Analysis: Will Beijing fill Cuba’s Caracas void?

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China’s Huawei Technologies shows off a smartphone at the 2016 Havana International Fair. Photo by Jon Braeley.

China has been Cuba’s No. 2 trade partner for years, eclipsed only by the island nation’s close ally and energy supplier, Venezuela. As a fellow communist nation, China has been a stalwart supplier of goods and credit. But as Cuba’s economy slips into recession for the first time in two decades—largely due to cut backs in Venezuelan oil shipments, loans, and aid—will China pick up the slack?

Experts say the Asian giant likely will cover some of the loss, partly out of political solidarity, but not enough to replace the massive support provided by Venezuela for more than a decade.

The Chinese tend to be business-oriented, say specialists in China-Latin America relations, and Cuba doesn’t offer too much in the way of natural resources, guarantees for loan repayments, or investment opportunities that could serve as a platform for the United States or other major markets worldwide.

“As long as Cuba continues not to have money, the amount of support they will get from the Chinese will be limited,” said Evan Ellis, Latin American research professor at the Strategic Studies Institute of the U.S. Army War College in Carlisle, Pa.

What’s more, the Chinese are frustrated by the slow pace of Cuba’s economic opening.

“China has been trying to advise the Cuban government on ways forward with economic reform [but] with little progress, much to the dismay of the Chinese government,” said Margaret Myers, director of the China-Latin American program at Washington’s Inter-American Dialogue. More Chinese engagement will be predicated on reform, she said, including less red tape for investors.

China could still become Cuba’s No. 1 commercial partner as Venezuelan trade shrinks. Yet preliminary data for 2016 suggests that China isn’t expanding to fill Venezuela’s void. Chinese government statistics for 2015 show $2.21 billion in two-way trade with Cuba, including $1.88 billion in Chinese sales to Cuba and $330 million in Cuban sales to China. For the first 11 months of 2016, that trade appeared to be running flat or slightly down: $1.96 billion, including $1.69 billion in Chinese sales and $270 million in Cuban sales.

In addition to stagnating, the trade is lopsided, because China sells Cuba mainly higher-priced telecom equipment, buses, and industrial goods, and buys mainly sugar and other lower-priced Cuban commodities.

Beijing already finances some sales to Cuba, partly based on politics, offering the island “no-interest loans you don’t see much elsewhere in Latin America,” said Myers. Yet that financing is relatively limited. Myers estimates that China’s two main development banks have provided some $5 billion in low- or no-interest loans to Cuba in the past decade or so. That’s far less than Soviet subsidies to Cuba, which topped $3 billion yearly in the 1980s, and even less compared to Venezuela’s contribution, estimated as high as $7 billion annually at its peak.

The Chinese remain active on some infrastructure projects, including wifi expansion supplied by Huawei Technologies and port improvements in Santiago de Cuba estimated to top $120 million. But other proposed Chinese ventures have yet to materialize, including a Geely auto plant in Mariel.

How much China compensates for Venezuela’s decline also depends on President Donald Trump. The Chinese were hoping that thawing U.S relations with Havana would accelerate Cuba’s economy and create new opportunities for Chinese business on the island. They’re now waiting to see what Trump does.

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