Caracas Chronicles

Beyond the structural issues in the Cuban economy, the Díaz Canel regime is currently facing a real cash flow problem. Mining exports are down, affected by underproduction and lower international market prices. Underinvestment in infrastructure and a decrease in the delivery of Venezuelan oil led to repeated nationwide blackouts throughout 2024 that still affect the majority of the population on a regular basis.

The agriculture industry has suffered greatly from years of lower yields and low maintenance, leading in 2024 to the worst harvest on record. Cubans’ basic food basket is now made up of imported products. However, the cash crunch has been so severe that imports decreased by a third in 2024, leaving the government with no option other than requesting UN assistance to cover a depleted stock of basic goods.

The mirage of a rising private sector in Cuba, after some preliminary announcements, ended up being another propaganda stunt killed by corruption, bureaucracy, and lacking will from the state. Government options seem limited, with Díaz Canel performing a balancing act between fractions and ultimately leaving decision-making to a 94-year-old Raúl Castro that is way too old to carry out reform. Added to the mix, they now face the most hostile White House possibly in decades, with the son of Cuban migrants that has made his political career out of his anti-communist heritage running the State Department.

And so, life on the island is now harder than it ever was. It is estimated that as many as 18% of Cubans have left in the past two years.

The question now is what trick will the Cuban autocrats pull out this time. Door is open to whomever is willing to extend their helping hand in an ever complicated international context. As Venezuelans, we should be interested in how the renewed Cuban crisis plays out.

Economic concerns in Miraflores

The mounting international and domestic pressures in both countries highlight the importance of sticking together and keeping their symbiotic relationship for the purpose of regime survival, opposite to the spread of protectionism across the world. Cuban resourcefulness, too, will mark a blueprint of the options available for Maduro & Co. as a similar cashflow crisis brews at home. 

In Venezuela, the exchange market stability caved in with the brecha cambiaria hovering around 20%. This is just the visible side of a crisis in the making, with the government unable to defend the rate and unwilling to let it slide further. The gap between official and black-market rates is set to choke the private sector’s ability to restock on goods and restrict treasury capabilities for businesses of all sizes. If sustained, it will eventually drive the country into an inflationary spiral or worse—a severe goods shortage if the regime attempts to fight it with even more controls as we have seen in the past.

Today, as economic hardship heightens in Cuba and Venezuela, allies are looking inward, making the regimes fear they might be left hanging out dry.

The structural causes of this cash flow crunch are known, but with a new sanction regime and U.S.-imposed third-party tariffs to buyers of Venezuelan crude, it means heavier discounts for Venezuelan oil in the black market. With the oil economy cornered and the private sector lacking access to foreign currency, it leaves the door open for illicit cash generators.

Recent reports from Bloomberg show that plans are already in motion to combat the ensuing cash flow issue. Black market oil dealers and rising activity of “zombie” ships coming in and out of the Jose and Amuay ports will test the lessons learned during the PDVSA-crypto scheme and prove, again, how valuable control over these covert channels is for the regime. Delcy’s recent trips to Qatar and China, pleading for oil purchases and the renegotiation of debt payment terms, highlight the gravity of the situation. 

However,  this turn around the international context we currently face is not very promising for the hopes of Cuban and Venezuelan regimes. Oil prices are currently trading below five-year averages due to supply and demand pressures, further decreasing potential revenue. A global economic slowdown due to the lingering tariff war has dropped demand, while the Saudis, de facto leaders of OPEC, have been increasing production to both punish cheating cartel members and to leave a door open to negotiations with Washington.

When old pals may not help out

Historical allies of both regimes are fighting their own battles at home. A Chinese economy that had been slowing must now start gearing up to face off against the Trump administration tariff regime. China is set to lose 15.8m jobs and 10% of its exports linked to the tariff war, with factories already struggling to keep output as they furlough employees to stay afloat. For now, the Russians are taking advantage of the U.S. political context, trying to use their closer ties to Washington to obtain sanctions relief. It’s unlikely they would risk a deal to rescue the Cubans or Venezuelans this time around.

Even regional allies are facing internal struggles. Colombia, where Petro struggles to hold a cabinet meeting together, faces a crisis as the ELN conflict in Catatumbo continues to unravel. Mexicans are isolating themselves: the Rio Grande border and Trump give them enough to chew on. Even India, who consistently bought Venezuelan oil in the past few years, must now deal with simmering tensions with Pakistan—an event that could open a global pandora box. And beyond what the Irainians could provide to the oil industry, their capabilities seem restricted as they struggle to support regional allies.

With the oil market playing against the autocratic duo, renewed sanctions, and rising nationalist policies making allies prioritize domestic issues, Cuba and Venezuela will struggle to avoid further economic and social despair.

For Maduro and Díaz Canel, isolationist behaviours from their own allies constitutes a worrying consequence of this new order. Regimes in Havana and Caracas have survived previous international hostilities and economic turmoil thanks to collaboration from allies and a network of black market dealers that provided a financial lifeline in time of need.

Today, as economic hardship heightens in Cuba and Venezuela, allies are now looking inward, making the regimes fear they might be left hanging out dry. Therefore, the path taken in an attempt to stabilize Cuba will be closely monitored by a Maduro who has become well versed in backroom dealing as a mechanism to survive.

But don’t underestimate the sacrifice the autocratic world could make for some of its long-lasting Latin American members, nor the ability of both regimes to pull off one of their survival tricks. After all, retaining power at all costs is their area of expertise.