangements there is no public information in the official debt statistics of Cuba and Venezuela regarding financing of Venezuelan Petroleum exports to Cuba. The working assumption is that Venezuela and Cuba have a barter arrangement whereby oil exports are exchanged for the services of Cuban personnel in Venezuela. Whether there are any special compensation transfers between the two countries is not known. In the estimates presented here it is taken that there is a pure barter arrangement without any finance involved.

Under barter the grant element of Venezuelan exports to Cuba can be gauged by comparing the value of the payment in the form of oil exports with a market-based payment for the services of Cuban doctors, intelligence operatives and other personnel in the island. Conveniently the Mais Médicos agreement between the government of Brazil and the Pan-American Health Organization (PAHO) by which Cuba is compensated for the services of its medical personnel in 2013-2018 provides a useful reference of a market-based price for the Cuban services. According to this agreement, the Brazilian government pays annually $36,700 per Cuban professional in 2018, the last year of the accord before it was abrogated by the Cuban government after the demand for new terms of the agreement by the incoming Brazilian administration of Jair Bolsonaro.

Applying the Brazilian average compensation in the PAHO agreement one can obtain a rough estimate of the market value of Cuban services in Venezuela. There is no exact number available of professionals from Cuba in Venezuela, and estimates range from 30,000 to 50,000. I use 40,000 personnel for the period 2012-2018. The 2018 PAHO compensation in current dollars has been adjusted for previous years by the personal consumption expenditures of the US GDP deflator.

The Chart shows the grant element of Venezuelan exports. It is derived by subtracting the PAHO market value of Cuban services from Venezuelan exports. The grant element was $4.5 billion in 2012 and it has fallen steadily to $1.4 billion in 2015, becoming slightly negative in 2018. This means Venezuelan aid to Cuba vanished.

It is not surprising that Venezuela has curtailed its oil exports and subsidies to Cuba in the face of the collapse in production. The Petrocaribe scheme with regional countries has also ceased to operate. Venezuela in effect ceased to be a net giver of aid to its neighbors. Venezuela provided 1.1% of its GDP in aid to Cuba in 2012, a top figure for overall foreign assistance by any rich nation. The grant element of aid to Cuba (see Table) also far exceeded the 16 % of the Petrocaribe scheme reaching 74 % in 2012 and averaging 45 % for 2012-2018. This means Cuba on average obtained triple the grant element from Venezuela for oil imports than other Caribbean and Latin American countries.

Source: Estimated by the author

[1] See Ernesto Hernández-Catá, “Cuba’s Petroleum Trade Statistics and the Impact of Cutbacks in Venezuelan Oil”, ASCECUBA Blog, March 15, 2019.

[1] US Energy Information Administration, and Lucia Kacsas,, “Venezuela Oil Exports Slump to a 28-year Low”, January 2, 2019.

[1] Banco Central de Venezuela,

[1] PDVSA, Press Release, 4/29/05.

[1] SELA, Evolution of the Petrocaribe Energy Cooperation Agreement, Caracas 2015.

[1] 5% is the discount rate currently used by the IMF to gauge the grant element of concessional loans.

[1] There were direct investments by PDVSA, the Venezuelan state oil company, in Cuba in 2008-2013 estimated at some $500 million.  See Luis R. Luis, “Cuba’s Capital Account of the Balance of Payments”, Cuba in Transition, 2017.  These investments do not involve a grant element.

[1] “Contratos de Mais Médicos com Cuba já custou R$7.1 bilhoes ao Brasil”.,redacao/2018/11/15 and “Mais Médicos: Como se inscrever, qual o salario,” Exame, 11/21/2018.

[1] The agreement is stipulated in reals and is thus subject to exchange rate fluctuations; here a fixed end-2018 exchange rate is used.

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